Base, Arbitrum, And Ethereum L2s Will Have To Buy Decentralization, Here’s Why

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As a seasoned analyst with years of experience in the crypto realm, I find myself intrigued by the current state of Ethereum and its layer-2 solutions. The boom we’re witnessing is undeniably impressive, with over $37 billion worth of assets being managed off-chain. However, the question of decentralization remains a lingering concern.

Over a prolonged period of improvement, Ethereum – the global leader in smart contract platforms – is experiencing growth in capacity. Yet, this expansion doesn’t align perfectly with the aspirations of decentralization purists. In an attempt to cater to its vast user base, the network predominantly uses off-chain methods, leveraging roll-up technologies to handle increased transactions and alleviate the pressure on the mainnet.

The Ethereum Layer-2 Boom

The surge in growth can be attributed to the widespread adoption of layer-2 platforms. As per L2Beat’s latest findings, these off-chain solutions designed to enhance Ethereum’s scalability collectively manage assets valued at approximately $37 billion. Arbitrum, among them, is leading the pack with over $13 billion under its management.

Despite the boom, the question of decentralization still lingers. Arbitrum, Base, and other layer-2s on Ethereum might be gaining traction, but most have yet to decentralize.

For instance, since their developers haven’t yet provided a robust, decentralized, and fault-free system or a sequencer, they present a vulnerability within the larger Ethereum network.

Public data shows that Arbitrum has a permissioned fault-proof system, with Optimism having to withdraw after audits reveal flaws. In any layer-2 setup, a fault-proof system exists to ensure any transaction sent to the sequencer is valid, just like it would if sent on the mainnet.

The transactions are processed first in a fault-tolerant manner, then grouped together (batched) and finally verified on the main network. A fee is charged every time Ethereum validators confirm these batches of transactions.

Will L2s Have To Buy Decentralization From Mainnet Validators?

In simpler terms, the issue arises because transaction fees have rapidly decreased in the past few months following Dencun’s activation. This downward trend hints at the possibility of low gas fees within a thriving layer-2 environment potentially discouraging validators. However, despite this concern, analysts from Token Terminal are confident that this situation is set to reverse soon.

In their prediction, all Ethereum layer-2s will eventually have to “buy” decentralization from mainnet validators. The good news is there are many to choose from. According to Beaconcha.in, over one million validators are securing the blockchain.

Token Terminal suggests that while it’s possible to construct such a system, establishing a decentralized network of layer-2 validators could require significant resources due to its intricate nature.

Due to this factor, purchasing decentralization from a group of Ethereum layer-1 validators becomes possible. If chosen, these validators would bargain for higher transaction fees compared to the standard network rates, substantially boosting their earnings.

Concurrently, as the need for a layer-2 decentralized solution increases, so too will the flow of validators.

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2024-10-24 05:11