Ethereum faces criticism over dependence on layer 2 solutions

Justin Bons, founder and Chief Investment Officer of Cyber Capital, has sharply criticised Ethereum’s (CRYPTO:ETH) current state, claiming the network is faltering while Layer 2 (L2) solutions thrive.

Bons argued that Ethereum struggles to maintain its fee revenue due to limited network capacity, while L2 solutions capitalise on this weakness, restricting Ethereum's growth potential.

Bons stated that Ethereum’s inability to sustain high fee revenue is due to its constrained capacity.

Meanwhile, L2 solutions have reached record highs in usage and fees, allegedly lobbying to keep Ethereum’s network capacity limited.

He referred to this situation as "parasitic," where L2s benefit from Ethereum's limitations, especially following the implementation of EIP-4844 (Proto-Danksharding).

According to Bons, this has led to a significant drop in Ethereum's fee revenue, which has impacted its deflationary mechanism.

The growing reliance on L2 solutions, according to Bons, has created a fragmented ecosystem that disrupts liquidity and composability, vital components for Ethereum's seamless operation.

He argued that while L2s were initially designed to scale Ethereum by handling transactions off the main chain, they now operate almost independently, fostering a centralised environment contrary to the decentralised principles they were meant to uphold.

Bons further criticised Ethereum's governance model, claiming that its rejection of on-chain governance has resulted in centralised control over the network’s development.

He suggested that this model allows L2 entities to exert disproportionate influence, potentially hindering Ethereum’s advancement.

Bons speculated that if Ethereum were to scale at the Layer 1 (L1) level through new technological developments, it could render L2 solutions obsolete, drastically impacting their market value.

He implied that L2 entities might oppose such advancements to preserve their market position, highlighting a potential conflict of interest within the ecosystem.

At press time, the Ethereum price was $2,467.01.