1/31) Scaling a blockchain exclusively through L2s is a terrible idea
As it comes with horrible UX & trust trade-offs; pushing people into centralization
Inevitably leading to failure; as users move to scalable chains instead
L2s have become the greatest source of corruption:
As it comes with horrible UX & trust trade-offs; pushing people into centralization
Inevitably leading to failure; as users move to scalable chains instead
L2s have become the greatest source of corruption:
2/31) From Arbitrum to Optimism, all major L2s are still centralized!
There is a reason for this, as L2s do not inherit the security of the L1
Even after "decentralizing" their sequencers
L2s only have a fraction of L1 security, as they still rely on a separate consensus layer
There is a reason for this, as L2s do not inherit the security of the L1
Even after "decentralizing" their sequencers
L2s only have a fraction of L1 security, as they still rely on a separate consensus layer
3/31) Since, ironically, the solution lies in reinventing decentralized consensus for sequencers
Going full circle & ending up in a worse position
As it divides PoS capital between hundreds of L2s instead of combining it all under a single L1
As stake = security in this case
Going full circle & ending up in a worse position
As it divides PoS capital between hundreds of L2s instead of combining it all under a single L1
As stake = security in this case
4/31) L2s are not solving the problem; only shifting it over to a weaker model instead, making it worse
As the SCs still require admin keys for upgrades, controlled through a DAO
It is true that L2s could burn their admin keys instead, but in the real world that is not the case
As the SCs still require admin keys for upgrades, controlled through a DAO
It is true that L2s could burn their admin keys instead, but in the real world that is not the case
5/31) This is why L2 sequencers & admin keys end up facing the same challenges as an L1
Without being optimized to solve these problems by virtue of scale, unlike most major L1s
Even though a sequencer cannot steal user funds, it can censor & front-run, which is unacceptable
Without being optimized to solve these problems by virtue of scale, unlike most major L1s
Even though a sequencer cannot steal user funds, it can censor & front-run, which is unacceptable
6/31) As it defeats the whole point of using a cryptocurrency, to begin with
However, the L2 SC admin key can steal user funds, as it can change the SCs rules!
These are mostly governed by trusted multi-sigs right now
Including the largest players such as Optimism & Arbitrum!
However, the L2 SC admin key can steal user funds, as it can change the SCs rules!
These are mostly governed by trusted multi-sigs right now
Including the largest players such as Optimism & Arbitrum!
7/31) This is not even the biggest problem with L2s
As the UX issues this causes are completely unsolvable in the context of a competitive market
The best way to demonstrate this is by using a simple example;
Two users exchanging value in an L1 world compared to an L2 world:
As the UX issues this causes are completely unsolvable in the context of a competitive market
The best way to demonstrate this is by using a simple example;
Two users exchanging value in an L1 world compared to an L2 world:
8/31) The case of two users exchanging value within an L1 is simple
Simply scan the other user's QR code & press send, as long as they are also using ETH
In the case of L2s, this is not so simple, as the user now needs to know what L2 their friend is on & how to bridge between
Simply scan the other user's QR code & press send, as long as they are also using ETH
In the case of L2s, this is not so simple, as the user now needs to know what L2 their friend is on & how to bridge between
9/31) To make things even worse;
The user also now needs to find out whether these specific L2 are even secure or decentralized
As in a free market, there will always be custodian & centralized L2s
Since even today, most L2s have admin keys & or centralized sequencers!
The user also now needs to find out whether these specific L2 are even secure or decentralized
As in a free market, there will always be custodian & centralized L2s
Since even today, most L2s have admin keys & or centralized sequencers!
10/31) Adding difficulty is that L2s are not all compatible with each other
Due to ETH roll-ups not being enshrined, we should expect a wide range of L2s; a UX nightmare
The free market guarantees competing interests will not coalesce on the same interoperability protocols
Due to ETH roll-ups not being enshrined, we should expect a wide range of L2s; a UX nightmare
The free market guarantees competing interests will not coalesce on the same interoperability protocols
11/31) Nor should they
Making a fully decentralized & permissionless L2 seamlessly interoperable with a custodian L2 is irresponsible
When the trust model differs; more user choice has to be introduced
However, it is this user choice which makes the UX untenable; a catch-22
Making a fully decentralized & permissionless L2 seamlessly interoperable with a custodian L2 is irresponsible
When the trust model differs; more user choice has to be introduced
However, it is this user choice which makes the UX untenable; a catch-22
12/31) This inevitably ends up in most users choosing custodians, which simplifies the process
This is exactly what happened to BTC's Lighting Network
Driving people away from using the empowering features of the L1 by arbitrarily restricting capacity
Into custodian solutions!
This is exactly what happened to BTC's Lighting Network
Driving people away from using the empowering features of the L1 by arbitrarily restricting capacity
Into custodian solutions!
13/31) As the majority of LN users are now on custodian solutions, I correctly predicted this back in 2015
This is all a UX nightmare & far too much to expect from normal users
Inevitably leading to people opting for custodian solutions, which is exactly what happened to BTC
This is all a UX nightmare & far too much to expect from normal users
Inevitably leading to people opting for custodian solutions, which is exactly what happened to BTC
14/31) I predict the same will happen on ETH if it continues like this
A common objection to this is that on-chain scaling sacrifices decentralization
ETH's original roadmap included execution sharding (horizontal scaling)
Somewhere along the way, ETH decided that was too hard
A common objection to this is that on-chain scaling sacrifices decentralization
ETH's original roadmap included execution sharding (horizontal scaling)
Somewhere along the way, ETH decided that was too hard
15/31) However, here comes the twist
In the meantime, blockchains such as NEAR, EGLD, XTZ, TON & more have proven that execution sharding is possible!
This means we can scale on-chain without sacrificing decentralization or pushing the majority of users onto custodian solutions
In the meantime, blockchains such as NEAR, EGLD, XTZ, TON & more have proven that execution sharding is possible!
This means we can scale on-chain without sacrificing decentralization or pushing the majority of users onto custodian solutions
16/31) The ETH community should not ignore this fact & demand that ETH pivots back to execution sharding
The trade-off in composability, interoperability & UX is overblown:
Especially compared to L2s which are far worse in this department, as I explained earlier in this thread
The trade-off in composability, interoperability & UX is overblown:
Especially compared to L2s which are far worse in this department, as I explained earlier in this thread
17/31) Sharding is a more competitive solution, one that will defeat the modular scaling thesis
As it will provide users with all of the benefits of the L1 chain without any of the inherent trade-offs that come with L2s
This can be done by "enshrining" L2s or sharding the L1
As it will provide users with all of the benefits of the L1 chain without any of the inherent trade-offs that come with L2s
This can be done by "enshrining" L2s or sharding the L1
18/31) This begs the question, why does ETH not do this?
Revealing the elephant in the room:
There is several orders of magnitude more funding for L2s compared to L1 in ETH & BTC
Billions are being created around L2 tokens, compared to mere millions for L1 development...
Revealing the elephant in the room:
There is several orders of magnitude more funding for L2s compared to L1 in ETH & BTC
Billions are being created around L2 tokens, compared to mere millions for L1 development...
19/31) This creates a massive bias toward L2 scaling
Even to the point of arbitrarily restricting L1 capacity & not pursuing L1 scaling technologies
We saw this in BTC as well;
As it went against the original vision for Bitcoin by arbitrarily restricting the block size limit
Even to the point of arbitrarily restricting L1 capacity & not pursuing L1 scaling technologies
We saw this in BTC as well;
As it went against the original vision for Bitcoin by arbitrarily restricting the block size limit
20/31) History is repeating itself in ETH
As its blocksize limit (gas limit) was set by miners & now its maximum is fixed by the client
Furthermore, ETH has pivoted away from on-chain scaling by dropping execution sharding from their roadmap
A betrayal of their social contract
As its blocksize limit (gas limit) was set by miners & now its maximum is fixed by the client
Furthermore, ETH has pivoted away from on-chain scaling by dropping execution sharding from their roadmap
A betrayal of their social contract
21/31) The incentives are so terribly misaligned in favor of L2 development
That major L2 companies such as Arbitrum have straight up bought out major clients such as Prysm
History is repeating; as this is what happened to BTC through companies like Blockstream & Chaincodelabs
That major L2 companies such as Arbitrum have straight up bought out major clients such as Prysm
History is repeating; as this is what happened to BTC through companies like Blockstream & Chaincodelabs
22/31) This is how L2s have become the greatest corrupting force in this industry
As they benefit from not scaling the L1 in the short term
Turning developers into multi-millionaires through L2 tokens & VCs
Certainly does add a strong bias towards L2 scaling over L1 scaling!
As they benefit from not scaling the L1 in the short term
Turning developers into multi-millionaires through L2 tokens & VCs
Certainly does add a strong bias towards L2 scaling over L1 scaling!
23/31) All systems with such perverted incentives will trend toward corruption given enough time
Blockchains are no different at this scale; as it can still be controlled at a center
History is repeating itself; a real tragedy for humanity, as it means ETH & BTC will not scale
Blockchains are no different at this scale; as it can still be controlled at a center
History is repeating itself; a real tragedy for humanity, as it means ETH & BTC will not scale
24/31) What is needed is ETH L1-biased funding instead of rent-seeking L2-biased funding
This can be achieved by taking part of the block reward & dedicating it to a treasury
Through on-chain governance, stakeholders would vote for proposals that allocate funds for development
This can be achieved by taking part of the block reward & dedicating it to a treasury
Through on-chain governance, stakeholders would vote for proposals that allocate funds for development
25/31) Thereby providing an indefinite source of L1-biased funding
This is not a new idea, having been pioneered by cryptocurrencies such as DASH, DCR & XTZ
Running live for years before the experiments in DAOs occurred in ETH
The mixed results; were due to a lack of scale
This is not a new idea, having been pioneered by cryptocurrencies such as DASH, DCR & XTZ
Running live for years before the experiments in DAOs occurred in ETH
The mixed results; were due to a lack of scale
26/31) However, even with all the flaws of on-chain governance; there is no better alternative
In that sense, it is like a democracy
Flawed, inefficient, corruptible & susceptible to mob rule
Yet still, it is the best form of government we have, just like on-chain governance!
In that sense, it is like a democracy
Flawed, inefficient, corruptible & susceptible to mob rule
Yet still, it is the best form of government we have, just like on-chain governance!
27/31) I am not against L2 solutions; I definitely do think they have their own niche use cases
However, I disagree with arbitrarily restricting L1 capacity in favor of L2 scaling
Allow both to scale within the bounds of decentralization & let the market decide which is better
However, I disagree with arbitrarily restricting L1 capacity in favor of L2 scaling
Allow both to scale within the bounds of decentralization & let the market decide which is better
28/31) Scaling the base layer allows both L1 & L2 scaling to occur
Favoring L2 scaling by restricting the L1 removes the option for users to choose L1
The goal of this restriction is to "force" users onto L2s
In reality, this will lead to users moving to scalable L1s instead
Favoring L2 scaling by restricting the L1 removes the option for users to choose L1
The goal of this restriction is to "force" users onto L2s
In reality, this will lead to users moving to scalable L1s instead
29/31) I was a Bitcoin supporter from 2013 to 2016
I even supported ETH from the first day of launch, mining it with several rigs in 2015
It makes me incredibly sad to see history repeating itself in this way
ETH is a huge improvement over BTC, but it too can be superseded
I even supported ETH from the first day of launch, mining it with several rigs in 2015
It makes me incredibly sad to see history repeating itself in this way
ETH is a huge improvement over BTC, but it too can be superseded
30/31) I do still have hope that ETH can pivot back to its original roadmap of execution sharding
Or pursue enshrined roll-ups instead
However, that would cause billions worth of L2 tokens & VC investments to be wiped out
Whether ETH leadership would do that remains to be seen
Or pursue enshrined roll-ups instead
However, that would cause billions worth of L2 tokens & VC investments to be wiped out
Whether ETH leadership would do that remains to be seen
31/31) I really do believe in the massive utility cryptocurrency will be able to offer the world
So this critique comes from a deep place of optimism; we can solve the scaling trilemma
I hope the ETH community can take this as a constructive criticism
For a truly better future
So this critique comes from a deep place of optimism; we can solve the scaling trilemma
I hope the ETH community can take this as a constructive criticism
For a truly better future
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