Justin Bons, the founder and chief investment officer of European cryptocurrency fund Cyber Capital, has again criticized the activities of Ethereum L2 solutions. In a recent X post Bons called these blockchain platforms, which are intended to improve the scalability of the Ethereum network, dangerous on Saturday because they can siphon off users’ money in an uncontrolled manner.
Is Ethereum L2’s centralized design a problem?
According to Justin Bons, most major Ethereum L2 solutions are centralized, with individual servers often responsible for running the platform’s operations. Cyber Capital’s CIO argues that this design, which goes against the cypherhunk principle of decentralization and security, could be considered detrimental to investors, as these chains could collapse at any time due to a single event or even be manipulated to steal users’ funds.
In support of these claims, Bons pointed to Consensys’ zkEVM Roll-up network Linea, whose management paused block production on June 2, 2024 due to a bug in the platform’s smart contract.
The acclaimed crypto researcher also highlighted that the Optimism chain experienced a 2-hour downtime on February 15, 2024 due to a bug in the network’s centralized sequencer. In addition to these examples, Justin Bons’ report also included similar incidents with other Ethereum L2 solutions, such as Starknet, ZkSync, Arbitrum, and Polygon, all of which can be traced back to the centralized nature of these projects.
The founder of Cyber Capital strongly opposes these L2 solutions, stating that they do not offer the same level of security and stability as the main Ethereum network. Furthermore, he states that while an adverse scenario such as loss of user funds has yet to occur, the fact that such a potential exists is very worrying.
Interestingly, these statements follow previous claims by Bons that Ethereum had formed a parasitic relationship with L2s, resulting in these platforms now running nearly independently of the main network, with significant control over liquidity and other factors critical to the Ethereum ecosystem.
Ethereum poised for further price decline
In other news: Popular crypto analyst Ali Martinez has postulated that Ethereum can continue a downward trend for the time being. It is notable that the prominent altcoin underperformed in August, losing 22.36% of its value. According to the MVRV momentum (180 days), which measures the change in market value to realized value ratio over 180 days, Ethereum still appears largely overvalued. Therefore, the downtrend is likely far from a reversal.
At the time of writing, the second-largest cryptocurrency exchange is trading at $2,500, down slightly by 0.99% over the past day. Meanwhile, the asset’s daily trading volume has dropped by 55.75%, valuing it at $6.85 billion.
Main image from Forbes USA, chart from Tradingview