Opinion: From Decentralization to L2 Dependence, Ethereum Is Drifting Further Away from Its Original Vision
TechFlow Selected TechFlow Selected
Opinion: From Decentralization to L2 Dependence, Ethereum Is Drifting Further Away from Its Original Vision
If you truly love Ethereum and Bitcoin, you must be willing to let go for the sake of their original ideals.
Navigating Web3 tides with focused insightsAuthor: Justin Bons, Founder & CIO of Cyber Capital
Translation: TechFlow
Most L2s will remain centralized because the incentive structures are inherently distorted.
The so-called "solutions" to these problems are overly optimistic and border on laughable.
Profit-driven companies won’t give up their revenue streams.
This is why ETH has deviated from its original vision and become a centralized service platform:
Competing L1s and L2s are eating away at ETH’s user base, while its leadership actively promotes and celebrates ETH’s decline. This is a tragic state of affairs, as it betrays the founding principles they once claimed to uphold. By promoting centralized solutions, they also empower corporations forced to comply with government censorship.
Privacy has always been one of the cornerstones of the cypherpunk movement, as cryptography once promised widespread privacy-enhancing technologies. Yet ETH pushes most users toward L2s that can monitor, freeze, steal, and censor funds—clearly departing from earlier cypherpunk ideals. It is walking down the same self-destructive path as BTC, choosing L2 scaling over on-chain scaling. In fact, history is repeating itself:
The Centralization Reality of L2s
Currently, all major L2s are fully centralized and capable of censoring and stealing user funds. Since multi-sig-controlled admin keys can alter contract rules (including enabling theft), and centralized sequencers can instantly censor transactions, the risks are immediate and real.
Even more concerning is the potential direction of change. Here, the situation becomes particularly dire, as every proposed solution to L2 centralization relies on an absurd level of optimism—requiring profitable companies to voluntarily relinquish substantial current revenues…
This completely ignores human nature and historical precedent—a common mistake among elite engineers and computer scientists. It also underscores why blockchain research must be multidisciplinary, incorporating insights from the humanities. Critiques of ETH's proposed solutions aren't technical in nature but expose inherent social coordination failures embedded within them.
Decentralization requires powerful stakeholders to surrender their power. Historically, this rarely happens, as it contradicts their incentives. Occasionally, exceptional individuals make the right choice. But overall—and especially when observing large groups—we should always consider incentives, as they are far better predictors of mass behavior.
This is precisely why I believe most L2s will never decentralize. The incentives strongly favor keeping L2s centralized. “Trust me, bro” isn’t sufficient—especially in a space where we should verify, not blindly trust.
Drake’s Counterargument
Moving revenue collection from one part of the system to another isn’t a valid solution, as @drakefjustin recently attempted by shifting Base’s revenue to the execution layer rather than the sequencer. For Base to be truly “decentralized,” Coinbase would need to relinquish *all* revenue. Drake’s suggestion to keep execution centralized clearly isn’t viable.
The harsh truth is that Coinbase may never decentralize—that’s the reality behind the so-called “L2 scaling” roadmap! Users are handed over to centralized, effectively custodial solutions, crushed under the weight of KYC, AML, and institutional-level censorship, obliterating the original vision.
L2 Interoperability
L2s have consistently opposed adopting universal interoperability protocols, instead pushing their own proprietary solutions—even at the cost of long-term sustainability. This mirrors the Tragedy of the Commons in political science. Over twenty attempts at unified interoperability amount to no agreement at all!
L2s don’t just compete with each other—they also compete directly with L1s, creating multiple fragmented ecosystems instead of one cohesive network, unlike the L1 scaling approach. The free market will continue producing diverse, competing L2s representing different interest groups that don’t always cooperate. While this dynamic is often beneficial, for blockchain scaling it leads only to massive fragmentation, ultimately degrading user experience. Believing everyone will adopt the same seamless interoperability protocol while custodians exit due to superior technology… is pure fantasy, incompatible with how free markets actually function, where custodial and centralized L2s will always exist.
Ironically, while the ETH core team advocates for L1-based sequencing, major L2s are building their own “shared sequencers,” such as Arbitrum’s Superchain and Polygon’s Agglayer. For “shared sequencing” to work, everyone must use the *same* one—which is clearly impractical. Expecting dominant L2s to abandon their efforts in “solving interoperability” is unrealistic. The same applies to Eigenlayer and other restaking platforms, which perform similar sequencing functions.
All of this makes a true shared sequencer impossible—it’s mostly greed-driven fantasy. Their idea is: if everyone uses the same L2 (their L2), UX problems vanish! Technically possible? Perhaps. Realistically feasible? No. I see this as analogous to BTC maximalists who believe there will eventually be only one…
This is why fragmentation and composability issues between L2s remain permanently unresolved. The same reason explains why interoperability between L1s has also failed to materialize. However, at least in that case, L1s aren’t artificially constrained by flawed L2 narratives. So my issue isn’t with L2s per se, but rather the lack of focus on L1 scaling—even if that neglect results from L2 lobbying.
Economic Security
The trend of moving actual usage away from ETH is the root cause of its decline, because cryptocurrency survival depends on economic security. While @aeyakovenko mocks the ETH community as a joke, revenue remains critical. Clearly, blockchains that support their own usage will generate significantly more revenue in the long run than those outsourcing all usage. And ETH is moving toward the latter—an extremely unwise strategy by any measure!
Distorted Incentives
Now let’s address the elephant in the room: L2s receive orders of magnitude more funding than ETH or BTC L1s. L2 tokens and venture capital have generated billions, while L1 development receives mere millions. This creates obvious conflicts of interest, even opening the door to outright corruption. Due to distorted incentives, developers might deliberately limit L1 capacity to benefit L2s—simply by avoiding or opposing L1 scaling initiatives.
This is why L2s have become the industry’s largest corrupting force. In the short term, they profit by preventing L1 scaling. L2 tokens and equity have turned developers into millionaires. Unsurprisingly, this fosters a strong preference for L2 scaling over L1 scaling. By supporting narratives that restrict L1 capacity and promote exclusive L2 expansion, L2s stand to gain more. This creates a clear conflict between the long-term success of L1s (ETH and BTC) and the short-term profits of L2-focused companies.
It’s also because VC firms can extract rent via the “L2 scaling” narrative—since L2s are typically profitable enterprises, whereas L1 scaling is a public good. VCs cannot take a percentage fee from well-designed L1s, but doing so on L2s has become standard practice. Scaling L1s offers little short-term benefit to these investors, while the “L2 scaling” roadmap delivers returns—even if it plants the seeds for ETH’s eventual self-destruction.
L1 Scalability
Both perspectives hinge on a core assumption about L1 scalability. ETH’s stance holds that the trade-offs of L1 scalability are unacceptable, thus justifying the “L2 scaling” roadmap based on this perceived technical limitation.
In contrast, the L1 scaling view is more optimistic, asserting that current L1s can scale to meet demand without sacrificing decentralization. Whether through full parallelization, DAGs, or sharding, multiple paths exist. The ETH community is ideologically locked into an outdated technological framework, much like the Bitcoin community. ETH is rapidly becoming a legacy “dinosaur” like BTC, complete with similarly harmful, almost cult-like ideological traits.
ETH Maximalism
ETH supporters are increasingly indistinguishable from Bitcoin maximalists—not coincidentally, as they’ve adopted nearly identical philosophies and narratives as coping mechanisms or belief systems.
This stems from identical systemic flaws in the governance structures of both BTC and ETH. Thus, environmental pressures have given rise to a specific belief system—akin to convergent evolution in biology. I firmly believe that had formal on-chain governance been implemented, refusing to scale the L1 would never have been considered a viable option.
Governance
Ultimately, the question comes down to: “Who decides?” The unfortunate reality is that BTC and ETH development is often dictated by a relatively small group of individuals. This is the essence of “off-chain governance”—a highly centralized decision-making process vulnerable to manipulation by small, motivated factions (like profit-seeking L2s) who directly benefit from short- and medium-term strategies of not scaling the L1.
On-chain governance, by contrast, allows all stakeholders to vote on proposals through a fully transparent process, yielding vastly different outcomes. Most importantly, such governance tends to favor the health of the L1 over the interests of whichever group currently holds concentrated control.
From political and philosophical perspectives, off-chain governance processes are easily manipulated and distorted, as “GitHub-style dictatorship” lacks the robustness of formal national institutions. Conversely, on-chain governance involving numerous stakeholders, combined with sophisticated checks and balances and separation of powers, stands a better chance of enduring over time and resisting humanity’s worst impulses.
On-chain governance should be seen as a mechanism to protect decentralization—not a repetition of old, traditional governance models. In fact, the opposite is true: off-chain governance is often a poor imitation of pre-blockchain governance systems. On-chain governance represents a new paradigm, leveraging blockchain technology’s strengths and aligning with L1 integrity and collective decision-making. Therefore, it’s no surprise that BTC and ETH leadership reject it entirely. Those with the most influence stand to lose the most under on-chain governance, which explains why existing incentives prevent its adoption unless established early.
The Real Solution
The solution lies in abandoning ETH and directing support toward its more scalable competitors. As stakeholders, we have no real voice in ETH’s governance.
We can certainly appreciate efforts within ETH to drive fundamental change—similar to BTC’s block size debate. Yet, as a veteran of that “civil war,” having stood on the “big block” side—the so-called “losing” side—I see little hope. Back then, the vast majority of businesses, miners, stakers, and users supported larger blocks, yet core developers achieved their goal anyway: eight years later, the block size limit remains effectively 1MB!
It’s hard to imagine stronger theoretical proof of centralized control over supposedly decentralized network rules. ETH lacks even the broad support for change that existed during BTC’s era, so I don’t see how it could succeed—especially without formal on-chain governance.
In crypto’s free market, we must also consider a significant demographic shift: those who support L1 scaling have left ETH, while those who oppose it have joined. So who remains to fight for L1 scaling? The same pattern occurred with BTC, turning it into a monoculture devoid of real transformative potential. All these shifts originate from the top, gradually steering entire ecosystems away from their original missions.
We once believed in “fork governance,” but this model has two fatal flaws: First, the threshold for “agree or fork” is too high, effectively becoming a disguised form of authoritarianism. Second, markets haven’t bypassed controversial chains via forks—they’ve opted instead for next-generation chains. That’s why the market didn’t route around BTC via BCH, but rather upgraded and shifted en masse to ETH at the time.
History Repeats
I went from being a diehard Bitcoin believer in 2013, to raising alarms in 2015, to becoming a critic by 2017.
I abandoned BTC, believing in ETH’s promises of on-chain scaling and sharding, becoming a strong supporter in 2015—only to sound the alarm again in 2022, and finally becoming a full critic by 2024.
Regardless of how you interpret my position, one thing is clear: despite our protests, I’ve remained highly consistent, while BTC and ETH have fundamentally changed under my observation. Radically altering a blockchain’s economics and purpose through arbitrary capacity limits runs counter to conservatism—we must not allow them to hide behind “conservatism” or “social contracts” when these principles have already been completely violated.
The real tragedy is that we’ve now missed global adoption opportunities twice, potentially setting progress back decades. But here’s the silver lining: we can now clearly identify the problems and implement solutions in the latest generation of blockchains, finally breaking this painful cycle.
Conclusion
This brings us back to the original solution—and explains why ETH is destined to fail. For the sake of decentralization and the cypherpunk dream, we must support ETH’s competitors with our actions.
If you truly love Ethereum and Bitcoin, you must be willing to let go—for the sake of their original visions. Because those visions matter far more than the price of any three-letter ticker. Focus on the big picture: the greatest goal of all—changing the world through financial sovereignty, censorship resistance, and real monetary independence!
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@cybercapital
