Ethereum
Ethereum Developers Shut Down Linea: Can Layer 2 Networks Be Trusted?
Late Saturday, a Ethereum The Layer 2 network called Linea found itself stuck between a rock and a hard place.
Through an exploit, attackers drained $2.3 million worth of ETH from a decentralized exchange running on Linea, called Velocore. Unable to contact the Velocore team, Linea executives made the decisive decision to freeze all transactions on the network in order to prevent further embezzlement. The plan worked: Linea users were protected against further losses.
That’s when the trouble started.
Crypto users immediately denounced Linea’s actions on social media, arguing that the company had violated the industry’s fundamental principle, decentralization. If a few people could stop Linea in their pajamas, how could the network be considered better than Wells Fargo?
Linea immediately pivoted, assignment on Twitter that the network was still in the “training wheels” decentralization phase, but planned to eventually move to a completely trustless structure. (Disclosure: Linea is owned by Consensys, which is one of 22 investors in Decrypt).
According to some developers, the incident highlighted a contradiction that does not only concern a single blockchain. Rather, it exposed flaws in the entire burgeoning Layer 2 ecosystem, a collection of private networks that have often been touted as Ethereum’s network. the path to follow.
“So you’re saying you intervened on behalf of the users here, but in the future, hopefully, if you work really hard, you won’t be able to intervene and your users will lose all their money?” Tom Lehman, co-founder of several Ethereum projects, including a layer 1 alternative Facet and Ethscriptions, told Decrypt. “That does not make sense.”
For Lehman, the contradictions revealed by Linea’s public relations woes this week are not isolated: they are endemic to Layer 2 networks.
“Having a centrally controlled layer 2 is not a problem,” he said. “It’s just that each of them being centrally controlled is a problem.”
Almost all major scaling networks, like Optimism, Arbitration, BaseAnd Polygon– were created by private, for-profit companies. Most rely on sequencers, controlled by the network team, which aggregate transactions and submit them to the Ethereum mainnet. In such cases, like Linea’s, project teams have the power to effectively shut down a network by shutting down said sequencers.
Why do most Layer 2s have such centralized control over their transactions? Linea, who did not respond DecryptAt the time of publication, he claimed in statements this week that this was a technical issue that requires long-term finesse.
But financial incentives can also play a role. By controlling this single choke point through which all transactions must pass, Layer 2 teams also control the profits gained from processing each network transaction. These fees are the lifeblood of Layer 2s, which often employ dozens of people, and these Ethereum networks are collectively managed. raking in millions of dollars in monthly profit on chain.
“L2s can be very profitable to run,” Lehman said. “But that profit is tied to how much control you have.”
Some Tier 2 teams say they are ahead of the pack and have taken distinct steps toward decentralization. Arbitrum, for example, offers a backup pathway that allows users to post their transactions directly to Ethereum, in case any issues arise within the Arbitrum ecosystem. However, submitting trades through this delayed inbox is not ideal and can take up to 24 hours.
Steven Goldfeder, CEO of Arbitrum lead developer Offchain Labs, said Decrypt that the company is currently working to decentralize its sequencer, but has been keen to argue that it poses less of a threat to centralization than other Layer 2s, given that the Arbitrum Foundation alone could not prevent users from posting transactions .
“On Arbitrum, the problem is much less than on other networks,” Goldfeder said.
Goldfeder welcomes harsh criticism regarding the risks of centralization in the Layer 2 ecosystem. He believes that such dissent puts crucial pressure on companies that might otherwise focus on different priorities.
“Otherwise the incentives are wrong: growth first, and decentralization at some point,” he said. “If we just take a centralized system and replace it with another centralized system with a vague pretense of eventual decentralization – often without technical details – then I think that’s very dangerous. »
Some developers like Arjun Bhuptani, the founder of the inter-blockchain bridge Everclearhowever, believe that even Arbitrum’s solution to the current Layer 2 centralization problems is insufficient.
“It’s better, but it’s still not ‘censorship resistance,'” he said. Decrypt arbitration.
Additionally, Arbitrum itself suffered network-wide breakdowns Many times Last year.
For Bhuptani, the issue of centralization is so pervasive at Layer 2 simply because private networks currently face other, more important concerns.
“A lot of it comes down to a question of priorities,” he said. “Projects today see greater threats to their survival on axes other than censorship, and so building decentralization is a lower priority than things like security, custody risk, and traction. walk.”
It is true that the question of censorship on layer 2 networks is still largely theoretical. The Linea team, for example, has never used its power to block transactions on behalf of a sovereign government.
But there is nothing fanciful about such a scenario. The American government has blacklisted Ethereum wallet addresses on several occasions. Centralized crypto exchanges have cooperated with the Israeli government to ban the reported accounts. Last month, a Dutch court sentenced a developer of Tornado Cash, an Ethereum coin mixer designed to keep transactions private, to more than five years in prison.
Even those who are part of the layer 2 ecosystem are worried about what could happen if the private teams behind so many networks, which, thanks to their incredibly low transaction fees, have recently been positioned as the best way to safely bring crypto to the masses – are legally required to respond to orders from governments around the world.
“Something I might consider legitimate,” Goldfeder said, “an oppressive regime somewhere might think it’s illegitimate behavior that should be censored.”
Some Ethereum developers, however, believe that this week’s entire debate over the future of Linea and crypto has been blown out of proportion.
“It’s easy for people who weren’t affected by the hacks to complain,” said Joseph Schiarizzi, developer of the Arbitrum-based stablecoin OpenDollar. Decrypt. “But if you have ever been a victim, you understand that the Linea team made the right choice.”
“I don’t expect every piece of infrastructure to be decentralized,” he continued. “I care much more about honesty and transparency, which is what Linea excelled at.”
Lehman, which is currently developing a more decentralized alternative to networks like Arbitrum and Optimism, said it does not want to demonize Layer 2 networks or dismiss their usefulness. He is only worried about the future of cryptocurrencies if they become ubiquitous.
“The problem comes when you say L2s are the future, this is how we evolve, that’s all,” Lehman said. “And in the process, [you] hand over the keys to and approve giant billion-dollar entities that operate insecure systems.
Edited by Andrew Hayward