Crypto Fund CIO Tags Ethereum L2 Solutions As Dangerous, Here’s Why

Justin
Bons,
the
founder
and
chief
investment
officer
of
European
cryptocurrency
fund
Cyber
Capital,
has
once
again
criticized
the
operations
of
Ethereum
L2
solutions.
In
a
recent
X
post
on
Saturday,
Bons
tagged
these
blockchain
platforms
designed
to
improve
the
scalability
of
the
Ethereum
network
as
dangerous
with
the
capacity
to
cart
away
users’
funds
unchecked.

Ethereum
L2
Centralized
Design
Poses
A
Problem?

According
to
Justin
Bons,
most
major
Ethereum
L2
solutions
are
centralized,
with
single
servers
often
being
responsible
for
running
the
platform’s
operations. 

The
Cyber
Capital
CIO
states
that
this
design
which
goes
against
the
cypherhunk
principle
of
decentralization
and
security,
can
be
considered
harmful
to
investors
as
these
chains
can
collapse
at
any
moment
due
to
a
singular
event
or
even
be
manipulated
to
steal
users’
funds. 

In
backing
these
claims,
Bons
made
reference
to
Consensys’
zkEVM
Roll-up
network
Linea
whose
management
on
June
2nd,
2024,
initiated
a
pause
in
block
production
due
to
a
bug
in
the
platform’s
smart
contract.

The
acclaimed
crypto
researcher
also
highlighted
when
the
Optimism
chain
underwent
a
2-hour
downtime
on
February
15th,
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
to
the
centralized
nature
of
these
projects.

The
Cyber
Capital
founder
expresses
significant
opposition
to
these
L2
solutions,
stating
they
do
not
offer
the
same
level
of
security
and
stability
as
the
main
Ethereum
network.
In
addition,
he
states
while
an
adverse
scenario
such
as
loss
of
user
funds
is
yet
to
occur,
the
fact
that
such
potential
exists
is
highly
concerning. 

Interestingly,
these
statements
follow
previous
claims
by
Bons
that
Ethereum
had
formed
a
parasitic
relationship
with
L2s
whereby
these
platforms
now
almost
run
independently
of
the
main
network,
with
significant
control
over
liquidity
and
other
factors
crucial
to
the
Ethereum
ecosystem.

Ethereum
Poised
For
Further
Price
Decline

In
other
news,
popular
crypto
analyst
Ali
Martinez
has
postulated
that
Ethereum
may
yet
maintain
a
downtrend
for
the
time
being.
Notably,
the
prominent
altcoin
produced
an
underwhelming
performance
in
August
losing
22.36%
of
its
value.

According
to
the
MVRV
momentum
(180-day),
which
measures
the
change
of
the
market
value
to
realized
value
ratio
over
180
days,
Ethereum
still
appears
largely
overvalued.
Therefore,
its
downtrend
is
likely
far
from
a
reversal.

At
the
time
of
writing,
the
second
largest
cryptocurrency
exchange
hands
at
$2,500
with
a
slight
loss
of
0.99%
over
the
last
day.
Meanwhile,
the
asset’s
daily
trading
volume
has
declined
by
55.75%
and
is
valued
at
$6.85
billion.