Vitalik Buterin, the co-founder of Ethereum, has announced that he will no longer consider a network a “layer 2” if it has not reached “Stage 1” by the end of the year. According to Buterin, the era of rollups being glorified multisigs is coming to an end, and the era of cryptographic trust is upon us. The distinction of whether a network is a layer 2 is not just a technicality for the Ethereum community but also determines the level of security and trust it provides to users’ funds.
This issue was brought to the forefront when decentralized finance protocol Velocore was exploited, losing $2.6 million. Velocore ran on the Linea network, which claimed to be an Ethereum layer 2. However, the team quickly halted block production to prevent the attacker from withdrawing funds to Ethereum. Critics argued that this halting of block production should not have been possible if the network depended on Ethereum for its security.
Buterin had already commented on the subject a month before the Velocore attack, stating that all Ethereum layer 2s need to have reached “Stage 1” by the end of 2024. He defined “Stage 1” in a post to the Fellowship of Ethereum Magicians message board, where he argued that layer 2 networks should be given a grace period to develop and become fully decentralized over time.
Over the past two years, most networks marketed as layer 2s have remained stuck at Stage 0 or less, leading to criticism that the Ethereum ecosystem is decentralizing too slowly. However, six networks have managed to reach at least Stage 1, including Arbitrum One, Optimism, dYdX v3, ZKsync Lite, DeGate v1, and Fuel v1.
These networks have implemented various mechanisms to ensure security and trust, such as fraud proofs, Security Councils, and delayed upgrades. They have demonstrated their commitment to decentralization and censorship-free transactions.
On the other hand, there are four networks that have not yet reached Stage 1 but may still do so by the end of the year. These networks include Base, Blast, ZKsync Era, and Starknet. They are in various stages of evaluation and implementation of the criteria for Stage 1.
Finally, there are networks that do not meet the criteria for Stage 1 and are still below Stage 0. These networks, including Scroll and Linea, lack the necessary node software or transaction validation mechanisms to be considered layer 2s.
The distinction between layer 2 networks that meet Buterin’s criteria and those that do not will continue to be a topic of discussion within the Ethereum community. Supporters will push for more decentralization and may stop referring to networks as layer 2s if they do not meet the standards. However, it remains to be seen which side will prevail in the long run.