On September 12, Ethereum co-founder Vitalik Buterin announced a significant shift in how he perceives layer 2 networks. He stated that any network failing to achieve “Stage 1” by the year’s end will no longer be classified as a layer 2. “The era of rollups being merely advanced multisigs is drawing to a close,” he remarked, emphasizing that “the age of cryptographic trust is upon us.”
This classification isn’t merely a technical detail for the Ethereum community; it holds weight in discussions about the security and trustworthiness of these networks. A network’s layer 2 status indicates whether it relies on Ethereum’s security—a crucial factor for safeguarding users’ funds—or if it operates independently, which could raise concerns about its security.
The urgency of this issue came to light on June 2, when the decentralized finance protocol Velocore suffered an exploit, resulting in a loss of $2.6 million. Operating on the Linea network, which identified itself as an Ethereum layer 2, the Velocore team swiftly halted block production to prevent the attacker from siphoning funds to Ethereum. Critics contended that such a pause should not have been feasible if the network genuinely depended on Ethereum for its security, as Ethereum itself cannot be halted by any authority.
In the wake of this incident, some critics argued that the Ethereum ecosystem is progressing toward decentralization too slowly. Buterin had previously addressed this topic a month prior to the Velocore attack, asserting that all Ethereum layer 2 networks must reach “Stage 1” by the end of 2024; otherwise, the community should cease referring to them as layer 2s.
### Understanding Stage 1
The concept of “Stage 1 layer 2” originates from Buterin’s post on November 2, 2022, to the Fellowship of Ethereum Magicians forum. In this post, he pointed out that Ethereum layer 2s were still in their infancy and could not be expected to achieve full decentralization immediately. Developers would require time to fully develop their networks, which would initially be heavily centralized but gradually evolve into permissionless systems that ensure censorship-resistant transactions.
A “Stage 0” network self-identifies as a layer 2 or “rollup,” posting compressed versions of its transactions to Ethereum. Additionally, it provides a “rollup full node,” allowing independent confirmation of the state of layer 2 as long as the complete transaction data from both layers is available. Users can withdraw from the network autonomously unless the team attempts to obstruct them by submitting a false state root to Ethereum.
In contrast, a “Stage 1” rollup incorporates a smart contract on Ethereum that features a “fraud proof or validity proof scheme,” preventing developers from posting invalid state roots. Should the developer attempt to make fraudulent withdrawals or block legitimate ones, those transactions will typically fail. However, this system has a safeguard: a vote from at least six out of eight members of the network’s Security Council can override the fraud proofs, a necessary measure in case bugs are discovered in the system.
Moreover, at least three of the eight Security Council members must not be affiliated with the development team, theoretically preventing the developers from unilaterally overriding the proofs. Any network upgrades must also be enacted with a minimum seven-day delay unless approved by the Security Council.
Since Buterin’s original post, most networks branding themselves as layer 2s have remained stuck at Stage 0 or lower, triggering criticism that the Ethereum ecosystem is not fulfilling its potential. However, six networks have successfully advanced to at least Stage 1.
### Networks Achieving Stage 1
According to research from blockchain analytics platform L2Beat, several networks have now reached Stage 1, ranked by total value locked (TVL):
1. **Arbitrum One**: This network has achieved Stage 1, operated by 14 validators who process transactions using fraud proofs. Any attempt to submit fraudulent transactions is blocked unless explicitly overridden by the Arbitrum Security Council, which consists of 12 members, with no single organization allowed to hold more than three seats. Upgrades by the ArbitrumDAO face a delay of 12 days and 8 hours, while the Security Council can upgrade the network immediately.
2. **Optimism**: Reaching Stage 1 on June 10, Optimism implemented the “Cannon” fault-proof system, but reverted to Stage 0 on August 17 due to detected bugs. The system was reactivated on September 11, restoring its Stage 1 status. Fraudulent transactions attempted by Optimism validators will be rejected unless overridden by a Security Council vote.
3. **dYdX v3**: This Ethereum layer 2 operates separately from the Cosmos-based dYdX v4 and employs zero-knowledge validity proofs to ensure the integrity of withdrawals. Validators can block withdrawals for up to 14 days, after which users can initiate a “forced exit” on Ethereum.
4. **ZKsync Lite**: Utilizing zero-knowledge proofs for transaction validation, ZKsync Lite doesn’t allow the team to process invalid transactions. Upgrades take effect after a 21-day period, during which users can initiate forced withdrawals if their requests are not included.
L2Beat also recognizes **DeGate v1** and **Fuel v1** as having achieved Stage 1, categorized as “Stage 2” networks, indicating they are fully decentralized.
### Networks Falling Short of Stage 1
The top four networks currently not classified as Stage 1 by L2Beat either fail to meet one of the criteria or are still under evaluation. Although all have reached Stage 0, they could potentially meet Stage 1 requirements by year’s end:
1. **Base**: Coinbase’s Base network does not currently implement fraud proofs. As part of the Optimism Superchain, it could easily adopt fraud proofs, but it hasn’t yet done so.
2. **Blast**: Recognized as a Stage 0 network, Blast users can run nodes to check deposit and withdrawal validity but lack the ability to withdraw funds against governing body decisions.
3. **ZKsync Era**: While Matter Labs claims ZKsync Era uses zero-knowledge proofs, its status is still under evaluation by L2Beat. The team recently announced a new governance system aimed at boosting decentralization.
4. **Starknet**: Although it has zero-knowledge validity proofs in place, Starknet requires permission from layer-2 validators for withdrawals, obstructing its classification as Stage 1.
There are several other networks with less than $600 million TVL still categorized as Stage 0. These include Mode, Lisk, Polygon zkEVM, and others, all of which have met at least one Stage 1 criterion but not all.
### Conclusion
As of now, two networks with over $700 million TVL, Scroll and Linea, have not even reached Stage 0 despite claiming to be layer 2s. Ethereum supporters are likely to continue advocating for greater decentralization within these networks. If teams fail to meet Buterin’s criteria, they may find themselves stripped of the “layer 2” label. The future remains uncertain as to which direction the Ethereum ecosystem will take.