# L2s are Not the Future of Scaling | Justin Bons | ETHDam 2023

- Channel: [CryptoCanal](https://streameth.org/cryptocanal)
- Date: 2023-10-07
- Duration: 26:31
- Watch: https://streameth.org/watch/yt-u89QIi8wnKA
- YouTube: https://www.youtube.com/watch?v=u89QIi8wnKA

## Description

Justin Bons is the Founder & CIO of Cyber Capital.
https://twitter.com/Justin_Bons

ETHDam is a Hackathon & Conference that gathered over 500 DeFi and Privacy builders on the 20th and 21st of May 2023 in Amsterdam. 

Privacy is normal. Following the arrest of Alex Pertsev, a Tornado Cash developer in the Netherlands, ETHDam 2023 is determined to counter the chilling effects of the lawsuit and bridge worlds to discuss the future of privacy and encourage to build on the shoulders of cypherpunk giants.

ETHDam is powered by CryptoCanal, - a blockchain education and events platform growing in Amsterdam, spreading its roots to Rotterdam and Zurich. ETHDam 2024 is on the map already! Keep up with us to see updates: 

CryptoCanal https://www.cryptocanal.org/
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Join CryptoCanal Community https://t.me/CryptoCanalCommunity 

We would like to thank our partners and sponsors that made this event possible. 🌷
Our BFF 1inch https://1inch.io/

Our Frens: 
Sismo https://www.sismo.io/
Aleph Zero https://alephzero.org/
Scroll https://scroll.io/
RAILGUN https://railgun.org/#/

And our Sisters:
oasis.app https://oasis.app/#earn
Maven11 https://www.maven11.com/
bitvavo https://bitvavo.com/en
Lido https://lido.fi/
Spankchain https://spankchain.com/
API3 https://api3.org/
Gelato https://www.gelato.network/
VanEck https://www.vaneck.com/nl/en/crypto-etn
Marlin Protocol https://www.marlin.org/
Silent Protocol https://www.silentprotocol.org/
Cyber Capital https://cyber.capital/
… and Proto https://twitter.com/protolambda 🍍

## Transcript

foreign well now we have what I thought was going to be a keynote but sounds more like a you're just going to give your Spiel is um l2s are not the future of blockchain scaling so a little bit controversial which I think the the person standing to my right is yeah very very renowned for so I'd like to introduce Justin bonds please go around Applause enjoy [Applause] hello all right it's a pleasure to speak to you all today and I'm up on stage here with what is indeed a bit of a controversial opinion especially for uh an ethereum conference so it's my view that layer 2 scaling is is very much the long path for ethereum to go towards um I believe that for most of ethereum's History execution sharding was was actually solidly on the roadmap and um about a year ago there was a pivot uh you know by the ethereum foundation and by the community by the developer community at large to Pivot away from execution sharding and focus on a layer 2 based roadmap now this is fundamentally something that I I disagree with and I'm going to explore why I disagree with this decision and there's multiple reasons why but I'd like to focus on on one of the big reasons why um which is that well first of all if we look at some of the largest layer twos take polygon which has a admin key which is able to steal or use of funds that live within the polygon contract that exceeds over a billion dollars if we look at optimism it's smart contract also has an admin key which is also able to still use the funds also exceeding you know several billion dollars we have arbitrim which also has a admin key controlled by a multi-sig which is also able to steal user funds right like this to me is very much goes against the very ethos of cryptocurrency and what we're trying to build here and and the pivot away from execution sharding by ethereum has been my biggest disappointment in cryptocurrency over the last few years not not FTX not free arrows Capital not regulation not the Beer Market no I think fundamentally speaking I think there's most harm is being done by this particular pivot in the roadmap and I would like to explain why I think it's such a bad idea and there's multiple reasons I can I can get into I can talk about the sequences and how desentralizing the sequences you know fundamentally requires another layer of consensus which will always inherently be weaker than the layer one but I think the more pressing issue is actually ux is the user experience now I'd like to just create a simple example to highlight the problem if I'm an ethereum user and I want to send another user ethereum it's very simple I say do you have ethereum yes I have ethereum I scan your QR code and then I press send it's a very simple straightforward user experience as long as you trust ethereum right I think that is a good user experience now if we imagine what a layer 2 ecosystem looks like what that user experience looks like looks like it is very different because with layer twos now if I want to do that same transaction with another user I have to ask that user okay what layer 2 are you using right do I understand the security and decentralizations of that of that layer too am I even able to directly transfer to that layer two do I need to go through a bridge first right so there's multiple steps that I need to take as a user in order to actually use that layer too that to me is a far far use worse user experience furthermore breaking things up in a way where we have an ecosystem with say hundreds of layer twos right in a free market this creates a diversity of choice this creates a free market of competition and in a free market of competition not everyone is going to agree with each other you're going to have competing power blocks you're going to have competing interests so all of these Solutions are not going to magically coalesce into a single interoperability protocol I I believe that is not going to happen right that is a major major issue right that means that compared to the Alternatives you know it will never be able to solve that fundamental problem so that means that liquidity ends up being fragmented composability across layer twos is fragmented and and interoperability is highly restricted requiring a user to go through many more steps in order to reach their end goal now saying all of this you might say in response well you know that is better than any of the other Alternatives we have right and this is why I mentioned execution sharding earlier I'm proposing that ethereum should in fact pivot back to its original roadmap which promised the deployment of at least 64 shards initially which the validators would be able to then validate as a whole and every Shard would be identical to each other that is what makes a shattered system interoperable that is what makes a a shattered system far more usable and importantly allows still for composability between the shards because as long as the chain is not congested you can use cross Shard transactions in order to solve that problem and it's and and the cost of that will still remain very low and it can be very automated on the back end this is not the case with a layer 2 ecosystem because with a layer 2 ecosystem the only way to solve the ux problem is to take away user choice now if you want to have a layer 2 ecosystem that is fully interoperable in a free market you're going to have custodian Solutions you're going to have admin Keys you're going to have trusted Bridges and to make that interoperable is actually putting a lot of risk on the user to be able to travel through all of those different steps where each step along the way there's a potential for failure and also the requirement for a user to understand all of these complex mechanisms to really assess the risk realistically instead of just using ethereum I think is a is a terrible mistake in the direction that ethereum is heading into and I'm saying this as an ethereum advocate I I mined ethereum in in 2015 in the first week of launch ethereum has been the largest investment in the fund I manage since since it launched in 2016 right so it's not easy for me to come up on stage and say guys I think ethereum is seriously taking the wrong direction here like it's making a massive mistake and I if ethereum will not scale its layer one I'm convinced that given enough time competitors will in fact overtake it because block space is valuable and I believe there is a massive utility that exists as part of cryptocurrency and and that utility is not captured with the layer 2 approach to scaling because of the fragmentation that occurs because of the free market dynamics which create competition which create competing power blocks all of these different competing companies are not all going to going to magically agree to use the same interoperability protocol this is why web 2 is also fragmented right if you're transacting between different banks different countries where you're going to have all sorts of delays you want to have all sorts of risk you're going to take all sorts of trust assumptions and the same is true with this idea of this layer 2 approach and I will add I don't believe demand is infinite I think we can scale to meet demand this is a critical understanding in this entire equation now I would like to address um another elephant in the room because I think it's not just the case that ethereum is taking the wrong path in its scaling roadmap which which I definitely do think is the case it's become a little bit worse than that and I think ethereum has set itself up in such a way that it's severely has severely misaligned incentives I would even go so far as to call this a form of corruption and let me put this very simply okay there is a few million dollars let's say of of funding for layer one development you know through the foundation and that money is slowly running out and not a lot of that money is even being devoted to layer one scaling at this stage a lot of it is being devoted towards Layer Two now if you compare that to funding for the layer 2 ecosystem we're talking about tens of billions of dollars tens of billions of dollars of funding for layer 2 development okay compared to Mere Millions I joined cryptocurrency because I believe in in in incentives I believe in systems and instead of predicting the actions of individuals which which can vary wildly people can be very evil and very righteous right across that Spectrum but I think if you take a large enough group of people over a sufficient amount of time then you can start predicting behaviors and if you have a system that is putting billions of dollars into Layer Two development and only millions of dollars into layer one development then I think that system will favor layer one development sorry Layer Two development at the cost of the layer one right that is a huge elephant in the room and I think I think that is something that you know the ethereum community needs to fight right I've talked to so many developers that were once core developers that are now layer 2 Developers and they're certainly making a lot more money as they are two Developers right this is a huge problem right especially considering that that layer two scaling is such an inferious solution from the ux perspective from from the perspective of actually creating a real D5 economy foreign it's also the case and it even has gone so far as for instance Arbor term is literally buying clients right you know this to me is creating a huge perverted incentive and and I'm sad to say and and I've I've been a researcher in this space since 2013. this reminds me an awfully a lot of what happened to BTC as well you know that's where history is repeating itself it reminds me in awfully a lot of that because BTC decided to restrict layer one capacity in favor of layer 2 capacity and look at where it is today right the layer one is still has the same limit as it did uh 10 years ago it has not scaled and lightning Network right has a very very small capacity there's more BTC in the ethereum network that's wrapped than there is in in in in the BTC lightning Network right I think one of the reasons ethereum was so successful I think there's multiple reasons one was the programmability which I think was a critical Innovation for ethereum but also that that Bitcoin reached its capacity and fees were spiking and ethereum came along and ethereum had tenfold the capacity of Bitcoin and transactions were cheap right and that's no longer the case because we've hit capacity and we haven't actually increased the gas limit and I understand that there is a limit to how much we can increase the gas limit before we start to sacrifice decentralization and this is where execution sharding I believe is a key solution to solving this problem because it allows for horizontal scaling you're able to deploy more shards as the network scales as activity increases go back to the corruption problem as well there's also another solution for this as well I believe the solution actually lies in decentralized governance right because if you take if you take part of the block award and then devote that to a treasury and then build a proposal system that's one way to create a L1 biased source of funding that's able to fund the development of the L1 without that I don't even think ethereum even has the funding who is going to fund this this sharding today like that that's a charitable proposition there's no money to be made there right this is why you need an independent source of funding in the independent source of funding for for layer one and I believe the answer there lies in execution shouting you know this is a to me this is a very sad situation um to see this happen again and um you know I really think the user experience is is really really lacking you know I mean just just think about it for yourselves you know fragmenting liquidity fragmenting composability all of this can be solved for execution shouting that's why it was on the original roadmap right today we only have dank shouting on the roadmap which is only shouting data and the data is there in order to scale the layer twos not to scale the layer one that means according to the current ethereum roadmap we're going to see very minimal increases in layer one capacity meaning fees will remain high meaning that if you're moving between layer twos sometimes you'll even have to touch the layer one right I think this is an uncompetitive solution I think the more a blockchain can scale while preserving desensualization the more competitive that blockchain becomes all right I think it'd be good to take some questions here um and please keep the question short because I will um I will repeat the question so that the mic can hear it hands up any questions okay yeah so so so the question is what is the solution like how do we solve this problem right so I currently believe that a lot of the ethereum developers have uh made up their mind that this is the correct path forward and they're committed they committed to this and and to talk about the misaligned incentive as well if we decide to now if we pivot back to scaling the layer one what will happen to those billions of dollars in investment from VCS uh from layer 2 tokens a lot of that value is going to get wiped out right we're talking about tens of billions of dollars of investment value being destroyed if we scale the layer one that is a massive misalignment incentive most of the people working on that used to work on layer one sharding work for layer twos today right so the solution to this has to be a Grassroots movement it has to be the ethereum community itself that stands up and demands a different roadmap and we need to convince developers we need to convince leaders to take a different path because if we don't do this long term I'm convinced that ethereum will lose its dominant position I'm convinced of that and this is why I'm standing on this stage now warning everybody of this threat warning you of the corruption warning you of the misaligned incentives warning you that this is the wrong path forward and I really want you to take this to heart I think this is actually one of the biggest issues that we're facing as a community and I think we need to reopen that discussion because quick me if I'm wrong here but a year ago there wasn't a giant debate about this pivot it just sort of happened and the narratives just shifted over time by the influences by by the leaders so to speak you know so I think I think in that sense it has to be a Grassroots Movement we have to start thinking about how to build opposition how to have how to fund competing clients that actually develop the technology that can be implemented on ethereum you know I I don't have all of the answers to this there are developers out there that that supported the original roadmap for instance the gith Developers for example have been also have been outspoken about this issue if we can find a way to fund development and actually produce code then we can start to have a real discussion about can we implement this code I think that that has to be the solution here and um I don't think we should just you know roll roll and show our stomachs and say well we're just going to do whatever the ethereum developers say we should do I think that's not desensualization I think we need to think about this as a community and not just follow you know what the leaders say like sheep to the slaughter all right another question thank you yeah that's a really good question so I'll just repeat the question here for the microphone um the question is do I still think there is uh demand for layer twos now I'm really happy you brought this up because I because I do want to bring a bit more of a measured approach here yes I do think there are use cases for layer twos right certainly I think uh desensifies exchanges which require high volume I think potentially uh things like streaming services where you have a relationship with a single service in which you can say load your uh Capital into right I think there are multiple applications where layer twos make sense but as a replacement for layer 1 scaling I think it's a flawed approach so I mean I think that's an important distinction to create and I think a lot of the value around layer twos is with the assumption is that it's just going to take over all activity and and I really don't think that is a realistic scenario what I really think would happen is yes you're a strict layer one capacity and then more people will move to layer twos but even more people I think over enough time will move over to competitors just because the ux is so much better just because it it it it maintains composability foreign Ty I think this is very very important you know from the perspective of a user I think as developers it's very easy to forget you know what it's like for a normal person to use cryptocurrency I'm not talking about about all of the people in this room today I'm not talking about your average ethereum user today I'm talking about bringing in the masses of of the world to actually be able to use this system and they're not going to use a system where they have to think about oh well does this have an admin key does this have a sequencer uh is this decentralized are my funds safe or not right and and also you know person a and person B can't transact because that wallet doesn't share this particular interoperability protocol that I think is also a terrible terrible approach and I think is a losing approach you know this is why it's so critical that we really think about this question critically and start to engage and start to think about Alternatives you know I I signed up to ethereum because I thought it was going to scale the layer one that's why I've been such a long time supporter and I can continue to be a supporter in in the hope that it's able to Pivot back because I think the ethereum has a wonderful Community full of open-minded people right who who are happy to hear an opposing opinion which is why I'll step off the stage and no one's going to attack me for what I've said and I think that is fantastic and that's where I see the potential for the ethereum community to still be able to Pivot back even if the narrative sounds so absolute today in terms of the direction ethereum is taking but we have to all keep in mind this is a new narrative this wasn't the case a year ago and it is today and we really have to ask ourselves how is that able to change so quickly how is it able to just shift so suddenly I've talked to so many people who still think that the layer one that ethereum is still going to scale its main chain and it's just not the case all right thank you for the question another question yeah we have one more question all right Global space yeah yeah and and can I so the question is can I see layer twos as a type of testing ground which can later be implemented in the layer one absolutely and I think the same is actually true for competing layer ones as well these are also testing grounds you know you know one of the reasons I'm so um confident in my position is that I'm is that today there's multiple cryptocurrencies that have implemented execution shouting successfully multiple right so the code is live it's running they've proven that it can be done just to name a few uh uh alrond near uh ton there's multiple examples of live execution charting with multiple shards cross-shar transactions and it actually works multiple ethereum developers have told me that it's too hard that they can't do it well if that's the case we need different developers if I'm being completely Frank because if other developers can do it then ethereum should be able to do it as well especially considering that it's clearly the better approach you know what are we doing here you know I think I think the reality is that a lot of cryptocurrencies at this scale are effectively still centralized in terms of their decision making you know I I believe in a decentralized future but I'm also realistic that that in reality there's influence there's this politics this interwoven interest this conflicts of interest and what happens in the end is the decision practically of maybe a hundred people tops okay that is not decentralization you know and that is fine when a cryptocurrency is still at an early stage that is fine but if we see that hitting in the wrong direction the community needs to stand up and and speak out against this and actually create an opposition create an alternative a better path this is why I stand here today and I'm saying ethereum is taking the wrong path and there is a better path and we should be taking the better path that leads to a better user experience a more scalable blockchain right a more decentralized blockchain because you know this this idea this idea that in a layer 2 ecosystem all of these layer twos are magically going to burn their admin Keys they're going to everyone is going to decentralize their sequences everyone is all just going to agree to use the same interoperability protocol that's a fantasy that's not taking human nature into account you know in a system where you allow the free market to solve this problem you're going to end up with a hundred different solutions and that is a user experience nightmare and it's also a nightmare for defy and so many people are going to get hurt by this as well because they're forced to use Bridges they're forced to use layer twos that have admin keys and we're putting so much at risk when we could just be using ethereum I want to scale ethereum layer twos do not scale ethereum at all right thank you thank you very much [Applause]