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The future of Ethereum (ETH) is very dependent on Layer Two (L2) scaling solutions, so crypto users need to learn how to evaluate L2 rollups such as Arbitrum (ARB), Optimism (OP), and Base.
Ethereum co-founder Vitalik Buterin has repeatedly shared his thoughts on X, community forums, and blogs on how crypto users can understand the security model of the roll-up system that they are using.
This week, Vitalik shared how he will talk about L2s in the future, proposing a new way to analyze the maturity and decentralization of an L2 rollup. Let’s investigate what he means.
State of Ethereum L2 Rollups in 2024
Firstly, we need to briefly discuss the state of the L2 sector in 2024.
Readers need to understand that L2 development is still in its nascent stage. The largest Ethereum rollups by market capitalization, Arbitrum, and Optimism, launched their mainnets less than three years ago, in 2021.
These projects were typically launched as minimum viable products (MVPs) with compromises made on decentralization and security to get the L2 chains off the ground and running.
As rollups mature, they remove these “training wheels” to make their systems more secure, decentralized, and with a quality of trustlessness.
That is why, on September 12, 2024, Buterin took to X to state that he would no longer publicly mention Stage Zero L2 rollups in his blogs and internet posts.
“The era of rollups being glorified multisigs is coming to an end. The era of cryptographic trust is upon us,” said Buterin.
“I take this seriously. Starting next year, I plan to only publicly mention (in blogs, talks, etc) L2s that are stage 1+, with *maybe a short grace period* for new genuinely interesting projects.”
I take this seriously. Starting next year, I plan to only publicly mention (in blogs, talks, etc) L2s that are stage 1+, with *maybe a short grace period* for new genuinely interesting projects.
It doesn't matter if I invested, or if you're my friend; stage 1 or bust.
Multiple… pic.twitter.com/4cGxgsfmUc
— vitalik.eth (@VitalikButerin) September 12, 2024
It’s a wise step for Ethereum’s co-founder, and there are learnings on L2s for all of us to consider.
How to Evaluate L2 rollups?
According to Buterin’s rollup evaluation framework, rollups can be categorized into the following three distinct growth stages based on their reliance on “training wheels”:
L2 Stage Zero: Full Training Wheels
Rollups are run by centralized operators at this stage. Take Coinbase’s Base L2 chain as an example:
Base, which saw its mainnet go live in August 2023, is currently operated by a single sequencer node — as of September 2024 — which is run by Coinbase. Sequencers are responsible for ordering L2 transactions, bundling them, and submitting them to the underlying L1.
This means that the single sequencer running a rollup has the power to censor L2 transactions. Furthermore, if the centralized sequencer node goes down, the rollup will stop functioning.
Sequencer nodes of a Stage Zero rollup chain are typically operated and maintained by its core development team.
Stage Zero rollups do not submit active fraud proofs or validity proofs to the underlying L1.
L2 Stage One: Limited Training Wheels
A rollup is classified as Stage One rollup when it starts being governed by autonomous smart contracts.
According to Buterin, a Stage One L2 must have a running fraud proof (in case of Optimistic rollups) or validity proof (in case of ZK rollups) system.
Stage One rollups can have a “Security Council” that has the power to override the proof system and post state roots in the event of potential bugs.
Buterin emphasized that the Security Council should have a 75% voting threshold to override a rollup’s proof system. He also added that 25% of the council must be outside a project’s core development team.
At the time of writing, crypto research company L2BEAT listed Arbritrum as a Stage One rollup. Arbritrum — the world’s biggest Ethereum L2 in terms of total value locked (TVL) — had a whitelist of 14 trusted addresses that could propose state roots and challenge them.
“On the other hand, if all of those 14 actors collude, an invalid state transition can be pushed through the protocol, significantly impacting safety,” said Luca Donno, a researcher at L2BEAT in a blog post.
L2 Stage Two: No Training Wheels
A rollup is considered a Stage Two rollup when it is fully managed by autonomous smart contracts.
At this stage, the Security Council is restricted to exercising power only to address “undeniable bugs” and protect against attacks.
Additionally, permissionless fault-proving systems must be in place, and network upgrades must have a delay period of over 30 days to allow users to exit in the event of unwanted upgrades.
“In the event that code does not have bugs, there must not be any group of actors that can, even unanimously, post a state root other than the output of the code,” said Buterin.
Only two rollups were classified as Stage Two rollups by L2BEAT as of September 2024. They were DeGate V1 and Fuel V1.
The Bottom Line
Crypto white knights like Buterin are constantly reminding the community to pay attention to decentralization levels and the trust models used in any crypto project we invest in.
We hope that the future will bring trustless L2s that can help Ethereum scale and achieve global adoption.
