Connect with us

Crypto World

Vitalik Buterin issues a blunt reality check to the biggest crypto networks

Published

on

Vitalik Buterin issues a blunt reality check to the biggest crypto networks

Ethereum co-founder Vitalik Buterin said the role of layer-2 networks needs to be reconsidered as Ethereum’s main network continues to scale and transaction costs remain low.

In a post on X, Buterin said the original rollup-centric roadmap, which positioned layer-2s as the primary way Ethereum would scale, “no longer makes sense.” That roadmap envisioned layer-2s as secure extensions of Ethereum that would handle most transactions while inheriting Ethereum’s security guarantees, often described as “branded shards” of the network.

Layer 2s, such as Arbitrum, Optimism and Base, are offchain networks built on top of primary blockchains (Layer 1s) like Ethereum. The main purpose of these is to increase transaction speed and reduce transaction costs on the main network.

Think of Ethereum’s main network as a packed main hall at a conference. Space is limited, so getting in can be slow and expensive. Layer-2 networks act like overflow rooms, letting people participate and interact without crowding the main hall, while still staying connected to what’s happening there.

Advertisement

‘You are not scaling Ethereum’

According to Buterin, two developments have challenged that original vision for Layer 2 networks.

First, progress among layer-2s toward later stages of decentralization has been slower and more difficult than expected. Second, Ethereum itself is now scaling directly on layer-1, with fees remaining low and gas limits expected to increase significantly in 2026.

Buterin wrote that scaling Ethereum should mean creating “large quantities of block space that is backed by the full faith and credit of Ethereum,” where activity is “guaranteed to be valid, uncensored, unreverted, untouched, as long as Ethereum itself functions.”

He argued that high-throughput chains connected to Ethereum through multisig-controlled bridges do not meet that definition. “If you create a 10000 TPS EVM where its connection to L1 is mediated by a multisig bridge, then you are not scaling Ethereum,” he wrote.

Advertisement

In his view, Ethereum no longer needs layer-2s to function as “branded shards” for the network. This means that, because Ethereum itself is scaling, layer-2 networks are no longer required to function as official extensions of Ethereum. He also noted that many layer-2s are “not able or willing” to meet the decentralization and security standards required by the model.

Buterin also noted that some layer-2s may intentionally choose not to move beyond “stage 1,” including for regulatory reasons.

In one example, he wrote that a project argued it may never decentralize further because “their customers’ regulatory needs require them to have ultimate control.” While he said that approach may be appropriate for those users, he added that such systems should not be described as scaling Ethereum.

“This may be doing the right thing for your customers. But it should be obvious that if you are doing this, then you are not ‘scaling Ethereum’ in the sense meant by the rollup-centric roadmap,” Buterin wrote.”

Advertisement

Instead, Buterin suggested viewing layer-2s as a spectrum of networks with different levels of connection to Ethereum, each offering different trade-offs. He said layer-2s should focus on providing value beyond basic scaling, such as privacy features, application-specific design, ultra-fast transaction confirmation, or non-financial use cases, and be clear with users about what guarantees they provide.

Read more: Ethereum co-founder Vitalik Buterin warns decentralized stablecoins still have deep flaws

Source link

Advertisement
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Crypto World

Solana (SOL) Plunges Below $100, Bitcoin (BTC) Recovers From 15-Month Low: Market Watch

Published

on

BTCUSD Feb 4. Source: TradingView


Meanwhile, HASH and HYPE have declined the most over the past 24 hours after charting impressive gains lately.

Bitcoin’s adverse price actions as of late worsened yesterday when the asset tumbled to its lowest positions since early November 2024 at $73,000 before recovering by a few grand.

Most altcoins followed suit with enhanced volatility, but some, such as SOL, HYPE, and CC, have been hit harder than others.

Advertisement

BTC’s Latest Rollercoaster

It was just a week ago when the primary cryptocurrency challenged the $90,000 resistance ahead of the first FOMC meeting for the year. After it became official that the Fed won’t cut the rates again, BTC remained sluggish at first but started to decline in the following hours.

The escalating tension in the Middle East was also blamed for another crash that took place on Thursday when bitcoin plunged to $81,000. It bounced off to $84,000 on Friday but tumbled once again on Saturday, this time to under $75,000. Another recovery attempt followed on Monday, only to be rejected at $79,000.

Tuesday brought the latest crash, this time to a 15-month low of $73,000. It has rebounded since then to just over $76,000, but it’s still 3% down on the day. Moreover, it has lost 14% of its value weekly and a whopping 18% monthly.

Its market capitalization has plummeted to $1.525 trillion on CG, while its dominance over the alts has declined to 57.3%.

Advertisement
BTCUSD Feb 4. Source: TradingView
BTCUSD Feb 4. Source: TradingView

SOL Below $100

Most larger-cap altcoins have felt the consequences of the violent market crash lately. Ethereum went from over $3,000 to $2,100 in the span of a week, before bouncing to $2,280 as of now. BNB is down to $760, while SOL has plummeted to under $100 after a 7% daily decline.

Even the recent high-flyer HYPE has retraced hard daily. The token is down by 11% to $33. CC and ZEC are also deep in the red, while XMR has gained the most from the larger caps.

The cumulative market cap of all crypto assets has seen more than $70 billion erased in a day and is down to $2.65 trillion on CG.

Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto
Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto

 

SPECIAL OFFER (Exclusive)

SECRET PARTNERSHIP BONUS for CryptoPotato readers: Use this link to register and unlock $1,500 in exclusive BingX Exchange rewards (limited time offer).

Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Advertisement

Source link

Continue Reading

Crypto World

Pumpfun Unveils Investment Arm and $3 Million Hackathon

Published

on

Pumpfun Unveils Investment Arm and $3 Million Hackathon


PUMP rallied as much as 10% but erased its gains as crypto markets dipped.

Source link

Continue Reading

Crypto World

Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

Published

on

Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

Assets in spot Bitcoin (BTC) ETFs slipped below $100 billion on Tuesday following a fresh $272 million in outflows.

According to data from SoSoValue, the move marked the first time spot Bitcoin ETF assets under management have fallen below that level since April 2025, after peaking at about $168 billion in October

The drop came amid a broader crypto market sell-off, with Bitcoin sliding below $74,000 on Tuesday. The global cryptocurrency market capitalization fell from $3.11 trillion to $2.64 trillion over the past week, according to CoinGecko.

Altcoin funds secure modest inflows

The latest outflows from spot Bitcoin ETFs followed a brief rebound in flows on Monday, when the products attracted $562 million in net inflows.

Advertisement

Still, Bitcoin funds resumed losses on Tuesday, pushing year-to-date outflows to almost $1.3 billion, coming in line with ongoing market volatility.

Spot Bitcoin ETF flows since Jan. 26, 2026. Source: SoSoValue

By contrast, ETFs tracking altcoins such as Ether (ETH), XRP (XRP) and Solana (SOL) recorded modest inflows of $14 million, $19.6 million and $1.2 million, respectively.

Is institutional adoption moving beyond ETFs?

The ongoing sell-off in Bitcoin ETFs comes as BTC trades below the ETF creation cost basis of $84,000, suggesting new ETF shares are being issued at a loss and placing pressure on fund flows.

Market observers say that the slump is unlikely to trigger further mass sell-offs in ETFs.

“My guess is vast majority of assets in spot BTC ETFs stay put regardless,” ETF analyst Nate Geraci wrote on X on Monday.

Advertisement
Source: Nate Geraci

Thomas Restout, CEO of institutional liquidity provider B2C2, echoed the sentiment, noting that institutional ETF investors are generally resilient. Still, he hinted that a shift toward onchain trading may be underway.

Related: VistaShares launches Treasury ETF with options-based Bitcoin exposure

“The benefit of institutions coming in and buying ETFs is they’re far more resilient. They will sit on their views and positions for longer,” Restout said in a Rulematch Spot On podcast on Monday.

“I think the next level of transformation is institutions actually trading crypto, rather than just using securitized ETFs. We’re expecting the next wave of institutions to be the ones trading the underlying assets directly,” he noted.