More than 85% of Layer 2 (L2) protocols on the Ethereum network are under the control of venture capitalists. This has sparked disapproval from the crypto community and debates about possible risks and implications for the sphere.
According to L2BEAT, this year, the total value locked (TVL) in the Ethereum L2 ecosystem grew by 158% and reached a record high of $10.69 billion in August, with the majority of projects in the sector receiving funding from various VCs.
Within the L2 ecosystem, the dominant networks are:
- Arbitrum One with a $5.87 billion TVL, accounting for 56.73% of the total value locked in the sector. The protocol developers raised about $120 million in venture capital funding to develop the project.
- OP Mainnet with a $2.68 billion TVL is 25.88% of the total value locked in the sector. Developers raised $150 million with the help of a VC fund to develop the project.
- zkSync Era with a $424 million TVL. Though the protocol dominates only about 4% of the sector, the developers managed to raise $200 million in VC.
Thus, over 85% of the Layer 2 protocol market is under the control of venture capitalists. This dominance may potentially entail certain risks, in particular, it could reduce the degree of decentralization and independence of networks.
This information sparked various discussions in the crypto community. Chris Blec, an advocate for decentralization, believes that L2 networks could face regulation due to corporate control and the pursuit of profit. He notes that many of these networks are run by large corporations and funds, which could reduce their decentralization.
His words are supported by the opinion of experts who expect increased regulation in this area. If L2 networks are further exposed to the influence of venture capital funds and fall under the management of large corporations, it may lead to more active regulation by government agencies.
Another cause for concern about the future of the L2 ecosystem was a statement by Vitalik Buterin, Co-Founder of Ethereum. He highlighted the problems of decentralization of L2 solutions, claiming that all Layer 2 networks on the Ethereum platform had “backdoors.” That is, the management of such protocols can exercise centralized control and code changes if necessary, which can also facilitate regulation from the outside.
The most active growth in the Ethereum ecosystem this year was seen in the sphere of Layer 2 solutions.
