Cyber Capital founder Justin Bons recently expressed concern about ethereum’s current woes, attributing entrenched corruption to a major misalignment of its incentives.

Bons asserted on social media that money flowing into the ecosystem through layer 2 solutions outstripped investment in layer 1. The gap between millions and billions has been the main reason for Ethereum’s departure from Layer 1 scaling, a development that is naturally to be expected in any system scaling.

The core problem is that Ethereum has gone astray, resulting in an unusual incentive structure. Developers, influencers, and leaders are forced to make higher profits in the short term by adhering to the Layer 2 narrative while supporting the Layer 1 capacity-limiting narrative.

This conflict of interest creates a clear conflict between the long-term success of the Ethereum network and the immediate benefits of Layer 2.

Bons suggested that Ethereum should consider returning to Layer 1 scaling by adopting roll-ups or shard chains. Additionally, he highlighted the continued interest among Ethereum developers in the ZK EVM (Zero-Knowledge Ethereum Virtual Machine), which has the potential to scale to Layer 1. However, its development is still in its infancy and is not yet considered viable.

What is needed is on-chain governance that directs funds from block rewards to a decentralized treasury. This approach, which would establish a Layer 1-centric source of funding capable of competing with opposing interests, has been validated by established public blockchains such as XTZ, DASH, and DCR.

The challenges facing Ethereum highlight the need for a strategic alignment of incentives that prioritizes Layer 1 scaling. As the ecosystem continues to grow, a balance must be struck between short-term gains and long-term sustainability.

Bons’ recommendations shed light on potential solutions, emphasizing the importance of addressing these issues in a timely manner.

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Filed under: Bitcoin - @ May 30, 2023 7:55 am