Do We Still Need L2s Now That Ethereum Has Scaled? - Uneasy Money

I gave it a MetaMask. I put money in the Metamask. That sounds great. That sounds like it's going to go well for us. Yeah. And I said, "Go, go make this transaction." And it couldn't figure out how to get the MetaMask dialogue. He's like, "I can't find the UI. Where is it? What's going on?"

It immediately was like, "I'm going to get the private key out of MetaMask and do this the real way." And I was like, "No, no, no, no, no, no." And I start saying, "Stop, stop, stop." And it won't stop. I have to like go to the machine and like I'm pulling, you know, like, "No, please don't get the private key."

Cla was like, "Bro, they blocked me." And then they followed the link and then opened an issue on the GitHub and very politely pointed out that we had like illegitimately blocked it and like like made his arguments as to like why this was legit. He like cited sources to like prove the legitimacy, which for the record, the human Austin did what most humans do, which is open X and was like, "Metamouse sucks." Yeah. Tag him.

Hey everyone, I'm Kane Warick and welcome to Uneasy Money because what happens on chain never stays on chain. Unfortunately Luca couldn't join us today, but I'm very excited because we have a couple of extremely special guests.

I'm here with Taylor, security at Menamask. And I've also got Austin, who I guess is claiming to fame is he's been doing crazy things with AI Agents on chain. I also have Carl the CTO of OP Labs.

So we are going to be getting in some L2 stuff, some Clanker stuff. It's going to be very fun. So one quick thing before we start, nothing you hear on Uneas Money is financial advice. We're just for builders talking about what's happening on chain and we want you to always do your own research before aping in.

You can find all of our disclosures at onchaincrypto.com/unemoney. And here's a word from our sponsors.

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All right. We are back. This is actually quite funny, right? So, usually we have Luca and Taylor and like Luca and I are like kind of on the spectrum of like crypto like a bit centrist and then Taylor's like a you know a little bit to the let's call it left right like the Ethereum wing and then I find myself I wake up this morning and I'm on the extreme edge of like lunacy over here in like multi-shane land and I've got a bunch of ETH maxis on the other side. replaced Luca with Luka with like the most E people you could find. I was like, what's going on here? But anyway, I'm here for it. It's going to be fun.

So first things first, Vitalic dropped a bit of a bomb, an L2 bomb on the timeline yesterday, saying the original vision of L2s as branded shards, which I had never heard that term before, so that was also wild. This thing you've never heard of no longer makes sense, guys. And I was like, "All right, you're like, "Cool. Checks out." I've never heard it before. I wasn't really wedded to it, but okay.

L2 decentralization has stalled short of stage two. While Ethereum itself is scaling faster than expected. Fees are low. Gas limits are set to rise materially in 2026. Many L2s are not and may never be fully decentralized. Some of them are like actively against decentralization at this point, which is certainly was not on my bingo card.

So, that's pretty amazing for various reasons. regulatory control, business reasons. So, they're not going to scale Ethereum because they're not really Ethereum. They're doing some other weird thing, right?

And so L2s should be seen as a spectrum ranging from Ethereum secured systems to application specific chains with different trust assumptions. And you know, scaling alone is no longer enough. L2s need to find some differentiation, some product market fit outside of just scaling Ethereum because Ethereum is going to scale itself at this point in in 2026. It appears like that's going to happen.

And we had some interesting reactions. Stephen from Arbitum was like, "We are an Ethereum pro, so like don't even worry about it. Not even a problem." And I was like, "What? Wait, what?" And I think someone went back and screenshotted a thing where he's like, "We're totally Ethereum. We're basically the same."

So, as an L2 founder, I don't know, Carl, what's what's your take? Is OP Ethereum? Is it not Ethereum? Is Ethereum even a thing? Where where are we at here in the arc of history?

Why are you giving me the hardest, dumbest question of all time? You're the best person. Like, seriously, optimism is Ethereum. I mean like okay depends on your definition of Ethereum. Is it a culture? Is it a chain? Well, if it's a chain then obviously it's not Ethereum. If it's a culture, it's Ethereum culture. Certainly. I worked at the Ethereum Foundation. Optimism was built to scale Ethereum and you know make progress on the frontier. So yes and no I guess.

But you know just on that right like let's let's talk about scaling. I think the thing that is, most interesting to me about this entire thing, right, is that L2s did the job that they were supposed to do better even than like anyone expected, right?

And like even me, like I was there in the early days like trying to help, you know, mean this into existence, right? and L2's uh you know they they succeeded wildly but also Ethereum in the interim while we had this L2 scaling road map managed to also succeed far more wildly I think than most of us reasonably expected right u and now it's like given the state of the world what is the optimal thing for Ethereum right ignore L2s for a second like what is the optimal thing for Ethereum and it appears like certainly from Vitalic's perspective, it's like let's lean into Ethereum being Ethereum and and scaling that, getting people to do things on Ethereum again that we haven't really been able to contemplate.

But then okay, what do we do with L2s? Like what is the point of an L2 then if Ethereum is scaling? Like what where do we land there?

I mean, okay, first off, when we say like part of this is crazy because when we're saying, okay, Ethereum is going to scale and if you want Ethereum homogeneous block space, then you should use Ethereum. Okay, great. That's exactly use Ethereum blockspace if you want Ethereum guarantees.

But then Vitalic in the same post also says if you don't want Ethereum properties, if you want custom building, if you want custom, you know, you name it. There's so many different chains, there's so many different business use cases, there's so many user use cases. If you don't want that, then you should still use Ethereum for things like data availability, for security. You know, you can do your own L1, but you should still use Ethereum because Ethereum is providing services to more than just the people who want to utilize it as block space.

So, this is to me there's some quotes in the tweet that are a little bit easy to content farm, some might say, but it was a long tweet. If Vitalic writes a 20,000word tweet, there's going to be some in there that's you could like, wait, hold up, hold up. Insane.

the so Austin like you know you've been a builder for a very long time in Ethereum deep in the the kind of deep uh dev og community building tools to make these easy for people like I remember one of the first things that that we talked about was your uh like um L2 kind of primer for people to like really understand like how L2s were you know connected and stuff right and and so um like how do Do you see this as a as a engineer who's helping engineers learn how to use Ethereum?

What are you saying to engineers? Like what should they be doing here?

I think part of it is return to mainet. Like it's cheaper now. We can do cool things on mainet again. We should be saying weird things like TCRs again.

I should I should point out you're not actually talking to the engineers you're talking to are not humans. They're inside of Okay, that's right. So, we should we should preface that with I'm not there's no assumption you're talking to people on Twitter here, right? Like you're talking to clankers on Maltbot trying to explain to them how to engineer on on Ethereum, right? Okay, cool. Yes.

So, yeah, I'm at home talking to my three MacBook Pros that or Mac laptops I have laying around. But what I'm telling them is return to mainet. It's cheaper there. When you want that those kind of security concerns, deploy on mainnet like return to mainet.

But L2s are going to have all sorts of cool different things. Shout out like Luca was going to be here with Abstract Chain. Abstract Chain did something really cool with like account abstraction, right? We saw a neat like smart contract wallet thing there. It may take L1 a long time to get that right. These L2s and L3s are getting that right.

So I I see some interesting like mainstream adoption happening out on the L2s where people don't even know they're using a blockchain and they want to have like this like very abstracted kind of experience. pass keys you you know well with with Infinex but like also maybe on L1 you need you know nation state level hardness and that's where you want to deploy to and it's a lot cheaper there now you can deploy a smart contract for like 15 cents right now it's insane.

And and these open claw agents are they buying this story or like what where they do whatever I say man I yeah there's so much better than people the only time I ever have person are they not asking you which one's going to like which which one do I buy here? I need to I need to make some money. My human sent me out here to make money. I I need to figure this out.

So So I don't know, Tay, like what's your what's Were you surprised by this? Was this like No. No. You're not surprised by anything anymore. That's No. No. I think that um I think my biggest takeaway was that it seems like Vitalic specifically is sort of both more in tune with sort of like the let's call it like the macro but like the crypto macro picture not like macro macro just crypto macro. uh and also quicker to like go on Twitter and say things which is good even if you disagree with him even if maybe the ideas are not fully evolved uh or like perfect they're never going to be perfect so like being able to have discussions and push back I think it's like a way healthier environment to operate in.

And I think my biggest takeway is just like the environment has changed. I think that if you go back in time and you consider where Ethereum was at and L2s there was sort of like a couple different paths we could go down. One of which is just like keep focusing on Ethereum and like keep uh treating everything else as a potential like threat and a bad thing and whatever. I think that that would have not necessarily created like a a great desirable competitive environment not be healthy and not get us to like a net positive place. I think that like it was sort of necessary to collectively decide that L2s work great for Ethereum against right like we had to scale Ethereum and it wasn't scaling itself, right? So someone had to do it. Yeah. Um so I think Yeah.

And also like in my view I don't think Ethereum would be in the position it is today without that. It would not it would like definitively not be fire situation. And and so now, but a lot has changed. Okay, so like the L2s have kind of like everything in crypto always went a little bit overboard with the L2s for us. Like a couple some good ones in there, but like we got like 800, bro. Like what the hell did we do? Yeah.

All right. A lot of them like as Vitalic points out a lot of them uh are are even the ones that you you kind of expected to like fully decentralize like aren't prioritizing that then you have this whole other array that like just never were going to or whatever. Um, and I think that like if you ask yourself today, what is it that Ethereum focused people and the Ethereum foundation especially, what do they need to see as like the north star, right?

And I think that one, they need clarity on the L2s because there is because if you don't provide that clarity, people are going to continue to ask why we're why we're accepting and supporting these things that like work against the mission. Um, but number two, I think that, you know, providing that clarity on that northstar specifically for Ethereum things, like no, we're not going to make excuses and say that the ALUS can do it. We're going to do it. It's going to be hard, but we're going to do it anyways.

And, uh, I don't know, like a lot of people take issue with some of Vitalik's leadership, I guess, things that he does, how he leads people. I can't fault him for this one. It feel certainly feels to me like he is on a much more pragmatic like you know realistic arc at the moment right like with with still you know some fatal copium mixed in because he's Vitalic but but like there there's a level of like pragmatism and like we have practical market solutions that we need and so there's two things right that I I'm curious your takes on.

one is um there's been this conversation that started from uh like DevCon last year, right? Um or maybe like 18 months ago or something of like you know Koffman saying we got to tax the L2s, right? Like we we must jack up the prices. The prices are too damn low. Um and and like there was a big kind of response to that of yeah like L2s are ripping off Ethereum. um they're, you know, getting all this cheap block space, not paying their fair share, and we should jack up the price, right? And it kind of peted out and people were like, "Ah, we don't have the technology to do that."

Um, does this feel like somewhat of the response to that kind of, you know, movement a little bit or do you think it's unrelated this idea of like come back to L1 and just pay for block space directly on L1, don't use the blob space for these cheap transactions like let's bring everyone back there. Is that is does it feel like this is part of the same thread or is that just completely unrelated?

I'm I'm I I just have to I'm bubbling with the desire to respond. Okay, I got so much first off. Absolutely not. And first off, I will also say my conspiracy theory is that that whole L1 versus L2 narrative was propagated by competitors to Ethereum uh to make us weaker as a community. You think compliments compromise? And if you if I you think he's I don't think intentionally. Wow. I don't think intentionally, but I think I think there was there was something that happened. Wow. Real talk. Anyway, um sorry conspiracy theory. The second thing I love L2. You're right.

Um we have 700 L2. No, a compliment is not compromised. He's he's very principled. But anyway, um the uh uh we have 700 L2s. We are pre-adoption, pre- global adoption of Ethereum, of blockspace, of crypto. Like 700 L2s is not about the quantity of L2s. It's about the quality of L2s. We have a handful of quality L2s. And the key is that Ethereum needs to capture that market, the market of all of the financial institutions that are coming on chain. He just, you know, shipped out this thing called OP Enterprise to get all of these institutions where using Ethereum, using Ethereum block space.

And so this is literally the very beginning. We are at the very beginning of the adoption curve. They are not even, you know, we have not even come close to seeing the cycle complete or the, you know, the realization of our Ethereum, you know, Ethereum vision. And then I think that like in terms of what do we do? How do we tax the L2s? Let's make sure we pump. I bet at least you're saying I like the fact that you've acknowledged that we must tax them. So, that's good. I'm glad. Yeah, I'm glad we're on the same page.

How do we tax them? We When when Ethereum provides value, it should get value in return. And guess what? Ethereum provides enormous amounts of value. And so, guess what? I was actually in favor of raising the base fee because it was so cheap before. It was probably not even covering the costs for the validators. So we need to at least cover costs and we should probably do a little bit more. However, that being said, as a growth phase, I just said, how much of the global financial system is on chain right now? Zero. Less than a percent, something like that. Round it to zero. We are round it to zero. We are literally in the very beginning of adoption.

And what do you do when you're, you know, about to grow and you're trying to grow and win the market, get a vast majority of the pie? Well, you raise the fees so that no one uses it. No, you lower the fees, bring everyone in, and then establish some equilibrium where you take value that you deserve and all of the users on your platform do too. And that is the reality. And customization is how we win that marketplace. And all right, it's just the beginning for Okay, so I I've got a couple of follow-up questions for for you guys.

So, if you go back to like the 90s, right, there was this platform war of what is the infra of the internet going to be running on, right? And Windows was like obviously NT, bro. Like it's like the best, of course, right? Um, and uh, and then these crackhead open source guys were like, no, no, no, like we've got Linux. Like it's like I built it in my basement. It's amazing. We should use that. Um, and Linux obviously won and it won by being free and easy to build on and open and all of those things, right?

Um, and I I you know, Kmani's rolling this grave right now because I'm arguing from analogy, but anyway, we'll we'll we have to mention him at least once per show. It's the contractual obligation. Uh, we're trying to get him to sponsor the show, that's why. So, eventually he will.

So, then these other guys show up, right? And like the whole internet's running on on Linux and everyone's like, "All right, it's the year of Linux on the desktop. We're going to go and get the end users, right? We're going to go and everyone's going to use Linux because it's obviously the best thing. The internet runs on it. Come on. People love installing drivers. It's amazing, right?"

Um, and so then Steve Jobs turns up and is like, "You know what? We've got this like shitty thing. it's a bad OS and we're gonna just take this one and we're going to wrap it up and now Linux is on the desktop but it's this weird hybrid OSX thing right um and like on some level you go well they won but they didn't win the way that they were expecting to win but like they definitely won there's no question like they won the internet like Linux and Unix won the internet they won the good desktops at at least right um and and so you know if we are in this world where EVM is the like Unix Linux equivalent right this open thing and it's like you should use this thing what does that mean for like adoption right like what does that mean for uh you know a per a startup that turns up and says we're going to build a new startup what framework are we going to build it on we're going to build this new like what does that mean like does that play out in the same way of like choose EVM but it might not be on Ethereum. It might be this different thing but at least it's EVM.

Well, I super short. I think that with one thing that Vitalik has made clear with this is like you should not create another freaking L2. And I think that that's like a really good thing like uh really really good thing because in my opinion we're past the point of healthy competition. I would even take like some like Salanaesque like do like truly duking it out competition. But at this point the if you're like adding these L2s if you keep if you keep having people come in and be like, "Oh, I'm going to create another arbitrage. I'm going to do another optimism." I don't think we're going to get net gains from that. Interesting. You know what I'm saying? That wasn't my takeaway from the post. I didn't I didn't think he was saying no more L2s. Maybe I Maybe I And he's not okay. He's not saying no more L2s.

But if you're a builder, right, and you're like like three years ago, four years ago, if you come into the space and you're like, I want to freaking win, creating a new L2 was like a really practical Yeah. And a lot of people did it, right? I don't think that that's true today. And it's and I mean, the market has kind of dealt with that, right? Like the market the market's like the we're pricing these all at zero basically, right? So So I don't know. I think I mean I think that that's one thing that just jump in Carl. You can just don't hold don't hold off. Just jump in. Just just go. I mean I agree with you. Okay. Okay. Great. I mean I agree. No more L2 protocols. Use the OP stack. It's open source. You can deploy an L2. No problem.

In terms of deploying an L2, building an L2. We literally have every single financial institution that can make the decision. Do I want an L1 or do I want to be an on L, you know, an L2 on Ethereum? And the answer to me seems very clear that Vitalic as well as the Ethereum Foundation. And I know for a fact they want all of these institutions to instead of being a competitive L1 to be at least be an L2 and ideally be stage two. But again, we're not going to have a one-sizefits-all solution for everyone. That was the that was the core of the post. The core of the post was hey institutions these big enterprises that hold huge amount of about your decentralization and like Yeah. Yeah. Yeah. And they don't want and they want a specialized feature set that allows them to differentiate their block space against the competitors and they we want to make sure that that is on Ethereum that it's interoperable with Ethereum that it contributes to the network effect of both the EVM as well as the liquidity network effect of Ethereum.

And the answer, the choice is either deploy a competitive L1 and actually go head-to-head or join in on the movement. And I think it's pretty clear what is going to be more creative to the Ethereum. Okay, but that's not those aren't the only choices, right? That's the only choice if you've already gotten to the point where you're like, I need an entire blockchain for my stuff, which I would say uh there's a lot of people who jump to saying that they they need an L2 or an L1 for that matter, who don't need that, who are perfectly fine being a protocol. And especially the ones who are uh more focused on retail, more focused on user experience, more focused on like who actually want the benefits that centralization brings. I would argue those definitely should not even necessarily go down the route of like let me create a blockchain. It's like use the existing stuff where the users already are build a protocol keep if you want to have the centralized database okay like do it where the decentralization where the the hardness where that benefits you okay like these things are uh like there's not there's no reason to drop everything and create like a whole new blockchain in a lot of cases like a massive amount of sometimes though like at the end of the day the customer if the customer is some like regional bank, right? And the only way they get this over the line is they own their own chain and the to me why do they have to own I don't know, bro. People are idiots. Like what do you want from me? Like I'm not the bank, right? Like why are they running a bank in the first place? I don't know. That's like the like the starting point of this is they run a bank. So they're going to do some weird right? So they run a bank and they're like, "Hey, uh we like this, you know, crypto stuff, right? like we think this makes sense. We want our own thing, right? We want to own it. That's what we're used to doing. Fine.

So at the limit then, right? You have this and this is comes back to this like Linux Unix analogy of like what substrate is it going to run on? If it's running on EVM, are we okay with the fact that all of these things run on EVM and are therefore at some level interoperable, right? Um, but they're their own chains effectively and all of the L2s are effectively their own chains now. And like how do we feel about that as an end state of the world? I don't know. My like my hot take is I don't know. I don't know if I love it.

Like I mean I would just say two two quick things. First off, I do think that there is a meaningful difference if you are using Ethereum and using Ethereum block space blobs etc. for things like interrupt and synchroniz like those things are have become memes like the whole base roll up and the whole you know a monad which is EVM but like triple point exactly so there is definitely a meaningful difference there and that is like a technical difference that will play out as the technology evolves. It takes a long time for technology to evolve so the memes become useless and you get a kind of pit of despair and then it comes out and people are like oh this is actually useful. Um so that is going to that that will happen.

Um and then the second thing is these enterprises are just going to make those decisions. So the question is do we want them in the Ethereum ecosystem or do we not? And I think Ethereum has spent a huge amount of time turning away customers because they don't fit a particular mold. That kind of attitude is so toxic. And this is what I think is ultimately like we should not be interpreting Vitalik's tweet that says oh we want to bring many people into the ecosystem regardless of you know their particular product requirements and make sure that they are welcomed in and we fit their users it's the equivalent of imagine you're the you're the EF uh BD person that that role doesn't exist I know but you're I was about to say cannot do that you're the EF saleserson Right? You're the head of sales at the EF, right? And and a regional bank walks into your office and they're like, "Hey, like we're really excited about this EBM thing, right? And they go, "Have you considered not being a bank?" Which is why the EF doesn't have salespeople. They No, I haven't considered not being a bank. That's how I make my money, bro. Like, what do you want from me? I like take deposits. I don't pay interest on it. And that's my business model.

Like we're like for for what it's worth, I was with the head of enterprise today on a call with HP talking about how we're going to like help out in terms of their education stuff. So there I think this whole thing you ask them whether they want to change their business model. I didn't stop. No, I didn't question their business models. No. But I think all of these things are phase like phase one was like your boss was like we got to be a blockchain and people are deploying like hyperledger right? And then like I think phase two is like okay let's let's like no one's using that. We didn't get collectively everyone to use our Let's let's try an L2. And then maybe that works and maybe that doesn't. And then eventually like protocol is phase three. If if they deploy an L2 and they can't get all their other people to use their L2, they're they're going to step into phase three, which will be a protocol. Yeah. Onchain on Ethereum.

And by the way, like I speak with some amount of experience here, guys. Like for those that don't understand the history, general history of Ethereum, but like in the very early days, you had the EF and they were very particular about what their focuses were. Sales not one of them. There were people that were very deeply involved in Ethereum in the early days who did do sales. Yeah. One of which was Joe Luben. Yeah. Who then created consensus. And what did he do? Thousands of people selling stuff. Right. Now, what did we learn from that experience? Because it was not that if you hire a whole bunch of sales and beauty people that everything is great. What did we learn? Okay. What is like consensus is bread and butter today? Like what is the thing that consensus focus on today, right? It's MetaMask and it's only MetaMask. Why is that? Seriously, like there were so many things that so many people did. Okay, the reason why that one over every single other thing, right, is that the value on the table from unlocking and enabling and empowering people to do like anything is so much more and will always be so much more than like your one little specific thing, right? The second that you lock people in and put them in this box and and keep them like this, you can only derive the value in that box. And the magic of interoperability and permissionlessness is that you can just unleash people and there's just value everywhere and they just then create their own value and keep going and it's like magical and wild and crazy and amazing.

For me, when I think about like the where we are today and where we can go, like Ethereum more broadly, not MetaMask, um the answer is always going to be like focus on unlocking more people. In part, that's like not blocking people out and not being like, "We don't like you." Like, no, no, no. But it's also not necessarily selling to people, right? We don't necessarily have to go and like uh like be like like there is there's some amount of value to having people understand that the magic of the protocol is that you can build your own platforms. You can build your own stuff. You can build your own applications. You can build end user retail becomes education over sales, right? And like that's you know one of the reasons why I think the stuff that Austin has been doing for such a long time is like get people building right? like get them build like make it as easy as possible on board them and they'll figure it out in 10 minutes when they start they'll be like oh my god this is like what am I what have I been doing with my life right now all it takes is a skills MD file it's so cool guys headed to the glue factory bro like you just uh you're just speedr runninging all of us your clankers will be out there can it can we actually can Can we actually pivot to I have one I have one more one more uh kind of question in this in this uh topic right um and I've I've raised this a bunch of times which is the investability of ETH the asset right one of the unintended consequences my my thesis is of the L2 proliferation and I did try to meme optimism as like the one L2 I tried that it didn't work um the market rejected my attempts to do that Um, and uh, and so we ended up with this proliferation of L2s and different assets.

And the the moment that I realized that it was completely over for us was Metas, right? When Vitalik's mom launched an L2 before optimism even launched an L2, like forked Optimism before it was even live, I was like, it's so over for us, right? So we ended up in this situation where we had all of these different L2 assets and they were for a period of time the only place where you could transact in a reasonable you know cost level right on in the Ethereum sphere and so everyone was doing their stuff on on L2s whether it was arbitum or optimism or or one of the others. Uh, and it created this really weird situation where new people coming into the ecosystem weren't using Ethereum or even sometimes ETH the asset, right? They were using like a version of ETH that was on the other chain and then there were other tokens that they could buy and um it really I think uh kind of diluted the value of ETH.