Vitalik finally admits to a major strategic mistake by Ethereum. Are you still holding your position?

Author: Gu Yu, ChainCatcher

After ETH price hit a new low since last May, Ethereum founder Vitalik Buterin published a lengthy article today reflecting on the long-standing Layer 2 strategy that has been at the core of Ethereum. He plans to increase investment in Layer 1, which is expected to cause a sensational impact across the entire crypto industry.

Initially, the roadmap centered around Rollups defined Layer 2 as shard support for Ethereum, providing trustless block space. In this article, Vitalik seems to have abandoned his previous advocacy for a “Rollup-centric” scaling model. He points out that while Ethereum’s base layer is scaling, the decentralization speed of Layer 2 is “much slower than expected,” and many Layer 2 solutions cannot or do not want to meet the trust guarantees required for true sharding.

“These two facts, for whatever reason, mean that the original vision of Layer 2 and its role within Ethereum no longer make sense. We need a new path,” Vitalik said. To outsiders, these statements imply that Vitalik admits the Layer 2 narrative is nearly outdated, and future focus will shift more toward scaling the Layer 1 itself.

Since its inception, Layer 2 has been one of the most capital-enthusiastic and market-focused concepts in crypto, with nearly a hundred Layer 2 projects like Polygon, Arbitrum, and Optimism raising over $3 billion in total funding. They have played a key role in scaling Ethereum and reducing user transaction costs, with multiple tokens’ FDV exceeding $10 billion long-term.

However, under strong competition from high-performance blockchains like Solana, Layer 2’s performance advantages have not been fully realized, and its ecosystem influence has waned. Currently, only the Base ecosystem remains active at the forefront of crypto, representing Ethereum Layer 2.

Mainly Published Layer 2 Token Market Cap and Funding Data Source: RootData

Moreover, Layer 2 outages still occur frequently. On January 11 this year, Starknet experienced an outage again after many years of operation. Post-incident reports showed a conflict between execution and proof layers caused about 18 minutes of on-chain activity rollback. In September last year, Linea was down for over half an hour. In December 2024, Taiko’s mainnet went down for 30 minutes due to an ABI issue, indicating ongoing technical instability.

In fact, Vitalik previously proposed a phased framework to measure Layer 2 decentralization, starting from Phase 0 (centralized trust committee can veto transactions), Phase 1 (smart contracts begin to have limited governance rights), to Phase 2 (completely trustless).

Despite nearly a hundred Ethereum Layer 2 projects, only a few have reached Phase 1. Coinbase’s Layer 2 project Base, started in 2023, only reached Phase 1 last year. Vitalik has criticized this multiple times. According to L2beat statistics, among the top 20 Rollup projects, only one—Aztec’s zk.money—has reached Phase 2, which is a privacy protocol, but development has stalled. The other 12 projects are still at Phase 0, heavily reliant on auxiliary functions and multi-signature setups.

Vitalik points out that Layer 2 projects should at least upgrade to Phase 1; otherwise, these networks should be viewed as more competitive, vampire-like “Layer 1 networks with cross-chain bridges.”

Source: L2beat

Beyond potential corporate interests delaying Layer 2 decentralization, Vitalik highlights technical challenges and regulatory concerns. “I’ve even seen at least one company explicitly say they may never want to surpass Phase 1. This is not only due to ZK-EVM security reasons but also because their clients’ regulatory requirements demand ultimate control,” he said.

However, Vitalik has not completely abandoned the Layer 2 concept. Instead, he broadens his view on what Layer 2 should achieve.

“We should stop viewing Layer 2 as Ethereum’s ‘brand sharding’ with associated social status and responsibilities,” he stated. “Instead, we can see Layer 2 as a full spectrum, including chains fully trusted and credit-supported by Ethereum with various unique attributes (not just EVM), as well as options with different degrees of connection to Ethereum. Everyone (or bots) can choose whether to focus on these options based on their needs.”

For future development, Vitalik suggests Layer 2 projects should focus on added value rather than just scaling. His recommended directions include: privacy-focused virtual machines, ultra-low latency serialization, non-financial applications (like social or AI), application-specific execution environments, and pushing beyond the throughput limits of next-generation Layer 1.

He also emphasizes the importance of ZK-EVM proofs, which can be used to extend Layer 1. This is a pre-compiled layer embedded into the base layer that “automatically upgrades with Ethereum.”

Over the past year, Ethereum Foundation’s organizational restructuring and two network upgrades have made Layer 1 a core strategic focus. One goal is to gradually increase gas limits through multiple iterations, enabling Layer 1 to handle more native transactions, asset issuance, governance, and DeFi settlements without over-relying on Layer 2. The Glamsterdam upgrade plan this year includes several improvements aimed at reducing MEV manipulation and abuse, stabilizing gas fees, and laying a solid foundation for future scaling.

In earlier statements, Vitalik indicated 2026 will be a key year for Ethereum to regain ground in sovereignty and trustlessness. Plans include simplifying node operation with ZK-EVM and BAL tech, launching Helios verification RPC data, implementing ORAM and PIR privacy protections, developing social recovery wallets and time-lock features for security, and improving on-chain UI and IPFS applications.

Vitalik emphasizes that Ethereum will correct the compromises made over the past decade regarding node operation, application decentralization, and data privacy, refocusing on core values. Although this will be a long process, it will strengthen the Ethereum ecosystem.

Appendix: Many industry figures have shared their views on Vitalik’s article and ideas. Here are some highlights from ChainCatcher:

Wei Dai (1kx Research Partner):

Glad to see Vitalik discussing the hindsight errors of a Rollup-centric roadmap. But asking “What would I do if I were an L2?” misses the point.

The key isn’t what Vitalik would do, but what L2 layers and application teams will do. L2s and their applications will always prioritize their own interests over Ethereum’s. To get L2s to reach Phase 1 or achieve maximum interoperability with Ethereum, it must be valuable for them to do so.

For a long time, this has been framed as a security issue (L2 needs L1 support for functions and CR). But in reality, the most important thing is whether Ethereum’s L1 can provide more users and liquidity to L2s and applications. (I think there’s no simple solution, but efforts toward interoperability are correct.)

Lanhu (Renowned Crypto Researcher):

Vitalik’s point is that L2 leverages L1, but in terms of value feedback or ecosystem benefits, L2 hasn’t delivered. Now that L1 can scale itself, there’s no need to rely on L2 for scalability. L2 should either align with L1 (native rollup) or become L1 itself.

What does this mean? Bad news for general-purpose L2s, good news for L2 application chains, as we’ve always said. L2 application chains can innovate and feed value back into the ecosystem.

Jason Chen (Renowned Crypto Researcher):

As Ethereum itself scales, the most noticeable change is gas fees dropping to near L2 levels. With further reductions and the gradual adoption of ZK, speeds will be comparable to L2s. So, L2s are in a very awkward position now. Vitalik’s tweet essentially declares that the initial phase of expanding Ethereum via L2 is complete. If no new narrative is found for L2s, they risk becoming obsolete.

For projects, the main goal of L2 was to profit from transaction fees, but for users, L2s no longer hold much significance—gas and performance are close enough to the mainnet.

Born on Ethereum, but also dying on Ethereum. The disputes among the princes and vassals have ended.

Haotian (Renowned Crypto Researcher):

I’ve mentioned over ten times in previous articles that the universal Layer 2 strategy is no longer viable. Each Layer 2 should pivot to a specialized one, which is essentially a form of Layer 1. I didn’t expect that after long guiding the Stage 2 strategy, many Layer 2s still became “discarded pawns.”

Universal Layer 2s carry a heavy development burden—initially facing technical alignment issues with Ethereum’s security, then regulatory issues due to centralized sequencers after token issuance, and finally the burden of failed ecosystem development. The fundamental reason is that all Layer 2s depend on Ethereum Layer 1 for survival. When Ethereum itself begins to struggle and leads the performance evolution of Layer 1, Layer 2 loses all potential to empower Ethereum, leaving only burdens and complications.