Loi Luu, the founder of Caliber, has recently raised concerns regarding the economic relationship between Ethereum’s Layer 1 (L1) and Layer 2 (L2) solutions. His argument is that the majority of L2s are exploiting L1’s security resources without paying the necessary fees, which is why there is an economic imbalance.
However, L2s that are meant to shift the transactions from L1 to L2 for scalability divert traffic from the main Ethereum network but do not contribute the same amount. Luu warns that if this continues, the Ethereum economy will be at risk.
The Role of L2s in Ethereum’s Ecosystem
Luu has proposed an enshrined fee mechanism in Ethereum where L2s would send a portion of their fees to L1. The requirement would be enforced through zkproofs, if an L2 fails to comply, its state updates would either not be finalized or it will be more expensive.
Although existing L2s might resist it because of the limited incentives, new L2 projects may follow this model, which would, in turn, push the older ones to be more competitive. But what would ETH do with the extra fees coming from the L2s? One of the options is to burn ETH and lower the total supply, which can, in turn, influence the value of ETH favourably.
Besides, the fees collected can be given to institutions such as the Protocol Guild or the Ethereum Foundation to cover the expenses of further network improvements and, thus, the continuous development of the ecosystem.
Ethereum co-founder Vitalik Buter weighed in on the topic, clarifying the complications of implementing such a mechanism at the protocol level. He agreed with the argument. He mentioned that L1 has no accurate way to know what L2 execution fees are.
The instance is nearly the same as the government trying to levy a sales tax by gaining access to only part of the data about transactions, users would find various ways not to pay the tax. Buterin earlier proposed the scheme of Harberger taxes on projects like ENS, which is similar to the idea of Harberger. In this system, taxes are levied on the basis of positive economic activity generated.
Nevertheless, Buterin sees this as a more challenging task for L2s. Introducing such fees might put the L2s in a position where they would not be able to deliver the kind of stability that users expect from them.
He suggested softer approaches, like forming a neutral cross-L2 proof aggregation layer that would only include the L2s willing to remit fees back to L1. He believes this system could be a subject of exploration without the enforcement of mandatory participation, thus giving the L2s the option to participate or not.
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