Original Title: Why Scaling Ethereum is Bullish for L2s

Original Author: Etherealize

Original Translator: Ken, ChainCatcher

On February 3, Vitalik Buterin posted on X with over 6 million views. “The initial vision for L2 and its role in ETH no longer makes sense,” he wrote, “We need a new path.”

Stakeholders from competing blockchains quickly rendered this as a failure. Cryptocurrency news media called it a “major setback.” The resulting narrative is that ETH finally acknowledges defeat — the rollup-centric roadmap is unworkable, while the monolithic scaling solutions adopted by blockchains like Solana are proven correct.

This assertion is incorrect. If you make investment decisions based on this, you risk being on the wrong side and missing the most significant infrastructure changes currently happening in the cryptocurrency space.

What Vitalik Actually Said

If you read the full text instead of just the title, the conveyed message is very clear. ETH has not given up on Layer 2 (L2 networks). It is shifting from a rollup-centric scaling approach (i.e., expecting L2 to be a replica of the base layer) to a model of aggressive scaling of L1 (Layer 1) itself. L2 remains important, but for different reasons: customization.

The initial vision perceived L2 rollups as replicas — simple copies of the ETH virtual machine, without the burden of base layer consensus. The idea was that these rollups would decentralize to “stage two” one day, inheriting the full security guarantees of ETH while providing cheaper transactions. In exchange, they would contribute to ETH's liquidity network effects and security budget.

But this did not happen. As Vitalik acknowledged, “The speed of L2's progression towards stage two (followed by advances in interoperability) is much slower and more challenging than initially expected.” Many chains claiming to be L2 are, in practice, centralized blockchains with ETH bridging. They can unilaterally change rules, censor transactions, and fully migrate, contributing little to ETH's network effects.

Two positive developments rendered the initial vision outdated.

The Base Layer is Quickly Scaling

After the London hard fork in August 2021, ETH's gas cap was set to 30 million gas per block. This level was maintained for more than three years. The ETH community has been cautious about increasing throughput due to a real trade-off at the core of blockchain design: pushing too many computational tasks onto the chain will raise the hardware requirements for validators, leading to the network becoming concentrated in the hands of a few, undermining the decentralization that makes the system valuable.

This is largely the trade-off that ERTH’s competitors chose to ignore. For instance, today a Solana validator node requires enterprise-grade hardware: over 24 physical CPU cores, 256 GB of memory, multiple enterprise-grade NVMe SSDs, and a 10Gbps network connection. The monthly hosting cost for a competitive validator node may exceed $1000. In contrast, an ETH validator can run on a mini computer worth $1100 placed under your desk. This is a significant distinction. Because of this, ETH can maintain around 1 million active validator nodes while achieving a level of decentralization that other smart contract platforms struggle to reach. By early 2026, Solana's network only had about 800 active validator nodes.

But blockchains do need to scale. High-performance competitors have proven there is significant demand in the market for cheap, fast L1 transactions. ETH's response is a broader cultural shift — from “long-term research” to “short-term execution,” and the results are already showing.

By 2025, through the collaborative actions of validators, the gas cap doubled from 30 million to 60 million, while Pectra and Fusaka upgrades expanded blob capacity and included other protocol improvements. The ETH Foundation has also committed to implement an aggressive roadmap, aiming to triple L1 throughput approximately every year for the foreseeable future.

By the end of 2026, the goal is to push the gas cap to over 100 million. In 2027, block times are expected to be halved from 12 seconds to 6 seconds (and potentially even shortened to 4 seconds), effectively doubling throughput without changing block size. In the same year, block-level access lists will allow nodes to process transactions in parallel, eliminating a major computational bottleneck. By 2028, migrating to a binary tree state structure will allow for higher gas caps as this eliminates the need for validators to store the entire state on disk. By 2029, the network will begin transitioning to a native zero-knowledge architecture — a fundamental architectural change that will completely alter the mathematical logic of scaling.

A key breakthrough to achieve this long-term vision is zkEVM. Currently, each node in every L1 blockchain must re-execute each transaction to verify the state. zkEVM compresses the verification process into a constant-sized cryptographic proof, which can be validated with minimal computational resources. When combined with ETH data availability sampling — which allows validators to verify the existence of data without downloading the entire dataset — it creates a pathway to throughput comparable to high-performance chains while retaining the decentralized characteristics that give ETH block space its unique value.

This timeline is approximately five years earlier than most observers expected. It is spectacular enough that Ben Edgington, a leader during ETH's transition to proof of stake, announced he would end his retirement to re-engage in the project.

ETH Foundation researcher Justin Drake articulated the north star goal of technological development: achieving second-level finality with “fast L1”; realizing 10,000 transactions per second with “gigabyte Gas L1” through real-time zkEVM proofs; and, achieving 10 million transactions per second with “trillion Gas L2” through data availability sampling. The roadmap also prioritizes post-quantum cryptography and native privacy features at the base layer.

New Value Proposition for Layer 2

So, if L1 is scaling, what is the significance of L2?

L2 has already found its product-market fit: serving institutions that want both the security of ETH and the liquidity of the ETH ecosystem, yet wish to customize chains to better serve their clients and comply with regulatory requirements.

This ultimately leads to the question of “stage two.” To reach “stage two” decentralization, an L2 must relinquish its unilateral control over upgrading its management bridging and proof system contracts — including the ability to rapidly respond to regulatory requirements or patch urgent vulnerabilities. For institutions that bring millions of users to the ETH ecosystem, this poses a genuine operational limitation.

This is the tension at the core of today's L2 ecosystem. Users can still withdraw their assets back to ETH's L1, which is the most significant safety assurance provided by Rollup. However, without achieving stage two, operators can still upgrade bridging contracts, censor transactions, or change rules. Moreover, due to a lack of interoperability, each L2 fragments liquidity and competes with other L2s in ways that are fundamentally no different from alternative L1s.

Vitalik's article addresses this tension by acknowledging reality: L2s exist on a continuous spectrum, and that’s okay. Some L2s will pursue complete stage two decentralization and will act as true extensions of ETH block space. Others will retain more centralized control in exchange for customization capabilities, which is also a reasonable use case, as long as this trade-off is communicated honestly in market narratives.

The demand for this second category of L2 is immense and growing, as demonstrated most clearly by Robinhood's decision to build an ETH L2.

In June 2025, Robinhood announced at EthCC (ETH Community Conference) that it would build its own ETH Layer 2 using the Arbitrum tech stack instead of launching a new L1 blockchain. This surprised many in the crypto industry. Robinhood is one of the largest retail brokerages worldwide. It has enough resources and a user base to launch its own chain. It had also actively discussed doing so. But it ultimately chose not to.

Robinhood's cryptocurrency head Johann Kerbrat explained the rationale, hitting at the core of why L2 is important: “Ensuring the security of a truly and highly decentralized chain is extremely difficult, and we can essentially get that for free from ETH. When you look at newly created L1s, they are not decentralized or secure, so at the end of the day, you just have a fancy database, possibly slower than a real database.”

The second factor is liquidity. Robinhood aims to tokenize all assets — starting with public stocks and expanding to private equity, real estate, and other real-world assets. This requires tapping into ETH's existing liquidity network. As Kerbrat stated: “We need this liquidity... If you are alone on your private island without anyone freely coming and going. I believe we can attract clients because Robinhood is a large platform, but if we want to rebuild the entire financial system on-chain, we need everyone to be able to come to our island.”

Robinhood's CEO Vlad Tenev compared L2's customizability to solutions being built on alternative L1s, arguing that this reflects a trade-off between short-term value and long-term value: “In the long run, control is more important as it allows us to build better products. Plus, the technology behind these Rollups has become so excellent that you really don’t miss out on too much.” As an L2, Robinhood retains full control over sequencer revenue, gas fees, regulatory customization, and product roadmap — while inheriting ETH's security and settlement guarantees. It could name it ‘Robinhood Chain’ while letting ETH handle the hardest parts.

Robinhood is not an isolated example. Coinbase (Base), Kraken (Ink), and OKX (X Layer) have all launched their own ETH L2s. But an even more illustrative signal is who chooses to build alongside them. Just this month, Nasdaq collaborated with Kraken to build a tokenized stock gateway, while the Intercontinental Exchange, the parent company of the New York Stock Exchange, invested $200 million in OKX, planning to put NYSE-listed stocks on-chain.

These institutions need the security of ETH and the liquidity of its ecosystem. But they also require regulatory compliance, privacy controls, custom fee structures, and operational control. A permissionless, fully transparent base layer does not meet all these needs. But a Layer 2 built on top of it can.

As Vitalik wrote days later in a follow-up clarification article, L2s should “do something that actually adds something new” (like privacy, efficiency for specific applications, ultra-low latency, institutional compliance, etc.). Most importantly: “The narrative should match the substance.” The degree to which L2 is connected to ETH in public perception should match its degree of connection in reality. Side chains with bridging are not the same as stage two Rollups that cannot survive without leaving ETH. Claiming to be “ETH L2” should mean something specific regarding its security assurances.

This is about protecting the integrity of the ETH brand, and thus safeguarding the trust that institutions are beginning to place in ETH.

Layer 2 remains the best business model in the crypto space. You don’t need to spend millions each year on validator infrastructure, and you don’t need to pay for security fees through token issuance. You inherit ETH's security and pay for it when using block space.

The Flywheel Effect: Why Scaling L1 Makes L2 More Useful

This is the part that those advocating that “ETH is abandoning L2” have completely missed: scaling the base layer does not compete with L2. It will greatly enhance the utility of L2.

To understand why, you need to grasp what ETH is at the protocol level. It operates as a globally replicated ledger. Each full node independently verifies each transaction to ensure the ledger is accurate. Protocol parameters, such as gas limits and block times, must be kept conservative enough for ordinary machines to keep up; otherwise, you'll eventually need data center-level hardware to participate, thereby reconstructing the centralized infrastructure you were initially trying to escape.

This means that the original L1 throughput is fundamentally scarce, which is also why ETH block space is valuable. This is why transactions settled on ETH have stronger guarantees than transactions settled on chains boasting only a few hundred validator nodes running across three data centers.

Rollups solve this limitation through a clever division of labor. They move the bulk of user transactions off-chain to L2, where they are both fast and cheap, primarily using ETH for two things: data availability (publishing compressed transaction data that anyone can use to reconstruct the state of L2) and final settlement (anchoring the state of L2 to L1 consensus). By bundling many off-chain transactions together, Rollups allow many users to share the gas cost of a single L1 transaction.

When ETH scales its L1, it directly reduces the costs of both functionalities. Each block containing more gas means cheaper settlement costs. More blob capacity means more L2s can publish data simultaneously without competing for scarce data availability. Faster block times mean L2 withdrawals and cross-chain operations become faster. Quicker final confirmation means L2s can confirm transactions with higher certainty in shorter timeframes.

The result is a system where each has its role: L1 handles what it does best (low-risk DeFi, high-value settlements, and acting as an authoritative source of data), while L2 competes on specialized use cases. This competitive dynamic is much healthier than the current state — where the main reason L2s exist is that L1 is too slow and expensive for everyday transactions.

Unresolved Issue: Liquidity Fragmentation

Layer 2 does not solve all problems. At present technology, each new L2 is an isolated asset and user island. Without seamless interoperability, the ETH ecosystem does not operate as a complete network but resembles dozens of competing networks. This is the most reasonable critique of the ETH L2 ecosystem.

The initially rollup-centric roadmap assumed that L2 would converge on interoperability standards, allowing liquidity to flow freely throughout the ecosystem. But this has not happened. Instead, liquidity has become fragmented, and for most users, bridging assets between different L2s remains a slow, costly, and risky experience.

The ETH Foundation has listed this as a top priority for 2026. The core of the plan is an “open intent framework,” where users simply declare what they want to do — exchange, bridge, pay — and the system automatically finds the best route across different L2s. In the background, a new ETH interoperability layer aims to make transactions across L2s feel indistinguishable from transactions on a single chain. Vitalik has also pushed for the development of native Rollup precompiles, which will directly verify zkEVM proofs on L1, thereby improving trustless composability between the base layer and Rollups.

This is the next problem to be solved. If ETH can get this right and make moving assets between different L2s feel like using a single chain, then each new L2 will enhance the whole network rather than fragment it.

What This Means

As of this writing, ETH's market cap is approximately $240 billion. It is the second most valuable blockchain in the world after Bitcoin, with a significant lead. The narrative of “ETH is dying” does not match the reality conveyed by the market.

Robinhood is tokenizing thousands of stocks on ETH's L2. The gas cap has doubled, and there is a reliable roadmap to increase it tenfold in four years from the current level. Institutional adoption of ETH-based L2 is accelerating, not slowing down. Furthermore, the enthusiasm in the engineering community has reached its highest point in years — which is reflected not only in the roadmap itself but also in the quality of talent being attracted back to the active contributor ranks.

What is happening is strategic maturation. The initially rollup-centered roadmap was a pragmatic response to urgency: in 2020, ETH could not quickly scale its L1 without sacrificing decentralization, while competitors were capturing market share. That crisis has ended. But the engineering talent and infrastructure that ETH invested in during that period — blobs, data availability sampling, zkEVM research, rollup frameworks — have not been in vain. They have laid the groundwork for the upcoming phase: an aggressively scaling L1 surrounded by a customizable L2 ecosystem, catering to institutional and specific needs that general-purpose blockchains can never satisfy.

The correct interpretation of Vitalik's article is not that L2 has failed. Rather, it is that the initial setting of L2 to take on all the social responsibilities of expanding ETH as a brand shard was the wrong framework. The new framework is simpler and more honest: L2s exist in a decentralized continuous lineage, each serving different client needs. The L2s closest to ETH inherit its security and contribute to its network effects. Those further away serve reasonable purposes but should not pretend to be something they are not. And the ETH L1 that imbues all this value is about to become even stronger.

ETH has not abandoned L2. It has merely given L2 a more enduring reason for existence than “L1 is too slow.” And this should make you more bullish on ETH, not lose confidence in it.

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