Ethereum Without 'L2 Paradox'... Foundation Says 'Returning to Mainnet Core Business'

[Block Media Reporter Ham Ji-hyun] The Ethereum Foundation (EF) has publicly disclosed the status of protocol development for the first time after a major organizational restructuring. On the surface, it is a monthly technical report, but it contains a clear declaration of what the foundation will focus on moving forward.

Since Ethereum founder Vitalik Buterin expressed skepticism about Layer 2 projects in February, the Ethereum Foundation has established a dedicated protocol organization to concentrate on mainnet development, raising questions about whether Layer 2 can grow alongside the Ethereum ecosystem.

"Focusing on What Only Protocols Can Do"

On the 4th, the Ethereum Foundation released an 'All-Protocol Update' report via X (formerly Twitter). This report is the first protocol update related report published after the foundation restructured its organization. Moving forward, the Ethereum Foundation plans to publish reports monthly detailing the development achievements and future plans of the protocol organization.

Will Cochran, the protocol cluster coordinator at the Ethereum Foundation, stated, "The newly established protocol organization operates under the principle of focusing on 'what only protocols can do.'" He introduced that this organization will be responsible for the entire process from Ethereum Improvement Proposals (EIPs), development networks (Devnets), to mainnet deployment, and will focus on core technology development for Layer 1. In other words, under the strategy of a 'small and focused foundation,' the protocol organization will handle only essential tasks and transfer the rest to other organizations or communities.

Previously, the foundation reduced its workforce by about 20%, cutting 54 positions, and reorganized into five areas: Protocol, Accessibility, User, Community, and Institution.

This signifies a commitment to concentrate development capabilities on maintaining the mainnet and core protocol research. The foundation has prioritized mainnet stability (P0), Glamsterdam and Hegotá upgrades (P1), upcoming hard fork research (P2), and long-term research (P3). Long-term research (P3) includes rapid finality, privacy, post-quantum resistance, and zero-knowledge proof-based Ethereum virtual environments (zkEVM).

The foundation's short-term goal is to implement the Glamsterdam upgrade on the mainnet in the fourth quarter of this year. The foundation announced that Devnet-7 has successfully completed large-scale chaos testing, and Devnet-8 will be released soon. At the same time, research on next-generation technologies such as zkEVM, new state trees, quantum-resistant cryptography, and privacy features is also ongoing.

Additionally, the foundation mentioned the increasing security risks due to advancements in artificial intelligence (AI) through this report, stating that the protocol organization is also strengthening AI-based internal security audits and conducting security reviews on the Glamsterdam Devnet.

This report goes beyond merely sharing development status; it demonstrates the foundation's commitment to investing in strengthening Layer 1 competitiveness even while downsizing the organization.

While Focusing on Layer 1 Growth... Growing 'Layer 2 Skepticism'

As the Ethereum Foundation concentrates on Layer 1 development, skepticism about Layer 2 is rising within the community.

Recently, on X, criticism has been raised regarding Layer 2 'Base,' operated by the digital asset exchange Coinbase, claiming that Layer 2 projects are not sufficiently contributing to the Ethereum ecosystem.

This is because Base is selling Ethereum (ETH) received as network fees instead of holding it long-term or reinvesting it back into the Ethereum ecosystem, thereby increasing its Bitcoin (BTC) holdings. Some critics argue, "Base is generating profits by utilizing Ethereum's security and network, yet its value is not being returned to Ethereum."

Originally, Layer 2 was designed to enhance Ethereum's scalability while sharing economic interests with the mainnet. Users paid gas fees in ETH, and Layer 2 utilized Ethereum Layer 1 as a data availability and final settlement layer, creating a structure that returned value to the network.

However, there is growing doubt about the 'Ethereum Alignment,' where various projects within the Ethereum ecosystem maintain decentralization while moving towards common goals. Notably, Vitalik Buterin has stated, "I will not recognize Layer 2 as Ethereum's official shards (Shards, divided sections through sharding)" and emphasized that Layer 2 projects should maximize interoperability with the Ethereum mainnet.

The growth of the Layer 2 ecosystem is also not what it used to be.

According to blockchain analysis platform The Block Research, as of the end of July, the total value locked (TVL) in Ethereum Layer 2 was approximately $5 billion. This represents a decrease of about 68% compared to the $15.93 billion recorded in October last year, marking the lowest level since 2023.

The Block Research analyzed that while the TVL of Layer 2 surged due to major Layer 2 launches like Optimism, Arbitrum, and ZKsync, the effect has now become negligible.

Although the Ethereum Foundation has expressed its intention to concentrate its capabilities on mainnet research by restructuring its organization, whether Layer 2 can create independent value and return that value as a member of the ecosystem will be a key issue moving forward.

Digital asset research firm OAK Research pointed out in a report that "the great paradox of Ethereum is that its technological superiority does not lead to economic value creation," stating, "For several years, Ethereum has pursued a rollup (L2) centered roadmap, resulting in 90% of total transactions occurring on L2 and record network usage, but this has led to liquidity fragmentation and the collapse of Ethereum mainnet (L1) revenues.",

Summary

This report goes beyond merely sharing development status; it demonstrates the foundation's commitment to investing in strengthening Layer 1 competitiveness even while downsizing the organization.