‘Ethereum L2s can steal user funds right now’ – Are the allegations true?

  • Exec claims Ethereum L2s can “steal user funds.”
  • Industry figures propose multi-signatories to eliminate single points of failure. 

It came as a shocking discovery that user funds in Ethereum [ETH] L2s are not securely protected.

In the words of Cyber Capital’s founder and CIO, Justin Bons, L2 solutions such as Arbitrum (ARB), Optimism (OP), Base, Blast, Starknet (STRK), and ZkSync have the potential to “misappropriate user funds.”

“Admin keys exist for Arbitrum, Optimism, Base, Blast, Starknet, and ZkSync. These leading L2 (Layer 2) solutions have the ability to access and potentially take users’ funds at this moment.”

It’s even more alarming that, based on VanEck’s assessment, this sector is predicted to exceed a trillion-dollar market value by the year 2030.

The executive criticized the present condition of L2 solutions, drawing an analogy with traditional banking systems. He also expressed his viewpoint that Ethereum merely pays lip service to the concept of decentralization.

If we deem it safe, we could potentially revert to traditional banking methods. ETH may claim to prioritize decentralization, but its actions hold more weight.

Reaction to safety concerns in Ethereum L2s

Anatoly Yakovenko, one of Solana’s co-founders, proposed a “multi-signature” shared sequencer as an alternative to the current “single admin key” system. In simpler terms, this means having multiple trusted parties manage the sequence of transactions on the Solana blockchain instead of relying on a single person or entity for this critical function.

“Each one should volunteer a tribute to be a member of the multi-sig for the shared sequencer.”

In simpler terms, multi-sig refers to requiring more than one person to approve transactions. This enhances decentralization by involving multiple parties, promotes transparency as all approvals are recorded, and eliminates the need for a sole administrator key, reducing the risk of unauthorized access.

Raj Gokal, another Solana co-founder, called for an expedited solution,

“Hope this gets fixed soon…”

Despite being the head of Helius Labs, a company specializing in Solana development, the founder and CEO expressed his confidence in Ethereum [ETH] L2s rather than Binance [BNB], Cardano [ADA], or Ripple [XRP] solutions.

He reiterated,

“I’d prefer it if L2s were among the top 10 cryptocurrencies, replacing Cardano, XRP, and BNB on that list.”

Asked whether Solana should consider some L2s as well, the Helius Labs’ exec quipped, 

“Could make sense in some cases.” 

An examination by AMBcrypto revealed a surge in transactions on Ethereum’s Layer 2 solutions following the Ethereumupgrade known as Denas, potentially influencing Ethereum’s price.

Despite some challenges, Ethereum was struggling to stay above $3K. The Securities and Exchange Commission (SEC) had yet to give its approval for spot Ethereum exchange-traded funds (ETFs), and Middle Eastern tensions were adding to the uncertainty.

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2024-04-17 19:03