On September 12, Ethereum co-founder Vitalik Buterin announced a pivotal shift in the classification of networks labeled as “layer 2.” He stated that any network not achieving “Stage 1” by the end of the year should no longer be considered as such. “The era of rollups being merely enhanced multisigs is ending,” he declared, emphasizing that “the age of cryptographic trust has arrived.”
For the Ethereum community, whether a network qualifies as a layer 2 is not just a matter of semantics. This classification influences the network’s reliance on Ethereum for security and, consequently, its ability to safeguard users’ funds. It raises the question of whether the network operates independently, potentially lacking adequate security measures.
This discussion gained urgency following the June 2 exploitation of the decentralized finance protocol Velocore, which resulted in a loss of $2.6 million. Velocore operated on the Linea network, which had claimed to be a layer 2 solution. The Velocore team promptly suspended block production to prevent the attacker from withdrawing funds to Ethereum. Critics pointed out that if Velocore truly depended on Ethereum’s security, its team should not have had the power to halt block production—after all, Ethereum itself cannot be paused by any single authority.
This incident fueled concerns among critics who argued that the Ethereum ecosystem was evolving too slowly toward decentralization. Buterin had previously addressed these issues a month before the Velocore incident, asserting that all Ethereum layer 2s must reach “Stage 1” by the end of 2024. If they fail to do so, the community should cease referring to them as “layer 2s.”
### Understanding Stage 1: The Decentralization Framework
The concept of “Stage 1 layer 2” originates from Buterin’s post on November 2, 2022, on the Fellowship of Ethereum Magicians message board. In it, he acknowledged that Ethereum layer 2s were still in the nascent phase of development and could not be expected to achieve full decentralization immediately. Developers should be granted time to fully realize their network’s components. Initially, these networks would be centralized but would gradually evolve to become entirely permissionless, ensuring censorship-free transactions.
A Stage 0 network identifies as a layer 2 or “rollup,” with all of its transactions compressed and published to Ethereum. The team provides a “rollup full node,” enabling independent verification of the layer 2’s state, as long as the complete transaction data from both layers is available. Users can withdraw without team intervention unless the team attempts to obstruct them by submitting false state roots to Ethereum.
In contrast, a Stage 1 rollup incorporates a “fraud proof or validity proof” system within its Ethereum smart contract, preventing developers from posting invalid state roots. Any attempt to withdraw funds fraudulently or to block legitimate withdrawals would typically fail. However, developers can bypass these fraud proofs with a vote from at least six of eight members of the network’s Security Council. This mechanism is designed to address possible bugs in the fraud-proof system. Moreover, at least three of the eight members must be independent of the development team, theoretically ensuring that the team cannot independently override the proofs. Any network upgrades must be enacted with a minimum seven-day delay unless sanctioned by the Security Council.
Over the past two years since Buterin’s post, many self-proclaimed layer 2 networks have stagnated at Stage 0 or below, leading to criticism that the Ethereum ecosystem is not fulfilling its potential. Nevertheless, six networks have successfully advanced to at least Stage 1.
### Networks That Have Achieved Stage 1
According to insights from blockchain analytics platform L2Beat, here are the networks that have reached Stage 1, ranked by total value locked (TVL):
1. **Arbitrum One**: This network is governed by 14 validators who handle deposits and withdrawals through a system of fraud proofs. If validators submit fraudulent transactions, Ethereum’s smart contracts will reject them unless the proofs are explicitly overridden. The 12-member Arbitrum Security Council controls overrides, with no single organization permitted to have more than three representatives. The Arbitrum decentralized autonomous organization (ArbitrumDAO) can upgrade the network, but this process involves a delay of 12 days and 8 hours.
2. **Optimism**: Achieving Stage 1 on June 10, it reverted to Stage 0 on August 17 due to bugs but was back at Stage 1 as of September 11. The network’s fault-proof system ensures that any attempt to process fraudulent transactions will be rejected. No single organization holds enough seats on the Security Council to override fault proofs without collaboration.
3. **dYdX v3**: This network operates separately from the Cosmos-based dYdX v4 and utilizes zero-knowledge validity proofs to ensure the correct processing of withdrawals. Validators can block withdrawals for 14 days, after which users can initiate a forced exit on Ethereum to retrieve their funds. Upgrades can typically take nine days, or two days if deemed urgent.
4. **ZKsync Lite**: Employing zero-knowledge proofs, this network confirms transactions without the possibility of processing invalid ones under normal conditions. If upgrades are initiated, they become effective after 21 days, allowing users a seven-day exit window.
In addition to these, DeGate v1 and Fuel v1 have also achieved Stage 1 and are recognized as “Stage 2,” indicating full decentralization.
### Networks Falling Short of Stage 1
Several networks currently do not meet the criteria for Stage 1, although they have reached Stage 0. These include:
– **Base**: Operated by Coinbase, this network lacks fraud proofs but can easily implement them, potentially reaching Stage 1 within the year.
– **Blast**: Currently classified as a Stage 0 network, users can run their own nodes but cannot withdraw funds against the governing body’s wishes without the introduction of fraud proofs.
– **ZKsync Era**: This network is undergoing evaluation, with its developers claiming the use of zero-knowledge proofs to validate transactions. It could be nearing Stage 1 but is currently classified as Stage 0.
– **Starknet**: Although it has implemented zero-knowledge validity proofs, users cannot withdraw without layer-2 validator permission. Given its existing technology, Starknet may quickly reach Stage 1.
A few other networks, each with TVLs below $600 million, remain at Stage 0, including Mode, Lisk, Polygon zkEVM, and others.
### The Road Ahead
As highlighted by L2Beat, two networks with over $700 million in TVL—Scroll and Linea—have not yet reached even Stage 0. Scroll has over $1.1 billion locked but lacks available node software for independent transaction verification. Similarly, Linea has over $780 million locked without public node software for transaction validation.
The evolving landscape of Ethereum layer 2 solutions continues to spark debate. As Buterin’s criteria are embraced, the Ethereum community is likely to advocate for greater decentralization, refraining from labeling networks as layer 2 unless they meet established standards. Only time will reveal how this dynamic unfolds and which networks will adapt to meet these expectations.