Author: Dan Hughes, founder of Radix, CoinTelegraph; compiled by Deng Tong, Golden Finance

For many years, cryptocurrencies have regarded the second layer (L2) solution as a panacea to solve the scalability problem. What if they are exactly what puts us in danger?

This persistence not only paves the way for large-scale adoption, but instead creates a complex network, including aggregation, bridges and decentralized liquidity, threatening the core principles of blockchain decentralization and security. The dream of seamless, decentralized networks is gradually fading, obscured by a complex system that echoes the inefficiency and centralization of the traditional financial world. Are we expanding innovation, or are we just recreating the past?

L2 should have alleviated the tribulation of blockchain. However, while they may fill the gap at an individual level, the L2 solution has put cryptocurrencies at risk of losing all three.

The growing growth of L2 has resulted in a highly fragmented ecosystem that is difficult to navigate and relies on complex aggregation and bridging solutions. This leads to centralization of certain parts of the ecosystem, attracting assets to decentralized liquidity silos, hindering security and killing competition for small projects.

These "solutions" bring large-scale friction and unnecessary security risks. While bridging-related hackers have become less common in the past two years, hackers always find new ways to balance ledgers—using summaries, channels and sidechains.

Many L2 dependencies on sequencers or trusted validators create additional cracks in the armor, i.e., single point failure, while isolated liquidity reduces the availability of the smaller L2, thus threatening cyber resilience.

These solutions also present great technical challenges for application developers looking to integrate with L2, requiring a deep and specific understanding of the mechanisms of each L2 that an application may need to touch.

L2 proponents believe that these trade-offs are necessary and easy to overcome, but there are more fundamental issues here than sacrificing security, scalability, or liquidity.

The ultimate goal of cryptocurrencies is to create a universal network where any asset or decentralized application can interact with any other asset or decentralized application in a trustless and secure way. However, the friction introduced by L2 destroys this instant interoperability, while the centralization of sequencers and validators destroys the basis of trustless systems. Not only does this hinder the scalability of decentralized finance (DeFi), it also leads to a completely different expansion, reproducing the inefficiency of existing siloed, decentralized and over-the-middle TradFi systems.

If DeFi’s goal is to transfer all financial activity to the chain, then we must do better than we are now.

Encryption needs to be built from the basics. Blockchain networks must prioritize scalability and security at Layer 1.

Shaving provides a clear path forward, but the industry must set higher goals and build long-term solutions, rather than just a quick solution to “temporarily solve” current scalability problems. This is not just about increasing the number of shards; it is about how we shard. Beacon chains just add a bottleneck, dynamic sharding is complex, limiting scalability and incurring huge overhead. Even the inside validator slice seems to solve all of these problems until you reach resource saturation on a network-oriented node that has to receive all transactions, just push the problem behind to find more validators and reduce the gains.

The obvious solution to extend DeFi to the same functionality as TradFi is state sharding, where the state of the blockchain is distributed across many different shards. Transactions involving states from different shards create a temporary consensus process.

The verifier responsible for the transaction state communicates, agrees (or disagrees) and updates the state atomically in all relevant shards. This allows transactions to be processed in parallel between multiple shards and even within shards, where the only thing shards need to be concerned is that transactions that modify the state they are responsible for have no cross-dependencies, thereby significantly improving throughput without compromising decentralization or accessibility.

When these shards integrate with atomic commitments, if any part of the transaction fails, everything will be cleanly aborted and no work is required to untangle the pending state changes.

This is just a solution. DeFi will be extended to Earth. It's just a question, the question is when and in what way it is done. That being said, a solution focused on the foundation of L1 development rather than relying on L2 patchwork will eliminate fragmentation, reduce complexity and ensure scalability and accessibility are once again at the heart of blockchain networks. Ultimately, the future that developers want to prioritize—token economics or the founding commitment of Web3—decentralization, efficiency, and security.

L1 Solution is a solution for everyone. They ensure the foundation of the ecosystem for developers, traders, average users and even billions of potential users. If there is no elastic and scalable architecture in the foundation, just one strong push is enough to bring the house of cards to amaze. Of course, a specific use case might be more suitable for using an L2 solution. High-frequency trading settlement is a perfect example, but exceptions can never prove the rules. From an ecosystem perspective, developers must focus on integrated, native scalability solutions, rather than just adding complexity and balancing more volatile “solutions” at the top. If you don't pay enough attention to L1, it will only cause problems.