Ethereum co-founder Vitalik Blerin praised the approach of Ethereum Layer 2 based on decentralization in response to recent concerns at the base order and whether it should be treated as an exchange.
“The base makes things the right way: an L2 at the top of Ethereum, which uses these centralized features to provide stronger UX features, while still tied to the decentralized base layer of Ethereum for security,” Vitalik Blerin Says on Tuesday.
He added that the Coinbase Layer-2 is reckless to your funds, “They cannot steal funds or will prevent you from removing funds.”
The real layer-2 was non-custodial, he continued. “These are Ethereum extensions, not glorifying the servers that are happening to submit the hashes.”
Baterin’s comments came in the midst of recent cynicism in the meaning of Layer-2 networks and centralization concerns. L2s are pushed to spotlight following comments by the Securities and Exchange Commissioner Hester Peirce in a Podcast on September 7th.
Are L2s the same in exchanges?
Many layer-2s use Centralized Function -Create of Transaction to provide better rates and avoid running to the front by bots. Peirce is placed on the potential implications of regulation when “matching machines” act like centralized exchanges.
“If you have a matching machine that is essentially controlled by a creature that controls all its pieces, then it looks more like an exchange, and we will need to think about that.”
However, he also said that if the “matched” owners were not security, “then we have nothing to say about it.”
Layers 2 are infrastructure providers such as aws
Coinbase Chief Legal Officer Paul Grewal Argued Calling layer-2 sequencers such as the base “replace” fundamentally misunderstood their role and functionality.
The SEC has defined a “exchange” as providing a market for the integration of consumers and sellers of security, he said, adding that layer-2s are “general blockchains that operate as infrastructure.”
They process messages as code, calling smart contracts, and batch all transactions, if these are payments, calls or messages.
Related: Vitalik Blerin recommends minimalism as key to Layer-2 Blockchain success
He compares the layer 2s like the base to Amazon Web Services: Both run code provided by developers, including exchange applications, but it does not make the infrastructure itself.
“If an exchange runs on AWS, AWS is an exchange? Obviously not.”
Sequencers do not match the machines
Base co-founder Jesse Pollak followed with more details on how sequencers work.
Users can transact through the base Sequencer or directly through Ethereum, maintaining full decentralization and resistance to censorship, he said.
“It’s like a traffic control that ensures smooth flow through a high priority traffic line that allows vehicles to get to where they go faster.”
He also cleaned the misconception of the engine, saying that the following ones do not act as “matching services” or machines such as those in traditional exchanges.
“Matching engines pairs buy and sell orders at specific prices to perform trading. Sequencers do not do that – they only determine the adoption – following where the transactions are processed.”
If the 2S layer is classified as exchanges, they will need to register with the SEC as security exchanges, comply with extensive regulatory requirements, and potential facial restrictions in operations, therefore pushing the industry.
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