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Full decentralization of Ethereum layer 2s will happen in a few years, multiple teams told Cointelegraph in June.

The goal of decentralization has been held back by a variety of factors, including a desire to implement user experience and security improvements. However, progress is now being made toward decentralizing these networks, and Stage 2 will be reached soon, the teams claimed.

The concept of Stage 2 decentralization refers to the final stage of Ethereum founder Vitalik Buterins list of layer-2 decentralization milestones. It is also called full decentralization, as it would theoretically make censorship nearly impossible to perform on the networks.

Ethereum layer 2s are networks that try to make Ethereum scale by compressing and validating its transactions on separate networks.

Linea founder Nicolas Liochon told Cointelegraph that within the next few years, users should expect most L2s to have reached Stage 2 of decentralization.

Rollups prioritized other important upgrades which directly impact the user experience and security, Liochon stated. For example, the Dencun upgrade has lowered costs by an order of magnitude for users.

But now that these upgrades have been implemented, progress toward reaching Stage 2 has started. According to Liochon, the team is planning to roll out a testnet with new decentralization features in the coming months.

Anthony Rose, chief technology officer of zkSync developer Matter Labs, expects the dominant L2s to reach Stage 2 over the next two to thre years.

Rose expects some consolidation in the space. Currently, more than 20 L2s have $100 million or more in total value locked (TVL). But in the future, we will see a relatively small number of very large networks. These networks will be made up of multiple individual chains, the largest of which will be completely decentralized.

The performance of these systems can take advantage of certain things, Rose stated. So I think well see the big ones that exist today being stage two [...] disposing of their training wheels over the next two to three years.

Optimism co-founder Karl Floersch stated that the move to Stage 2 will be swift and decisive. In his view, reaching Stage 2 is difficult because it requires multiple proof implementations and because these implementations are the most security-critical code and [require] unbelievable levels of assurance. Even so, he expects his own network to reach this milestone soon.

Floersch also claimed that once a single network reaches Stage 2, others will follow quickly. This is because of the open-source nature of blockchain development:

Steven Goldfeder, a co-founder of Arbitrum developer Offchain Labs, stated that his teams network is very, very close to reaching Stage 2. Currently, Arbitrums fraud proofs can only be overridden by a nine out of 12 vote from its security council. ARB tokenholders elect members of this council.

Related: Optimism implements fault proofs, reaching Stage 1 decentralization

I think two of them are from our team, Goldfeder clarified. So [...] our team doesnt even have the veto power.

To reach Stage 2, Arbitrum would need to remove the power of the security council to act except in those cases when there are provable bugs. This is more of a question of community readiness than anything else, Goldfeder stated. ARB tokenholders would need to vote for this change, and they havent done so at this point.

According to Goldfeder, the Arbitrum Security Council has never acted to override fraud proofs despite having the power to do so. Even so, the Arbitrum decentralized autonomous organization can vote to remove this emergency power if it chooses to do so, which would be the last hurdle to make the network Stage 2.

Vince Yang, CEO of layer-3 network zkLink, also estimated that full decentralization "won't take that long" and "would be less than two years." For Yang, much of the difficulty so far has stemmed from a lack of interest among users. L2/L3s already inherit the security from Ethereum, making the industrys actual demand for further decentralization relatively low, he stated.

In addition, L2 decentralized autonomous organizations haven't necessarily wanted to give up their monopoly on revenue, so its been hard to convince them to share this revenue with independent actors. There is an existing financial incentive for L2/L3 networks to maximize revenue on transactions, further discouraging attitude and behavior toward complete decentralization, he claimed.

According to Yang, zkLink uses the layer-2 Linea as a settlement layer. It is a validium rather than a full rollup, as it stores compressed transaction data with a data availability committee (DAC) instead of directly on the settlement layer.

He claimed that zkLink is "actively seeking the industry's best practices" and "will and are ready to fully decentralize, awaiting the footsteps and decisions of the top Layer 2s."

While the above networks were optimistic that full decentralization would be achieved soon, others claimed that this lofty ideal is still a long way off from being realized.

According to Metis co-founder Kevin Liu, most L2s are difficult to decentralize because they rely on token-voting systems for governance. Traditional token voting often results in concentrated control by large tokenholders, Liu stated.

To solve this problem, protocols need to decentralize their sequencers, which will ensure that the network is owned by all participating nodes and stakers from the economy layer. Liu claimed that Metis employs this model of governance, as each sequencer node earns mining rewards based on the blocks they produce, and all onchain activities benefit the nodes themselves.

Even so, Liu claimed that L2s are far from achieving the goal of full decentralization. From a technical standpoint, I dont believe pure decentralization for layer-2 solutions is achievable in the near future, given the current state of the technology and the ongoing need for upgrades, he stated.

Still, Liu claimed that teams should keep working toward the goal of decentralization, even though the road ahead will be long and difficult. He stated:

Related: Layer 2 networks must decentralize sequencers or face the consequences

The concept of stages of decentralization comes from Buterins November 2022 post, Proposed milestones for rollups taking off training wheels. In the post, Buterin suggests that layer-2 rollups could launch with temporary training wheels in the form of centralized control as long as they work toward decentralizing over time.

Buterin identified three stages of decentralization. To be labeled a Stage 0 rollup, a network needs to provide software that can be used to independently compute the rollups state. However, the development team can still censor transactions or block withdrawals by posting false state roots to Ethereum.

To be labeled a Stage 1 rollup, the network needs to have implemented fraud or validity proofs in its Ethereum smart contracts. This means that the teams sequencer can no longer publish false state roots, as these will be rejected as invalid.

However, Stage 1 networks are allowed to have a security council that can override valid transactions. Executing an override requires an explicit action by the council, and this can only be done with six out of eight votes from it. At least two members of the council must not be from the development team.

In a Stage 2 rollup, the security council cannot override the networks fraud proofs unless these proofs contradict themselves or each other or unless the network has not processed a transaction for at least seven days.

Blockchain analytics platform L2Beat regularly evaluatesL2 networks and classifies them based on Buterins criteria.

The lack of decentralization in most layer 2s led to controversy in June, as the Linea team successfully paused withdrawals and censored one users address. The censored user was an attacker who had exploited the Volocore decentralized exchange. While many users were happy that the attackers withdrawals had been blocked, some argued that the action was proof that layer 2s were taking too long to decentralize.

Buterin himself has argued that rollups should progress to Stage 1 by the end of 2024 or should not be considered rollups at all.

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Update (June 27, 2024 1:18 pm): This article has been updated to incorporate an additional statement from zkLink CEO Vince Yang.

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Full decentralization will happen in a few years Layer-2 rollup teams - Cointelegraph

Decentralization is emerging as a pivotal concept for web3 startups, offering a transformative approach to internet infrastructure, according to a16z crypto. This venture capital fund, which has been investing in crypto and web3 startups since 2013, outlines the critical advantages of decentralization in a recent article.

One of the primary benefits of decentralization is its ability to foster competition. By creating credibly neutral and composable internet infrastructure, decentralization lowers the barriers to entry for new businesses and services. This can lead to a more diverse marketplace, where a variety of digital services can flourish.

Another significant advantage is the protection of individual freedoms. Centralized networks, often controlled by large corporations, have the power to censor and gatekeep, which can infringe on personal liberties. Decentralized networks reduce the power concentrated in these corporate entities, thereby enhancing user freedom. An example cited is Twitter, where content moderation practices were called into question following Elon Musk's acquisition of the company.

Decentralization also ensures a more equitable distribution of rewards among all stakeholders. In the current model, the value generated by networks like Twitter, Facebook, and Instagram accrues primarily to stockholders. Decentralized systems, on the other hand, distribute value more fairly among all participants, including those who create and contribute to the ecosystem.

While some might argue that decentralization could be counterproductive for startups, as it opens the playing field to other entrepreneurs, it can actually lead to faster and stronger network growth. By delivering the benefits of competition, freedom, and equitable rewards, decentralization can help startups secure a larger share of a growing market.

This article is the first part of a two-part series that delves into the high-level concepts of decentralization. For a more detailed exploration, readers can refer to the second part of the series and additional resources provided by a16z crypto.

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The Importance of Decentralization for Web3 Startups - Blockchain.News

Artificial intelligence (AI) has the potential to usher in a new era of tools and technologies that will benefit people and their communities, creating new economic opportunities and accelerating creativity and innovation.

It also has the potential to do the opposite, building walls around closed-loop systems that strengthen existing corporate interests, eventually shutting out Web3 forever.

Chris Donovan, chief operating officer of Near Foundation, the governing body of the blockchain abstraction protocol, Near Protocol, told Cointelegraph what is troubling him and his fellow colleagues.

Our great concern right now when talking about the open web is that if we dont have a credible, irrevocably open environment for AI development, then the open web may never come to fruition, said Donovan.

Illia Polosukhin, co-founder and CEO of Near Foundation, explained to Cointelegraph why AI poses a risk to open systems.

Most AI development is happening within really large corporations which have a very clear incentive where they need to continue generating more revenue for the company, said Polosukhin.

Polosukhin calls this phenomenon corporate-owned AI, and the threat he describes isnt immediately obvious. But Polosukhin, who himself worked at Google for over three years, goes on to explain the matter further.

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This [AI] has very antagonistic goals to the individuals that are using it because Google or Facebook cant find another billion users somewhere, he says. They just dont exist on the internet. So they need to grow their revenue per user, and to do that, they need to get users to spend more time on their product.

In this scenario, large corporations utilize AIs to corral users into corporate silos.

Its a very dystopian future if you imagine that, says Polosukhin.

Polosukhin looks to lessons from the past to inform his prediction of the future.

If you assume the current wave of corporate-owned AI is continuous, at some point, you are just sitting on an operating system or on a social network, and you literally dont have any other way out. Youre not going to even have a browser, says Polosukhin.

Polosukhin points to Microsoft, a leader in the AI race, which has, at various times, pursued anti-competitive practices. In 2001, the United States brought an anti-trust lawsuit against Microsoft for attempting to monopolize the web browser market.

The case was eventually settled when Microsoft agreed to amend business practices that were deemed unfair.

Microsofts approach to stifling competition would appear to have changed little in the intervening years.

On June 25, the European Union charged Microsoft with unethical practices related to its bundling of Microsoft Teams with Office. According to EU regulators, this software bundling gave Microsoft an undue advantage over competitors such as Slack and Zoom.

But while these examples are damning in and of themselves, Polosukhin believes that AI could create a perfect storm of anti-competition because of its potential to actively manipulate its users.

You will not be able to escape that kind of system, and you will think thats actually what you want, said Polosukhin.

While the monopolization of software and media platforms is one risk factor concerning Nears founders, Donovan predicts that AI could accelerate social medias worst tendencies.

These platforms dont incentivize good behavior or high-quality information. They incentivize attention and eyeballs on the screens, which I think is a very negative paradigm, says Donovan.

Polosukhin further believes that large tech platforms will want to provide more and more information directly rather than diverting to third-party sources, eventually diluting the plurality and independence of media.

You will not leave Google. Youll not go to smaller pages. You will not give them any revenue anymore. All the publications [...] will have less and less traffic from Google, said Polosukhin.

Having discussed negative scenarios at length, Cointelegraph asked Polosukhin to discuss some potential advantages AI can bring.

Polosukhin said that AI has the potential to make individuals more successful and transform even non-tech-savvy users into builders.

One of the main things we are working on is the AI developer this ability for individuals to build applications from scratch. Even if youre non-technical, you can come in and build or customize existing applications, says Polosukhin.

Maybe somebody has built a tool for you, but it probably has a bunch of things that you would want to change. Imagine that while youre using it, you press tab, and you can add a new feature, outlines Polosukhin. Thats how you become more productive, how you get more empowered and how you build the environment around you that actually suits you best.

Another area Polosukhin highlights is AI assistants that can complete tasks such as booking flights or other activities.

Unsurprisingly, for a firm with such strong opinions on the future of AI, Near is pursuing its own vision of artificial intelligence, which it calls user-owned AI.

At the launch on June 20, Near announced six partners for the project spanning data, models, compute and inference.

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According to Near, these solutions working in concert will help create the foundation of an AI ecosystem that is secure, decentralized, and tailored to empower end-users as well as researchers contributing to open source.

According to Polosukhin, the vision for Near is to become the underlying layer while the protocol itself is the identity, the payments that facilitates the grander design.

Youre not going to run AI inference onchain, clarifies Polosukhin. You run it offchain on specialized compute [...] but we are building a few different components that tie all of this together to enable this future.

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Corporate AI could undermine Web3 and decentralization Industry observers - Cointelegraph

California, known for its bright sunny skies and innovation, is quickly turning into a hub for blockchain technology. A slew of new companies are using this game-changing technology in numerous ways, from foundational infrastructure toto focusing on privacy solutions. Known for disrupting industries, the state is continuing the trend when it comes to banking and cryptocurrency. Heres your inside scoop on the companies and events shaking up the blockchain industry throughout California, sponsored by Binance.

A comprehensive overview of Californias blockchain landscape wouldnt be complete without first looking at Ethereum. Analysts are keeping a close eye onthe current price of Ethereumas a predictor of blockchain growth. This major blockchain system is central to recent progress in the industry. The price of Ethereum fluctuates due to market conditions and investor opinion, displaying the ever-changing state of the cryptocurrency sector. Nonetheless, the core technology being developed shows some serious promise. ProShares efforts to secure spot Ethereum ETF reflects a rising business interest in this versatile platform. Interestingly, in the first three months of 2024, Ethereum revenue generation outpaced some well-established firms, proving its increasing economic dominance.

With the recent inclusion ofBlockchain in the Fortune 500, adoption is at an all-time high. Blockdaemon, a key infrastructure platform, handles an incredible network of nodes. This gives necessary services for the blockchain system. At the same time, Orchid addresses internet safety with its distributed VPN service. It has a marketplace where individuals can buy bandwidth using digital currency. Ankr, a powerhouse Web3 Infrastructure platform, aids developers with multichain tools and DeFi solutions. 0x Labs revolutionizes the finance landscape with its decentralized exchange system. Superdao is referred to as Shopify for DAOs. This simplifies creating and starting Decentralized Autonomous Organizations. It really supports the overall increase in online communities built on collective ownership.

A lot of the progress in the industry will depend on sustainability efforts, much like the efforts ofPerformance Foods in Gilroyand their greener distribution model. Blockchains require significant energy to run their massive server networks. This often comes from conventional energy sources, like fossil fuels, leading to a substantial carbon footprint. This is particularly true for Proof-of-Work (PoW) consensus mechanisms. PoW, used by blockchains like Bitcoin to secure transactions, requires a vast global network of computers solving complex math problems. The first computer that successfully solves the problem validates the next blockchain and receives cryptocurrency as a reward. The continuous competition uses significant amounts of energy, raising some concerns about this technologys environmental impact.

However, you should know that companies in California are aware of this issue. More of them are looking into alternatives like Proof-of-Stake (PoS), which uses much less energy. In PoS systems, validators use their own cryptocurrency holdings to confirm transactions. This removes the need for energy-consuming calculations required in PoW systems. Companies are also considering renewable sources like solar, wind, or geothermal power for their servers, which could greatly cut down blockchain operations carbon footprint.

Sustainability is often a topic at many Blockchain events and conferences throughout California. Several key events are planned which should uphold Californias prominent position in blockchain discourse. The upcoming Blockchain Expo North America in Santa Clara is set to gather industry leaders, developers, and blockchain fans, to discuss recent developments in blockchain, crypto and the growing Web3 sector. Later this year, the Blockchain & AI Virtual Expo is set to unite top thinkers in blockchain and artificial intelligence, promoting collaborative efforts and sparking innovative concepts where these impactful technologies work together.

Will the blockchain industry make its way to Gilroy? AsMayor Blankleyrecently said, Investing in Gilroy is something that comes with risk (and) we are so appreciative of everybody that decides to take that risk. Therefore, its not unlikely that one of these companies will look to Gilroy to expand in the future. The blockchain scene in California is rich with opportunity. Future investing will likely concentrate on sectors that can be significantly disrupted by the technology. Blockchain options might be useful for managing supply chains, securing health records, or reforming voting systems. As regulations shift and the general public becomes more educated about this innovation, blockchain firms in California are set to become leaders in creating a decentralized banking system.

California is swiftly attracting global attention for its advancement of this transformative technology. Thats all due to the implementation of its progressive vision and push for further innovation throughout the industry. The rapidly growing creator economy might greatly benefit from blockchain technology in the near future. This technology provides a safe and effective method for artists and content creators to handle their digital possessions and establish a direct connection with their viewers. Blockchain technology is advancing and discovering new applications, and Californias active industry in this area will definitely benefit. Keep an eye on this exciting industry thats paving the way for the advancement of decentralized technologies.

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California's Banking on Decentralization: Upcoming Trends and Events in the Blockchain Industry - Gilroy Dispatch

Open source blockchain foundation Hyperledger has announced plans to evolve into a broader umbrella, the Linux Foundation (LF) Decentralized Trust. Apart from blockchain software, the foundation already supports decentralized identity and interoperability software. Now it wants to do more, particularly in security.

Ledgers and ledger technologies are but one component of the decentralized systems that will underpin a digital-first global economy. LF Decentralized Trust is where we will gather and grow an expanded community and portfolio of technologies to deliver the transparency, reliability, security and efficiency needed to successfully upgrade critical systems around the world, said Daniela Barbosa, General Manager, Blockchain and Identity at the Linux Foundation in a statement.

The Linux Foundation wants to host software used in the coming migration to tokenization and the modernization of infrastructure that will accompany the shift.

This is important as we look to the future of developments in blockchain and tokenization, where an open-source, developer-led environment will help to continuously improve and evolve the software that underlies some of the core infrastructure that many financial institutions are utilizing, said Catherine Gu, Head of CBDC and Tokenized Assets, Visa.

An obvious question is what other technologies might be included under the umbrella? For example, multiparty computation (MPC) is a decentralized cryptographic technique and a natural bedfellow for blockchains.

We see a host of added security, implementation and integration, decentralized identity, interop and ledger technologies and applications on the horizon, Barbosa added via email.

We are currently working with various communities that are interested in bringing code bases and communities working on Zero Knowledge (ZKP), MPC and more decentralized innovations to the Linux Foundation. Technologies like MPC, threshold cryptography or FHE (fully homomorphic encryption) dont really have an obvious home at the LF right now. There are a lot of things that are about decentralization but not specifically blockchain for which people and companies want to build projects collaboratively in the open, and thats the primary reason were doing this expansion.

To date Hyperledger has been the home of open source software development, not so much standards. Todays announcement mentioned that the new umbrella will host new open source software, communities, standards, and specifications. Hence this appears to be a vertical expansion in addition to a horizontal one.

Barbosa agreed. However, she highlighted that its not entirely new, pointing to Hyperledgers work on verifiable credential specifications with AnonCreds.

As part of the expansion, LF Decentralized Trust will include directed funding models. Barbosa said that supplemental funds for projects are common with other LF projects. They allow community members to fund specific projects directly, with the fund deciding how the money is allocated.

Much of this work was already in progress with Hyperledger, but the security aspects such as ZKP and MPC are key expansion areas. For those attached to the Hyperledger brand, each project gets to decide whether to keep or drop it. Onwards and upwards.

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Hyperledger to expand into Linux Foundation Decentralized Trust - Ledger Insights