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Comment by smoldesu | Hacker News Reader

If there's one thing that people should correctly point out as scams in the world of crypto, it should be L2 chains. Every single one of them is a ploy to enrich their creator, full-stop. I don't even know what kind of pipe dream they sell to their investors to get capital.

It's particularly funny, because I remember Justin Sun trying to scam people like this years before cryptocurrency had really taken off. Back then, though, everyone who had skin in the game actually cared about the health of the community, and the guy lost millions of dollars trying some really insane hostile takeover tactics. Nowadays though, nobody cares. The hucksters of this world make their money hand over fist now.

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That’s a rather myopic view.

You could look at L2s as a sort of credit card system, and from a systems and technology POV there’s nothing inherently “scammy” about it. For web3 applications of any meaningful large scale, L2 solutions are necessary.

For better or worse, the L2 developer platforms that I assume you’re referring to are essentially low-code solutions to abstract away the actual systems software engineering aspect of web3 development. Are the low-code SaaS companies overvalued or “scammy”? I’m not suggesting they are or are not.

Well-staffed tech companies building web3 applications often build their own implicit L2 solutions because it’s just how you connect things in a distributed system with modern L1 blockchain constraints.

> Well-staffed tech companies building web3 applications often build their own implicit L2 solutions because it’s just how you connect things in a distributed system with modern L1 blockchain constraints.

Sure. The banks do the exact same thing, which is what makes them so goddamn profitable to run. The problem is that the entire cryptocurrency space now has to choose between two destinies:

a. Default on the trustless model in order to continue scaling, passing the actual verification process to private validators who may or may not be scamming you.

b. Let every token lose it's value, allow the system to suffocate and continue pushing for airtight security until the bitter end.

Now, neither of those are attractive choices. I'll tell you what, though: I'd rather have a $20 bill than $20,000 of Monopoly money.

> I'd rather have a $20 bill than $20,000 of Monopoly money

All currencies we use are smoke and mirrors. The difference is that that $20 bill is backed by well armed US Marines and an crypto currency is not

Can I sell the underlying Marines in the event I lose faith in the investment?

This is as clear and succinct a statement as to why "web3" has nothing to offer as I have read.

Translation: we will rebuild existing financial institutions with a bunch of move-fast break-things poorly-regulated "difi" companies which will both intentionally and through ignorance recapitulate every flaw of the existing financial industry.

Purpose: as in the Celsius case, to intentionally exploit regulatory response time so as to extract money through opaque extra-legal and unethical exploits, intended to allow ourselves and chosen insiders to run off it, leaving deluded last-fools holding the bag.

There is literally no benefit to anyone except the VC backing the scam, who are using chaff and FOMO to farm rubes.

I think this has been going on for at least 2000 years…

It doesn’t matter if it’s crypto or gold, there will always be people manipulating financial systems, but that doesn’t mean any system is inherently good or bad.

https://en.m.wikipedia.org/wiki/Financial_crisis_of_33

https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007%E2%...

https://en.m.wikipedia.org/wiki/WeWork

I think the person you're responding to was talking about Bitcoin L2 chains, probably more specifically the lightning network.

I actually agree with that about Bitcoin.

Web3 is generally done on EVM or cosmos chains, some of which are L2s (and some of which are loosely considered L2s). But most of them are still separate chains, so not L2s in the sense that the Lightning network is an L2. If you're looking at EVM chains, then L2s are certainly required to handle significant throughput, but the "lack of transparency" mentioned by GP isn't an issue with them.

How is lightning “a ploy to enrich its creator”?

Especially considering that it is being independently developed by three organisations as an open source protocol that offers complete self-hosting and doesn't require an intermediary during operation...

Basically it leads to hubs forming where lightning nodes with large amounts of funds are better able to facilitate transactions, and also benefit from that due to transaction fees.

I’m a relative crypto noob, but I did see certain “lightspeed” transactions which would allow for high-volume and “instant” transactions. Is this also considered an L2 chain, or not? If not, how does it circumvent the limitations of the bitcoin blockchain without sacrificing transparency?

> Is this also considered an L2 chain, or not?

I can't say for sure without actually seeing the tech, but if a company promises to scale cryptocurrency transactions then they're probably doing it on an L2 chain. The problems with this are obvious: trusting a single party to handle all of your transactions and not abuse that insider info is crazy. These people are going to use their power over the chain to eke out every cent they can, otherwise it doesn't make financial sense to operate in the first place. It looks attractive from a VC standpoint, but that's because it's a deliberate honeypot.

What about a decentralized L2 with zk-proofs?

I don't know, and I don't really care. Any sufficiently complicated technology is indistinguishably from magic, and I don't trust magic to manage my finances. L1 chains are simple and their trust models are transparent, I don't think any L2 chain is going to see widespread adoption when decidedly better alternatives exist.

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