Buterin Dismisses Allegations of Ethereum Layer-2 Fund Theft Risk

Ethereum co-founder Vitalik Buterin has firmly denied allegations that the network’s Layer-2 solutions can unilaterally seize users’ funds.

This statement comes after several crypto stakeholders reignited the debate over fund security on Ethereum Layer-2 networks on the social media platform X (formerly Twitter).

Buterin Addresses Skepticism Over Ethereum Layer-2 Fund Security

On August 31, Justin Bons, founder and CIO of Cyber Capital, argued that Layer-2 networks are inherently risky due to their centralized structure, claiming they could easily steal users’ funds.

“L2s are dangerous, as they can steal user funds and can even go down at any time! A clear consequence of their centralized design. [This] betrays the cypherpunk principles they pretended to hold dear,” Bons claimed.

Mert Mumtaz, co-founder and CEO at Helius, corroborated this view in a separate post. According to Mumtaz, it is “insane” that major Layer-2 solutions on the mainnet have the technical capability to do so.

However, Buterin quickly responded by dismissing these fears. He explained that Ethereum Layer-2 solutions cannot unilaterally take users’ funds, as they require a high level of consensus to function. Buterin noted that a security council, with a voting threshold of at least 75%, oversees governance issues.

Read more: A Beginner’s Guide to Layer-2 Scaling Solutions

Buterin also added that at least 26% of council members must be independent of the company behind the Layer-2 solution. He highlighted that both Arbitrum and Optimism meet these criteria, making the idea of L2s stealing funds highly unlikely.

“A major nuance: the rules for stage 1 require that only a security council with >= 75% vote threshold can overrule the code, and a quorum blocking (ie. >= 26%) subset needs to be outside the company. OP and Arb both comply with this. So the orgs cannot unilaterally steal funds,” Buterin stated.

Despite Buterin’s statement, some community members still expressed skepticism over the situation, with Mumtaz stating that he shouldn’t “assume intent on behalf of the organization.”

Buterin Clarifies ETH Sales

In a parallel development, Buterin also addressed concerns about his recent Ethereum sales. In an August 31 post, he explained that his sales are not profit-driven but intended to support meaningful projects within and outside the Ethereum ecosystem. He mentioned that some proceeds go to charitable causes, including biomedical research and development.

“I haven’t sold and kept the proceeds since 2018. All sales have been to support various projects that I think are valuable, either within the ethereum ecosystem or broader charity (eg. biomedical R&D),” Buterin stated.

Read more: Who Is Vitalik Buterin? An In-Depth Look at Ethereum’s Co-Founder

This clarification comes at a time when the crypto community has been increasingly concerned about the frequency of Buterin’s ETH transfers. Last month, he moved 800 ETH, worth about $2.01 million, to a multisig wallet, with 190 ETH subsequently swapped for 477,000 USDC.

Despite these transactions, Buterin still holds a significant amount of Ethereum. According to the Arkham Intelligence dashboard, he currently owns approximately $592 million worth of ETH.