Don’t Listen to the Cynics
A venture investor’s open letter on why Layer 2 is working exactly as intended
Editor’s note: The following is a fictional but representative steelman of the pro-L2 VC position, written in response to Meet the New Boss. We’ve tried to make it as strong as we honestly can. If you’re a financial investor evaluating L2 projects on commercial fundamentals — TVL growth, fee revenue, developer mindshare — much of what follows will sound reasonable, and some of it genuinely is. The investment thesis and the technological promise are different claims, and the VC below is careful, in their own way, never to fully separate them. We’ll come back to that at the end.
I’ve read the “Meet the New Boss” post making the rounds, and I want to engage with it — not to be dismissive, but because I think it’s going to mislead a lot of people who deserve better than that.
I’ve spent the last six years deploying capital into Layer 2 infrastructure. I’ve sat across the table from the people building these systems. I’ve watched the “it’s all centralised, it’ll never work” take cycle through the community every year or so, always with a new technical wrapping. The critique sounds more sophisticated each time. It’s still missing the same things.
On Regulated Ramps: This Is What Winning Looks Like
The original post frames KYC at fiat ramps as evidence that crypto has been “captured” — that the state walked in through a door it always owned and the revolution is over. I think that fundamentally misreads what crypto needed to become to be useful to most people.
The examples chosen — WikiLeaks, the Canadian convoy, Palestinian payment access — are real, and I’m not going to pretend they aren’t. But they’re not why most people interact with financial infrastructure. Most people want to pay bills, send money to family, invest their savings. For those people, a compliance framework that matches the legal environment they already live in isn’t a cage — it’s a feature. It’s what makes it possible to build products they’ll actually trust and use.
The alternative — fully permissionless, no identity requirements — sounds principled until you look at who actually uses it. The data is pretty clear. Ransomware operators. Sanctions evaders. Exchange hackers. If that’s your user base, you don’t get institutional liquidity. You don’t get custody partners. You don’t get the ecosystem that makes these products work for everyone else.
KYC didn’t capture crypto. It opened the door to the capital and infrastructure that scales it. The cypherpunk dream assumed a population of technically sophisticated users who needed to escape state finance. The actual market is ordinary people who want a better version of what they already have. Compliance frameworks reflect that market. That’s not surrender — that’s product-market fit.
On Lightning Routing: Progress Is Real
I’ll give the routing critique this: it’s the argument I’d make if I were trying to sound technical while writing off Lightning. The channel balance problem is real. Failed payments are a real UX problem. I’m not going to pretend the current experience is seamless for everyone.
But “the problem is unsolvable” is doing a lot of lifting in that argument, and the actual trajectory of the network doesn’t support it. Success rates are up substantially from where they were three years ago. Real transactions are happening — in El Salvador, across merchant integrations, in remittance corridors where the alternative is 10% wire fees. The teams working on routing have improved it continuously and will keep doing so. That’s how infrastructure matures.
The “it has hubs, therefore it’s captured” argument proves too much. Credit card networks have hubs. The global banking system has correspondent banks. Every settlement network at scale has concentration, because that’s how liquidity pools work. What matters is whether the hubs are subject to competition and protocol-level constraints — and Lightning’s are. The fact that routing isn’t perfect today is not evidence that the architecture is flawed. It’s evidence that it’s not finished.
On Sequencer Centralisation: Temporary Means Something
Yes, major L2s run centralised sequencers today. This is known. It’s documented. The teams building these systems have been more transparent about it than most infrastructure projects are about their limitations. I’ll take that over opaque promises any day.
The post calls this “structurally permanent” and suggests the decentralisation roadmap is a fiction. I’d push back on that pretty hard. I’ve met the people at Espresso, at Astria, at the ZK teams — Polygon, Scroll, others — and the work is real. ZK-rollups in particular take a fundamentally different approach that sidesteps a lot of the ordering constraints the post treats as universal. The assertion that no one has solved the canonical sequencer problem ignores that multiple credible teams are closing in on it from different directions.
Are timelines slipping? Sure. That’s true of every hard infrastructure problem. “The roadmap will keep slipping” is a bet on organisational behaviour, not a technical argument. It might be right. It also might not be. I’ve seen enough “this will never work” predictions age poorly in this space that I take them with some salt.
In the meantime: yes, Coinbase can be leaned on to censor a transaction on Base. That’s a real limitation, and users who need censorship resistance at the base layer should know it. For the vast majority of users who don’t, the system is delivering real scale and real utility right now. That matters.
On the Unacknowledged Experiment
I’ll be honest — the “sequencer goes dark” scenario is a fair point to raise. The recovery path from L1 data has not been tested under real-world collapse conditions. I won’t pretend otherwise.
What I’d say is that every piece of financial infrastructure has failure scenarios that haven’t been run in anger. Prime brokerage, clearing houses, correspondent banking — the 2008 crisis surfaced a lot of assumptions that nobody had actually stress-tested. The answer wasn’t to abandon the financial system. It was to build better disclosure, better resolution frameworks, and better insurance. That work is underway in this space too. I’ve put money into some of it.
The criticism lands as “we don’t know what recovery looks like.” Fine. The appropriate response is to find out and document it — not to treat the gap as a reason the technology can’t work.
On Monero: The System Is Working Correctly
Monero is being delisted because it’s incompatible with AML obligations at regulated entities. That’s it. That’s the whole story.
The post frames this as suppression — evidence that genuinely censorship-resistant tools get removed when they work too well. I’d frame it differently: financial infrastructure has to meet certain legal requirements to operate within the regulated system. Monero, by design, can’t meet them. So it can’t operate there. Nobody has touched the protocol. The network works. What’s gone is convenient fiat conversion at exchanges with compliance departments.
The idea that this is crypto betraying its vision doesn’t quite land for me. The vision I backed was sound money, programmable value, non-inflationary savings — not untraceable transactions. Different people wanted different things from this space. Monero is a coherent design optimised for one set of those things. It’s just not the one that scales into a global financial system within legal reality.
What the Critics Get Wrong
The post is making a real point underneath all the technical framing. Crypto was sold as something, and it delivered something somewhat different. That gap is real and worth acknowledging.
But I’d reframe what it actually delivered. L2s are scaling infrastructure. They make Ethereum usable by people who aren’t running nodes. The DeFi protocols on top of them give anyone with an internet connection access to lending markets, liquidity pools, and collateralised borrowing — without a credit score, without a bank account, without a compliance officer deciding whether you qualify. Your keys, your funds, non-custodial by design. That didn’t exist before. It exists now. It runs on infrastructure that’s still maturing, but it’s real and it works.
Is that the maximal 2009 vision? No. Is it a meaningful improvement over what came before for millions of people? Yes. The critics are grading on a curve where nothing short of perfect scores zero, which is a good way to write off every piece of infrastructure humanity has ever built.
— A general partner at a Tier 1 crypto infrastructure fund. Views are my own.
What They Didn’t Say
Back to our voice.
That’s a good pitch. Genuinely. If you came away feeling like most of the original criticisms had been addressed, that’s the intended effect and it mostly worked — which is worth noticing.
Here’s the thing though: the VC above is not wrong about much. The investment thesis is real. TVL growth is real. Fee revenue is real. If you’re modelling these as infrastructure companies with network effects and developer moats, the centralisation concerns may not be relevant to your returns. A fast, well-run, centrally-operated server can be an excellent business. That’s not a gotcha — it’s an accurate description of what many of these projects are.
The dishonesty isn’t in the individual claims. It’s in what’s quietly being argued past.
The “edge cases” framing for WikiLeaks and the Canadian truckers is doing more work than it looks like. The original post’s point wasn’t that most users get censored — it was that who gets censored depends entirely on who holds power in a given moment. The mechanism is what matters. Under different political conditions — and political conditions do change, often faster than infrastructure does — “edge case” becomes something much larger. The VC is arguing from today’s environment. The original post is arguing from the architecture. Those are different arguments and the VC’s version doesn’t actually address the other one.
The routing section is the one where the voice slips most noticeably. “Success rates are up, real transactions are happening” is not a response to the specific claim that the routing problem is information-theoretically constrained by the privacy of channel balances. It’s a sales update. The original argument is that the information needed to solve optimal routing is, by design, not available to the routing algorithm — and no amount of improvement in implementation changes that. The VC doesn’t address this because, we’d guess, they don’t fully understand it. Which is fine — most people don’t. But it means the rebuttal doesn’t land.
The ZK-rollup mention is the technically smartest move in the piece — the research is real, and ZK sequencers do have different properties. But sit with what’s actually being argued: the VC is pointing to work done by entirely separate teams, at arm’s length from their own portfolio, as evidence that the products they funded are fine. Espresso and Astria are not Optimism. Scroll is not Base. If these approaches work well enough to cite as a defence, the obvious question is why the capital didn’t follow — why users are on centralised sequencers today while the solutions the VC is vouching for remain elsewhere, still maturing, apparently not urgent enough to back with a cheque. Citing what other people might build is not a defence of what you actually shipped to market. It’s a redirect dressed as an answer.
The “non-custodial” claim in the closing argument is where we’d push hardest. The DeFi pitch — your keys, your funds, no compliance officer deciding if you qualify — is compelling and mostly true of the smart contracts themselves. But those smart contracts live on infrastructure operated by a single company. If the sequencer doesn’t include your transaction — because it’s under legal order, because it’s been hacked, because the team went quiet — you cannot interact with your own position. You can’t repay a loan before it’s liquidated. You can’t pull collateral before a market move wipes it. Your keys are still yours. Your access to using them runs through a single point of control.
That’s custody. Not of your assets directly, but of your ability to act on them at the moment it matters. The word “non-custodial” describes the smart contract architecture. The full-stack reality is something different — and in financial markets, the moment when the distinction matters is always a moment when time is critical.
The “unacknowledged experiment” section is where the VC is most honest, almost despite themselves. Yes, the failure scenarios haven’t been tested. Yes, better disclosure and insurance frameworks are the appropriate response. All true. But notice what didn’t make it into the reply: any acknowledgment that users currently have no way to know this, that the marketing describes the theoretical guarantee as though it were a practical one, or that “better disclosure is underway” is not the same as “you are currently adequately informed of this risk.” The gap between those two things is exactly where real users get hurt.
None of this means these systems are worthless or that you shouldn’t use them. Lots of useful things carry undisclosed risks. The practical question is simpler: are you using these systems with an accurate picture of what you’re trusting, or the picture the marketing gives you? Those are often quite different, and only one of them lets you make a real decision.
The marketing pitch, stated or implied, is always a variation of the same thing: this is crypto — trustless, censorship-resistant, permissionless — with better UX and faster settlement added on top. An upgrade. What it doesn’t mention is what had to come out to make room. The trustlessness. The censorship resistance. The permissionless access. None of those were decorative. They were the point. Strip them out and what remains is a fast, cheap system controlled by a company — which is, and we say this without malice, exactly what we already had.
The VC’s most revealing moment isn’t a technical argument at all. It’s the one about banks and clearing houses having untested failure modes too. That’s offered as reassurance. Read it plainly: the defence of trustless decentralised finance is that it has the same failure profile as the institutions it was built to replace. They’ve completed the circle and are explaining why landing back at the start is fine.
As for the bells — the decentralised sequencers, the censorship-resistant routing, the features that would make the original promises actually true — they’re on the roadmap. They’ve been on the roadmap. A bell that never rings isn’t a feature in development. It’s a selling point that ships free with every whitepaper.
The new boss gives a better presentation. The org chart looks familiar.
If the VC’s arguments landed — and they might have — we’d ask just one question: how much of what convinced you was technical, and how much was tone? Worth actually checking.
Born suspiciously male on a small blue planet during its one thousand nine hundred and seventy first orbit chasing an unremarkable star in a galaxy tucked away at the edge of the universe where nothing of much interest happens and even less is remembered.