Ethereum co-founder Vitalik Buterin has effectively drawn a line in the sand for Layer 2 networks, signaling that commercial dominance no longer excuses centralized control. The critique lands squarely on the doorstep of Coinbase’s Base, which recent data confirms now commands a staggering 62% of all Layer 2 revenue, generating over $75 million in fees year-to-date.
Buterin’s comments, made in a recent detailed post, dismantle the long-held assumption that L2s are automatically “extensions” of Ethereum. He argued that if a network processes high throughput but relies on a multi-signature bridge for security, a common trait among “Stage 0” rollups, it is not scaling Ethereum, but merely acting as a separate chain.
The Revenue vs. Decentralization Gap
The timing of the critique is precise. Base has become the ecosystem’s financial engine, capturing nearly two-thirds of sector revenue and surpassing Arbitrum in DeFi Total Value Locked (TVL) with $4.63 billion. Yet, this commercial success masks a structural vulnerability: Base remains heavily centralized, controlled entirely by Coinbase.
“I have even seen at least one company clearly state that they may never want to go beyond the first phase… because their customers’ regulatory requirements require them to have ultimate control. If you are doing this, then you are not scaling Ethereum.”
While Buterin did not name Coinbase explicitly in that sentence, market context makes the target clear. Base fits the profile of the corporate-backed L2 that prioritizes compliance and uptime over the permissionless fraud proofs required for “Stage 1” decentralization status.
The ‘Stage 1’ Ultimatum
This is not an idle philosophical debate. Buterin previously pledged to stop publicly acknowledging L2s that fail to reach Stage 1 status by 2025. Stage 1 requires a working fraud or validity proof system where a security council cannot unilaterally overturn the code unless a specific error is detected. Currently, Base operates with “training wheels” that allow Coinbase to pause or upgrade the chain at will.
The friction highlights a diverging roadmap. Coinbase treats Base as a product to onboard its 9.3 million monthly active users, generating substantial revenue ($75M+) that flows back to the corporation rather than Ethereum mainnet. In contrast, Buterin is redefining L2s not as “branded shards” of Ethereum, but as a spectrum of plugins. Those that refuse to decentralize effectively demote themselves from “Ethereum scaler” to “connected sidechain.”
