Is DeFi failing its promise? Now, let’s talk about Layer 2s (L2s) and the recent ETH exodus from these networks. This trend has huge ramifications for anyone interested in advancing financial inclusion in places like Africa. The headlines are all about percentage drops and Binance's staking moves, but the human cost could be devastating if we don't pay attention.

L2s: A Bridge For The Excluded?

When L2s like Optimism, Arbitrum, and Base started gaining traction, many of us viewed them as a shining light on the horizon. Reduced transaction costs and increased transaction speed are the magic wands. Now, those same people in emerging markets are able to join the global digital economy with the knowledge that even a few dollars can go a long way. Imagine, for example, a small business owner in Nigeria. They’re deploying L2s to ensure they can be paid by overseas customers whilst keeping transaction fees at a low. Or a household in Kenya able to use L2s to send remittances home without high fees. This was the promise.

  • Remittances: Sending money home is often cheaper.
  • Micro-lending: Access to small loans becomes easier.
  • Global Commerce: Participating in the digital economy is more viable.

The data is clear: ETH balances on major L2s are shrinking significantly. After Optimism’s holdings of ETH dropped, Arbitrum and Base followed suit. While some analysts point to Binance moving funds back to Ethereum mainnet to capitalize on staking rewards (a 20% increase in staked ETH in 90 days? Wow!), I can't help but wonder: Whose progress are we really celebrating here?

The Price of "Progress" For Whom?

Are we really just creating yields for the mega ETH whales? If so, essentially, are we willing to give up the accessibility that L2s had initially pledged to bring the unbanked and underbanked. Now, I’m not saying staking is bad, actually. Without space for experimentation and adaptation, painful centralized decisions can have devastating unintended consequences, particularly for the communities that most depend on these tools to live every day.

I interviewed Aisha, an artisan in Ghana, who leverages L2s to reach global markets for her handicrafts. As she explained to me, “The fees were always getting cut short at worst. If they do increase, I’m at a loss as to how I am supposed to compete. Her words hit me hard. This isn't about abstract percentages; this is about real people's livelihoods. It’s about the long-term erosion of economic empowerment for people who need it most.

Yet, the silence about the potential impacts on emerging markets is deafening. We're so busy patting ourselves on the back for ETH's price gains (up 25% in 90 days! Staked ETH at all-time highs!) and the increase in "accumulation addresses" (wallets that never sold ETH now hold a record 22.8 million ETH!) that we're forgetting the original vision of DeFi: a decentralized and inclusive financial system for everyone, not just the wealthy.

Forgotten Voices, Forgotten Promises?

Where are the voices of these marginalized communities, that this administration without shame promised a seat at the table to? What’s the plan to make sure L2s remain available to people who need them? We may not want to live with the consequences of decreased liquidity or the potential for increased transaction fees. Will lower liquidity on L2s drive transaction fees, pricing out millions of users in developing nations?

My goal isn’t to curtail innovation or throw stones at the winners of successful innovation projects. I am suggesting that we need to be more mindful of the social impact of our decisions. Let’s invest in solutions that increase access to financial services, including taking a hit on short-term profitability.

Maybe it’s just the time now to consider other L2 scaling solutions which are tailored toward low-resource contexts. Now it’s time to build heartier on-ramps and off-ramps. This will be the critical on-ramp for people living in emerging markets to get started using L2s. It’s high time for the Ethereum community to have a frank discussion. We need to have a conversation about downstream impacts of the ETH exodus from L2s.

This isn’t only about technology, it is very much about humanity. It's about ensuring that the promise of DeFi isn't just another broken promise for those who need it most. We shouldn’t make L2s the next Ethereum insiders’ club to keep the privileged few happy. The future of our shared financial inclusion mission rests on it.

This isn't just about technology; it's about humanity. It's about ensuring that the promise of DeFi isn't just another broken promise for those who need it most. Let's not let L2s become another exclusive club for the privileged few. The future of financial inclusion depends on it.