Existing L2s on both Bitcoin and Ethereum are money service businesses (MSBs) and are likely to fail under regulatory pressure right after privacy services! 🧐 1. All L2s (whether sidechains or rollups) are custodial. Customer funds are either locked in a multisig contract controlled by some federation (Liquid Network) or fully controlled by some emergency council (Arbitrum One, Optimism, etc.). Yes, they can steal all user funds if you didn't know. L2s enable transmitting funds from one person to another. 2. All L2s are a) centralized, b) for-profit businesses. a) While some might pretend to be "D"AOs, in fact, they're still fully controlled by their developers or initial investors due to how the tokens allowing to elect the said "security councils" are distributed. Technically speaking, they are all just ordinary companies. Lightning Network also consists of centralized authorities, which already go down one by one. These centralized parties transmit funds for their users. b) Their business goal is to earn on transaction fees. These fees are pocketed in and distributed amongst the token holders (i.e. shareholders). 3. None of these L2 companies have any banking licences. This makes them and the persons behind developing them a low-hanging fruit for virtually any three-letter agency. Hopefully, no sanctioned persons use Base? 🤔 4. Unlike L1 miners and validators, all those who run L2s are easily identifiable and targeted. It's known who's developing them, who's holding the admin keys to control the security councils, and so on. Many privacy services (Samourai, Wasabi, Tornado) and Lightning service providers (Phoenix, WoS, IBEX, Mash to name a few) are already down at least in some jurisdictions. L2s are a huge legal liability waiting to happen: blockchains need L1 scaling to win. Which L2 will go down first do you think? 🤨