Ethereum layer 2 blockchain Linea is under fire after revealing that Velocore, a decentralized exchange operating on its network, was hacked and unilaterally stopped block production.
Over the weekend, 700 ETH, equivalent to more than $2.6 million, was moved out of the layer 2 network via an anonymous third-party bridge due to the Velocore hack. As of press time, Volocore had incurred losses totaling $6.8 million. Linea explained that not being able to contact the DEX team led them to immediately “stop the sequencer to prevent further fund outflow.”
It added:
“Sequencer paused at blocks 5081800 and 5081801. During this pause, we gave the Velocore team time to support vulnerability triage efforts. We also censored the hacker’s address. This significantly reduces the ecosystem impact for Linea users.”
Linea justified the decision by noting that hackers “started selling large quantities of tokens for ETH.” Beyond the exploit depleting the liquidity pool, this would have created other problems for the ecosystem for users.”
The community blames Linea.
The cryptocurrency community strongly criticized Linea’s decision to stop block production, claiming it violated the ethics of the emerging industry.
Mert Mumtaz, CEO of Helius Labs and a big supporter of Solana, acknowledged the rationale behind the move but expressed concerns about the long-term impact. He said:
“Consensys’ L2 unilaterally turned off the chain yesterday, which is reasonable considering the circumstances, but also a clear signal that this is not a cryptocurrency.”
Echoing this sentiment, Alex Gluchowski, CEO of Matter Labs, emphasized that decentralization for all sequencers is very important. He urged all layer 2 solutions to prioritize incorporating decentralization into their platforms.
“Decentralizing sequencers is not an option. Any serious L2 stack should do this first,” Gluchowski said.
Decentralization Goal
Meanwhile, Linea said it continues to work to decentralize its network and sequencers to prevent a recurrence of this incident. It said:
“Linea’s goal is to decentralize networks, including sequencers. As our network matures into a decentralized and censorship-resistant environment, the Linea team will no longer be able to stop block creation and address censorship. This is the main goal of our network.”
The Consensys-backed blockchain also noted that most competing networks still rely on centralized technology operations to protect ecosystem participants. But, he added, “our core value is a permission-free, censorship-resistant environment.”