Ethical Risk Analysis of L2 Rollups

TL;DR

This paper analyzes ethical risks in L2 rollups, identifying widespread hazards like instant upgrades and proposer controls, and offers mitigation strategies based on empirical data and ethical risk analysis.

Contribution

It adapts Ethical Risk Analysis to L2 rollups, creating a taxonomy of decision authority and exposing prevalent ethical hazards through empirical signals.

Findings

86% of projects allow instant upgrades without exit windows

About 50% have proposer controls that can freeze withdrawals

Incidents mainly involve sequencer liveness and inclusion issues

Abstract

Layer 2 rollups improve throughput and fees, but can reintroduce risk through operator discretion and information asymmetry. We ask which operator and governance designs produce ethically problematic user risk. We adapt Ethical Risk Analysis to rollup architectures, build a role-based taxonomy of decision authority and exposure, and pair the framework with two empirical signals, a cross sectional snapshot of 129 projects from L2BEAT and a hand curated incident set covering 2022 to 2025. We analyze mechanisms that affect risks to users funds, including upgrade timing and exit windows, proposer liveness and whitelisting, forced inclusion usability, and data availability choices. We find that ethical hazards rooted in L2 components control arrangements are widespread: instant upgrades without exit windows appear in about 86 percent of projects, and proposer controls that can freeze withdrawals in about 50 percent. Reported incidents concentrate in sequencer liveness and inclusion, consistent with these dependencies. We translate these findings into ethically grounded suggestions on mitigation strategies including technical components and governance mechanisms.