Ethereum Layer-2 Security Risks and Investment Impact: Lessons from the Kinto Crash and Trends in 2025

In the summer of 2025, the Kinto token crash exposed key L2 vulnerabilities. Its market value plummeted from $80 million to $7 million due to a reentry attack exploiting the ERC 1967 proxy vulnerability. The incident involved the stolen $15 million USDC and the minting of 7 million tokens, highlighting the security risks that remain despite Ethereum’s upgrade to Pectra and adopting the BoLD protocol. Since L2 vulnerabilities account for 40% of the $300 million DeFi vulnerabilities in the second quarter of 2025, investors are advised to prioritize audits, diversified investment in risk-weighted assets (RWA), and AI-driven risk tools.