It's less decentralized, but it still gains from the decentralized nature of Bitcoin. The "settle up" transactions and the "punishment" transactions take place

It's less decentralized, but it still gains from the decentralized nature of Bitcoin. The "settle up" transactions and the "punishment" transactions take place on the L1 blockchain. If someone tried to cheat the lightning network, they would fail unless they were also able to cheat the L1 network, as my "proof that you tried to cheat me" is submitted and validated in L1, not L2.