▮ Network News · Ethereum Not all Ethereum layer-2s are dying, but many no longer have a reason to exist When Zero Network announced it was shutting down last month, the reaction across crypto was weary: another Ethereum layer-2 just bit the dust. The closure joined a growing list of struggling rollups and came amid renewed debate about whether Ethereum's sprawling layer-2 ecosystem has become too crowded. At the same time, Ethereum creator Vitalik Buterin has urged developers to rethink the network's long-term scaling roadmap, while several major projects have shifted away from marketing themselves as general-purpose blockchains and toward more focused applications in payments, stablecoins and tokenized assets. Industry participants, however, argue the opposite.
"We're in a consolidation phase for general-purpose layer twos, not layer twos broadly." — Ben Fisch, Co-founder and CEO, Espresso Systems |
Ethereum layer-2s exploded over the past several years as improvements in rollup technology dramatically reduced the cost and complexity of launching new chains. Rollups work by processing transactions off Ethereum's main blockchain, bundling hundreds of them together, and then periodically posting compressed transaction data back to Ethereum for settlement and security. The result was a flood of networks built using infrastructure stacks such as Optimism's OP Stack, Arbitrum Orbit and zkSync. But while launching a chain became easier, attracting users proved much harder. The numbers support that view. Today, activity across Ethereum's layer-2 ecosystem remains heavily concentrated among a handful of networks. Base and Arbitrum alone account for more than 80% of layer-2 DeFi total value locked (TVL), according to DefiLlama data.
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Source: DefiLlama |
That concentration has only become more apparent as smaller chains struggle to maintain liquidity. Over the past six months, networks including Linea, World Chain, Starknet and Mantle have all seen declining bridge deposits. Linea's deposits, for example, fell from $976 million in November 2025 to $367 million in May 2026, a decline of more than 60%.
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Source: Token Terminal |
"Without enough blockspace demand, user activity or developer traction, there is little reason to continue maintaining an L2." — Alice Hou, former Research Analyst, Messari |
Ironically, the economics of launching a rollup have never looked better. Ethereum's Dencun upgrade dramatically reduced the cost of posting rollup data to Ethereum through blobs. According to Messari research, data availability costs now represent only a small fraction of operator expenses for many OP Stack chains. That dynamic has created a paradox: the barriers to creating a blockchain continue to fall, but the barriers to attracting users continue to rise. From infrastructure to applications The shift is already visible across the industry. Several blockchain projects that once emphasized infrastructure are increasingly focusing on payments, stablecoins, tokenized assets and other application-specific markets. Fisch pointed to asset managers launching tokenized money-market funds, stablecoin issuers and tokenized deposit platforms as examples of businesses that have clear reasons to operate on-chain. For those firms, a dedicated layer-2 can offer lower costs, greater control and more predictable performance than deploying directly as a smart contract. That helps explain why exchanges remain among the strongest candidates. Coinbase's Base has become the dominant example, leveraging the exchange's existing customer base while integrating users into Ethereum's broader DeFi ecosystem.
"The question should not be, 'Can this company launch an L2?' It should be: 'Does this business already have enough distribution, financial activity and ecosystem synergies to make an L2 meaningfully useful?'" — Alice Hou, former Research Analyst, Messari |
A different vision for the layer-2 landscape The debate also reflects a deeper disagreement about what layer-2s are actually for. For years, Ethereum advocates framed rollups primarily as a scaling solution for Ethereum itself. Fisch sees them differently.
"I don't view layer twos as scaling Ethereum. I view layer twos as leveraging the existing security properties of layer one. Ethereum is sort of a commodity that layer twos can choose to use." — Ben Fisch, Co-founder and CEO, Espresso Systems |
If that trend continues, the future Ethereum ecosystem may look very different from the one imagined during the rollup boom. Instead of hundreds of competing general-purpose chains fighting for liquidity, the winners could be a smaller number of networks tied to specific businesses, financial products and user communities. By Margaux Nijkerk Full Story →
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