Not all Ethereum layer 2s are dying, but many general-purpose chains no longer have a reason to exist

When Zero Community introduced it was shutting down final month, the response throughout crypto was weary: One other Ethereum layer-2 simply bit the mud.

The closure joined a rising checklist of struggling rollups and got here amid renewed debate about whether or not Ethereum’s sprawling layer-2 ecosystem has change into too crowded. On the identical time, Ethereum creator Vitalik Buterin has urged builders to rethink the community’s long-term scaling roadmap, whereas a number of main initiatives have shifted away from advertising and marketing themselves as general-purpose blockchains and towards extra targeted purposes in funds, stablecoins and tokenized property.

To many observers, the developments have revived a well-recognized query: Has Ethereum’s sprawling layer-2 ecosystem change into too crowded?

Trade individuals, nonetheless, argue the other.

“The factor to acknowledge is that wherever the place any person could be working a wise contract on an present blockchain, somebody may equally run a layer two,” mentioned Ben Fisch, co-founder and CEO of Espresso Methods. “We’re in a consolidation part for general-purpose layer twos, not layer twos broadly.”

Ethereum layer-2s exploded over the previous a number of years as enhancements in rollup know-how dramatically decreased the fee and complexity of launching new chains. Rollups work by processing transactions off Ethereum’s foremost blockchain, bundling a whole lot of them collectively, after which periodically posting compressed transaction information again to Ethereum for settlement and safety. The mannequin permits purposes to supply quicker transactions and decrease charges whereas nonetheless counting on Ethereum as the last word supply of belief.

The consequence was a flood of networks constructed utilizing infrastructure stacks corresponding to Optimism’s OP Stack, Arbitrum Orbit and zkSync. However whereas launching a sequence turned simpler, attracting customers proved a lot more durable.

“There have been manner too many general-purpose layer twos, which frankly do not make sense as a product, as a result of there is not any purpose to have many, many variations of the identical factor,” Fisch mentioned.

The numbers assist that view. Right this moment, exercise throughout Ethereum’s layer-2 ecosystem stays closely concentrated amongst a handful of networks. Base and Arbitrum alone account for greater than 80% of layer-2 DeFi complete worth locked (TVL), in line with DefiLlama information.

That focus has solely change into extra obvious as smaller chains battle to keep up liquidity. Over the previous six months, networks together with Linea, World Chain, Starknet and Mantle have all seen declining bridge deposits. Linea’s deposits, for instance, fell from $976 million in November 2025 to $367 million in Could 2026, a decline of greater than 60%.

“I believe only some L2s with clear monetary demand will be capable to maintain themselves over time,” mentioned Alice Hou, a former analysis analyst at Messari, to CoinDesk.

For Hou, the important thing concern is not whether or not layer-2 know-how works, it is whether or not a community can generate sufficient exercise to justify its existence.

“With out sufficient blockspace demand, person exercise or developer traction, there may be little purpose to proceed sustaining an L2,” she mentioned.

Paradoxically, the economics of launching a rollup have by no means appeared higher. Ethereum’s Dencun improve, launched in 2024, dramatically decreased the price of posting rollup information to Ethereum by way of blobs. In keeping with Messari analysis, information availability prices now characterize solely a small fraction of operator bills for a lot of OP Stack chains.

“From an operator perspective, it’s undoubtedly cheaper to run an L2 at this time,” Hou mentioned. “The economics of launching an L2 have change into simpler, however the true problem continues to be producing sufficient sustained demand to make the community price working.”

That dynamic has created a paradox. The boundaries to making a blockchain proceed to fall, however the boundaries to attracting customers proceed to rise. Consequently, many groups are discovering that merely providing one other Ethereum-compatible chain is now not sufficient.

“Folks have realized that every one the completely different general-purpose blockchains compete with one another,” Fisch mentioned. “If you wish to succeed, it is advisable construct out a differentiated utility.”

From infrastructure to purposes

The shift is already seen throughout the business. A number of blockchain initiatives that after emphasised infrastructure are more and more specializing in funds, stablecoins, tokenized property and different application-specific markets. Conventional monetary establishments could change into a few of the largest beneficiaries.

Fisch pointed to asset managers launching tokenized money-market funds, stablecoin issuers and tokenized deposit platforms as examples of companies which have clear causes to function on-chain. For these companies, a devoted layer-2 can provide decrease prices, larger management and extra predictable efficiency than deploying immediately as a wise contract.

“The know-how determination to run as a layer two is just an possibility of working an utility onchain,” Fisch mentioned.

Hou mentioned she agreed that distribution issues greater than know-how.

“Solely L2s with a strong present person base and a transparent purpose to learn from blockchain infrastructure ought to launch their very own networks,” she mentioned.

That helps clarify why exchanges stay among the many strongest candidates. Coinbase’s Base has change into the dominant instance, leveraging the change’s present buyer base whereas integrating customers into Ethereum’s broader DeFi ecosystem.

“The query shouldn’t be, ‘Can this firm launch an L2?'” Hou mentioned. “It must be: ‘Does this enterprise have already got sufficient distribution, monetary exercise and ecosystem synergies to make an L2 meaningfully helpful?'”

A unique imaginative and prescient for the layer-2 panorama

The talk additionally displays a deeper disagreement about what layer-2s are literally for. For years, Ethereum advocates framed rollups primarily as a scaling answer for Ethereum itself.

Fisch mentioned he sees them in another way.

“I do not view layer twos as scaling Ethereum,” he mentioned. “I view layer twos as leveraging the prevailing safety properties of layer one.”

In that framework, Ethereum capabilities much less as a vacation spot and extra as a settlement layer that purposes can use when it is sensible.

“Ethereum is kind of a commodity that layer twos can select to make use of,” Fisch mentioned.

That imaginative and prescient aligns with a broader pattern unfolding throughout crypto infrastructure. Fairly than competing to change into the following dominant blockchain, extra initiatives are more and more treating blockchains as modular elements that may be assembled into bigger merchandise.

If that pattern continues, the longer term Ethereum ecosystem could look very completely different from the one imagined throughout the rollup increase. As a substitute of a whole lot of competing general-purpose chains preventing for liquidity, the winners might be a smaller variety of networks tied to particular companies, monetary merchandise and person communities.

Learn extra: ‘You aren’t scaling Ethereum’: Vitalik Buterin points a blunt actuality examine to the most important crypto networks