A new 21Shares outlook is sounding the alarm: most Ethereum Layer 2 networks may not survive past 2026 as activity, liquidity, and developers continue to concentrate around a small group of dominant chains.
After two years of rapid expansion, the L2 ecosystem is hitting a breaking point. While more than 50 Layer 2s are live today, nearly 90% of L2 transactions are already concentrated on just Base, Arbitrum, and Optimism — with Base alone processing over 60%. According to the report, usage across weaker L2s is down 61% since mid-2025, turning many into so-called “zombie chains.”
Several retrenchments highlight the trend: Kinto shut down, Loopring closed its wallet, and Blast’s TVL collapsed by over 90%. Even major DeFi protocols like Aave and Synthetix have scaled back deployments on underperforming L2s due to low liquidity and weak returns.
A key catalyst was Ethereum’s Dencun upgrade, which cut data costs by roughly 90%. While great for users, it triggered intense fee competition that pushed most rollups into losses. Base was the only L2 to generate positive revenue in 2025, reportedly earning around $55 million.
Looking ahead, 21Shares expects a much leaner L2 landscape — dominated by exchange-backed networks like Base, ETH-aligned designs such as Linea, and a small number of high-performance rollups built for near-real-time execution.
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