L2's survival fold: 8 chains divide the world, hundreds of players accelerate the reshuffle, and centralization concerns emerge

The Ethereum Layer 2 (L2) market is experiencing severe polarization, with only a few dominant chains capturing most of the value while over 100 others become "ghost chains."

Market dominance: Only 8 L2s have a TVL over $1 billion, collectively holding nearly half of the total market value. Over 100 chains have a TVL below $1 million and show near-zero activity.
Activity disparity: Base leads with 12.26 million weekly transactions and 19.78 million active addresses, far surpassing others like Arbitrum and Optimism. Many ZK Rollup chains (e.g., Linea, Starknet) see only thousands of transactions.
Revenue inequality: Base generates nearly $100 million monthly revenue, while most other L2s earn only a few thousand dollars, struggling to cover operational costs.
Project failures and struggles: Some L2s have shut down or paused operations (e.g., Kroma, Scroll DAO), while others survive through outsourcing or waiting for market improvements.
Resource advantage: Chains backed by major institutions (e.g., Base by Coinbase, Mantle by Bybit) benefit from strong ecosystems, user bases, and resources, giving them a significant competitive edge.
Centralization concerns: Recent downtime incidents on chains like Base and Starknet highlight risks from centralized sequencers. Regulatory warnings suggest such L2s may face exchange registration requirements.
Strategic shifts: Some projects are pivoting to L1 or focusing on token launches and partnerships, but competition remains intense across both L1 and L2 landscapes.

By Nancy, PANews

In her novel "Folding Beijing," science fiction writer Hao Jingfang depicts a futuristic city divided into three zones by social class, where residents in each zone enjoy vastly different access to time and resources. Today, this metaphor is playing out in the harsh reality of Ethereum's Layer 2 (L2) world.

With hundreds of Layer 2 chains launching simultaneously, there's already an oversupply, and the market may not need so many. Over the past few years, crypto-native institutions, various protocols, and traditional giants have all invested in Ethereum's Layer 2, making it a popular way to upgrade brands. On the surface, this presents a thriving new battlefield, but in reality, only a handful of chains are truly sharing in the pie, while most Layer 2 chains are quietly sliding towards extinction.

A few L2s support the ecosystem, while more than 100 chains fall silent

The differentiation trend of Ethereum L2 is faster and more brutal than many practitioners expected.

According to L2BEAT data, as of September 17th, Ethereum's L2 platform's TVL exceeded $58 billion, a 54.6% increase over the past year. This may seem impressive, but a breakdown reveals a more unbalanced picture.

Among more than 160 L2s, only 8 have a TVL of more than US$1 billion, almost occupying half of the entire market; 17 are between US$100 million and US$1 billion and still have a certain degree of activity; another 35 are at the tens of millions of US dollars level, barely maintaining their presence; the remaining more than 100 chains have a TVL of less than US$1 million and an activity level close to zero, becoming veritable "ghost chains."

Transaction activity more directly reveals the disparity. Data from The Block shows that as of September 15th, within the Optimism Rollups ecosystem, Base's seven-day average transaction count reached 12.26 million, far exceeding Arbitrum's 1.93 million and Optimism's 1.1 million. Meanwhile, L2 platforms like Blast and Mode only saw transaction volumes in the tens of thousands. The ZK Rollups ecosystem is also facing challenges. Most L2 platforms, including Linea, Starknet, Scroll, and zkSync, only have transaction counts in the tens of thousands or even hundreds of thousands.

The disparity in user activity is also significant. Growthepie data shows that over the past 30 days, Base has maintained its top position with over 19.78 million active interaction addresses. In comparison, Arbitrum One has only 3.71 million, OP Mainnet has 1.53 million, and Linea has 1.36 million. Some chains even have only a few thousand active addresses. Revenue distribution is equally extreme, with Base generating nearly $100 million in monthly revenue and Arbitrum One reaching tens of millions of dollars. Most other L2 chains only generate a few thousand to tens of thousands of dollars, struggling to cover operating costs.

Some L2 projects have simply failed. Scroll DAO recently announced the suspension of its governance process, with the entire leadership team resigning. The company is redesigning its governance structure, but has not yet clarified whether it will withdraw its existing proposals. Kroma has decided to shut down its existing L2 network to focus on new directions. Some projects are still struggling to survive. The founder of a public L2 chain told PANews that they are now taking on outsourcing work to support their team. At this point, everything is futile; all they can do is survive and wait for the wind to blow.

This polarization has caused ecosystem projects to begin to question whether most L2s are truly worthwhile. For example, Aave recently proposed shutting down underperforming L2s, while the Curve community also suggested halting all new L2 network integrations.

Resources determine success or failure, and centralization concerns emerge

In recent months, many L2 projects have been active, including technological innovation and ecological expansion.

For example, Coinbase recently launched its "universal application," the Base App, which will run entirely on the Base network and will soon be open to invitations. Subsequently, Base also recently stated that it is exploring the possibility of issuing a native token for the network, though it has yet to provide a specific timeline, design, or governance details. Other L2 projects that have recently launched tokens include Kraken's L2 network, Ink, and Linea.

Arbitrum and Robinhood are teaming up to target tokenized equity products, and are launching token incentive and subsidy programs to promote ecosystem development. Optimism's OP Stack has been adopted as an L2 solution by multiple institutions such as Upbit, GIWA, Clearpool, and cLabs, providing fast and verifiable transaction sorting. Starknet approved the v0.14.0 proposal, taking an important step towards decentralization and will soon launch a BTC staking integration upgrade. zkSync has launched Prividium, an institutional private blockchain infrastructure, and released "Airbender," a new RISC-V-based zero-knowledge prover.

Meanwhile, amidst the internal competition in Layer 2, some projects are adjusting their strategies or repositioning themselves. The Movement Network announced its transformation into a Layer 1 blockchain, supporting native token staking and the Move 2.0 protocol. But who says the L1 battleground is any easier than the L2 battleground?

In fact, as competition in Ethereum's L2 blockchain intensifies, a growing number of traditional and crypto institutions are leaning towards issuing their own L2 blockchains. Compared to relying on existing L2 blockchains, building their own blockchains not only reduces operating costs and meets regulatory requirements, but also offers the potential to capture greater profits.

Strong resource support is also providing L2 with greater competitive space. For example, Base, the highest-grossing blockchain, is backed by Coinbase, the largest compliant US exchange, providing strong support for its ecosystem and user growth. Mantle recently integrated with the mainstream crypto exchange Bybit, demonstrating the principle of "a tall tree provides shade." Furthermore, institutions like JPMorgan, Robinhood, Sony, and Upbit already possess extensive business resources and massive user traffic when developing L2 blockchains, giving them a competitive advantage over new chains starting from scratch. In contrast, resource-poor L2 blockchains, even if they attempt to gain bargaining power, are vulnerable to insufficient liquidity and market fragmentation, hindering sustainable development.

However, this trend has also heightened market concerns about the centralization of Layer 2 (L2) networks. In particular, recent downtime incidents among Layer 2 (L2) platforms like Base, Linea, and Starknet have highlighted the potential risks posed by centralized sequencers. In response, US SEC Commissioner Peirce recently warned that matching engines controlled by a single entity are more like exchanges, and that Layer 2 platforms with centralized sequencers may face exchange registration requirements.

These words serve as a wake-up call, reminding the market: in the pursuit of efficiency and scale, L2 cannot sacrifice decentralization.

Today's L2 competition is no longer just a battle of technology, but a comprehensive competition of ecosystems, resources, and governance models. Chains without a story, users, or resources may eventually leave the market quietly or wait for the wind to blow.