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

Layer-2 DeFi TVL Concentration

80%

Base and Arbitrum account for over 80% of layer-2 DeFi total value locked.

Linea Bridge Deposits Decline

60%

Linea's bridge deposits fell from $976 million to $367 million, a decline of over 60%.

Cost Reduction for Rollups

Not specified

The Dencun upgrade has reduced the cost of posting rollup data to Ethereum, but exact figures are not provided.

§ 01 Executive Snapshot

What: Analysis of the current state of Ethereum's layer-2 ecosystem, highlighting the struggles of general-purpose chains.
Who: Ethereum developers, Ben Fisch (co-founder and CEO of Espresso Systems), Alice Hou (former research analyst at Messari).
Why it matters: The evolution of the layer-2 landscape impacts the scalability and utility of Ethereum, influencing future blockchain application development.

Zero Network announced its shutdown, contributing to a growing list of struggling Ethereum layer-2 rollups.
Base and Arbitrum account for over 80% of layer-2 DeFi total value locked (TVL), indicating concentration in the ecosystem.
Linea's bridge deposits declined from $976 million in November 2025 to $367 million in May 2026, a decrease of over 60%.

The Ethereum layer-2 ecosystem experienced rapid growth due to advancements in rollup technology, making it easier to launch new chains.
The industry is witnessing a shift from general-purpose chains to more specialized applications focused on payments, stablecoins, and tokenized assets.

The immediate consequence is a consolidation phase for general-purpose layer-2s, with only a few expected to sustain themselves.
Long-term, the focus will shift towards application-specific networks that can leverage existing user bases and financial activities for success.

A potential risk includes the oversaturation of general-purpose layer-2s leading to reduced user engagement and liquidity.
Competition among chains for user activity and developer traction could hinder the viability of multiple layer-2 options.

Watch for the emergence of layer-2s that focus on specific applications, as they may signal a successful pivot in the ecosystem.
Future developments in Ethereum's scaling roadmap and user engagement metrics will indicate the health of layer-2 networks.

§ 07

What is the current state of Ethereum's layer-2 ecosystem?

The ecosystem is struggling, particularly with general-purpose chains, as many are facing shutdowns and reduced user engagement.

Why are general-purpose layer-2 chains losing relevance?

There is a shift towards more specialized applications, such as payments and stablecoins, which are better suited to leverage existing user bases.

How are Base and Arbitrum performing in the layer-2 landscape?

Base and Arbitrum account for over 80% of the total value locked in layer-2 DeFi, indicating a concentration of value in these platforms.

What risks are associated with the current layer-2 ecosystem?

Oversaturation of general-purpose layer-2s could lead to reduced user engagement and liquidity, impacting their viability.