The Ethereum layer-2 ecosystem is undergoing a consolidation phase as numerous general-purpose rollups struggle to attract users and sustain operations. The closure of Zero Network last month joins a growing list of failing L2s, sparking debate over whether the L2 landscape has become overcrowded. Despite improvements in rollup technology and cost reductions from Ethereum's Dencun upgrade (which lowered data posting expenses via blobs), activity remains concentrated among a few dominant networks like Base and Arbitrum, which together account for over 80% of L2 DeFi TVL. Many smaller chains, including Linea, Starknet, and Mantle, have seen significant declines in bridge deposits. Industry participants argue that the issue is not an oversaturation of L2s overall, but an excess of undifferentiated general-purpose chains. The focus is shifting toward application-specific L2s tied to payments, stablecoins, and tokenized assets, where businesses with existing user bases and clear use cases can leverage blockchain infrastructure. This trend may lead to a future where Ethereum serves primarily as a settlement layer for specialized, application-driven networks rather than a single scaling solution. Exchanges like Coinbase (with Base) exemplify this model.

Key facts

• Zero Network shutdown highlights struggles of general-purpose L2s.
• Base and Arbitrum account for over 80% of L2 DeFi TVL.
• Dencun upgrade reduced data costs but didn't solve user acquisition.
• Shift from infrastructure to application-specific L2s for payments and assets.
• Ethereum increasingly seen as settlement layer rather than scaling solution.

KeyAudit data perspective