Ethereum layer 2 consolidation is gaining pace as several general-purpose rollups struggle to maintain users, liquidity, and developer activity. The shift follows a period of rapid growth, when cheaper rollup launches brought many Ethereum-compatible chains to market.
However, recent closures and weaker deposit growth across smaller networks signal a new phase for the ecosystem. Industry figures say the pressure centers on broad, general-purpose chains, while application-focused networks may still find stronger demand.
Zero Network’s recent shutdown added to concerns about the number of Ethereum layer 2 networks competing for the same users. Its closure came as many rollups continued to face weaker activity, even after Ethereum upgrades lowered operating costs.
Ben Fisch, co-founder and CEO of Espresso Systems, said the sector is not seeing the end of layer 2 networks. Instead, he said, "We're in a consolidation phase for general-purpose layer twos, not layer twos broadly." His comment reflects a narrower issue across chains that offer similar products without clear user demand.
Ethereum layer 2 networks grew quickly as rollup technology became easier to deploy. Rollups process transactions away from Ethereum's mainnet, bundle them, and then post compressed data back to Ethereum for settlement and security.
However, easier launches did not guarantee user adoption. Fisch said, "There were way too many general-purpose layer twos, which frankly don't make sense as a product, because there's no reason to have many, many versions of the same thing."
Market data shows that Ethereum layer 2 activity remains heavily concentrated. Base and Arbitrum together account for more than 80% of layer 2 DeFi total value locked, according to DefiLlama data.
Meanwhile, smaller chains have struggled to maintain liquidity. Networks including Linea, World Chain, Starknet, and Mantle recorded falling bridge deposits over the past six months. Linea’s deposits fell from $976 million in November 2025 to $367 million in May 2026.
Alice Hou, a former Messari research analyst, said, "I think only a few L2s with clear financial demand will be able to sustain themselves over time." She added that the main issue is not whether the technology works, but whether networks can generate enough activity.
Hou also said, "Without enough blockspace demand, user activity or developer traction, there is little reason to continue maintaining an L2." Her comments point to the growing gap between technical launch capacity and real market use.
Ethereum’s Dencun upgrade in 2024 reduced the cost of posting rollup data through blobs. According to Messari research cited in the report, data availability costs now represent only a small share of expenses for many OP Stack chains.
Hou said, "From an operator perspective, it is definitely cheaper to run an L2 today." However, she added that the main challenge remains ‘generating enough sustained demand to make the network worth operating.’
This creates a difficult setup for new rollups. Launching an Ethereum layer 2 is cheaper than before, yet attracting long-term users has become harder. As a result, teams can no longer rely on Ethereum compatibility alone.
Fisch said projects now need a more defined product. He said, "If you want to succeed, you need to build out a differentiated application." Notably, this shift is already visible in payments, stablecoins, tokenized assets, and other financial products.
Several blockchain projects are now moving away from broad infrastructure branding. Instead, they are focusing on specific markets where blockchain rails may support payments, asset movement, settlement, or tokenized funds.
Fisch pointed to asset managers, stablecoin issuers, and tokenized deposit platforms as examples of firms with clearer reasons to operate on-chain. For such businesses, dedicated layer 2 networks may offer lower costs and more control than smart contracts deployed on a shared chain.
Hou said distribution matters more than technology. "Only L2s with a solid existing user base and a clear reason to benefit from blockchain infrastructure should launch their own networks," she said.
Coinbase’s Base remains a key example. The network benefits from Coinbase’s customer base while connecting users with Ethereum’s DeFi ecosystem. However, the broader market now appears to favor layer 2 networks tied to real financial activity, not chains built only to compete for generic traffic.