According to a stark new outlook from asset manager 21Shares in its State of Crypto report, the Ethereum Layer-2 (L2) scaling ecosystem is entering a period of severe consolidation, with most existing networks unlikely to survive beyond 2026. The report warns that user activity, liquidity, and fees are rapidly concentrating around a small group of dominant rollups, pushing dozens of smaller competitors toward irrelevance.
The dominance of a few key players is already stark. By late 2025, just three networks—Base, Arbitrum, and Optimism—were processing nearly 90% of all L2 transactions, with Base alone handling over 60%. This leaves the remaining field of more than 50 L2s struggling. Activity across smaller rollups has plummeted by 61% since June 2025, with liquidity evaporating. 21Shares describes many of these as drifting toward "zombie chain" status, operating with minimal activity.
The fallout has already begun. Projects like Kinto have shut down entirely, Loopring closed its wallet service, and Blast's total value locked (TVL) collapsed by 97%. Even major DeFi protocols such as Aave and Synthetix have scaled back deployments on struggling L2s, citing poor liquidity and limited user returns.
Competitive pressures intensified following Ethereum's Dencun upgrade, which slashed data fees by around 90%. This triggered aggressive fee wars that pushed most rollups into loss-making territory. In 2025, Base was reported as the only L2 to turn a profit, earning approximately $55 million.
Looking ahead, 21Shares expects the scaling landscape to coalesce around three resilient models: Ethereum-aligned designs like Linea that route value back to the main chain; high-performance contenders like MegaETH targeting near real-time execution; and exchange-backed networks including Base, BNB Chain, Mantle, and Ink. The report argues these models are best positioned to capture activity as stablecoins race toward $1 trillion in circulation and AI-driven finance reshapes demand.
