Zilliqa has confirmed it will stop operating as an independent Layer 1 blockchain and rebuild as an Ethereum Layer 2 aimed at regulated institutions. The new network, called the Zilliqa Institutional Layer (ZIL), was announced on November 4, 2026, with the team blaming weak adoption, scarce funding, and rising security costs for making its legacy chain unsustainable.
The move follows a steep decline for the project. ZIL now trades around $0.001645 with a market capitalization of roughly $33.94 million, down about 96% from the nearly $900 million valuation of May 2018 and about 99.4% below its all-time high of $0.2563 from May 2021. The team said holders do not need to take action yet, but the token's future economic role in the new network remains undefined.
Zilliqa's transition is designed to leverage Ethereum's security for settlement while adding built-in identity and compliance features. The plan introduces verifiable Legal Entity Identifiers, or vLEIs, to create permissioned markets for verified institutional participants. The Liechtenstein Trust Integrity Network, majority-owned by Telecom Liechtenstein, will issue and revoke credentials and operate the sequencer that orders transactions before they are posted to Ethereum. The project has not yet disclosed full details of its proof system or withdrawal mechanics, and no bank or asset manager has been publicly named as a launch participant.
The decision follows a difficult security year. In August, Zilliqa disclosed that a flaw in the legacy Zilliqa Ledger app allowed attackers to rebuild private keys from signatures visible on-chain, leading to at least 683.13 million ZIL stolen from 51 drained accounts, with 6,772 accounts exposed. In October, an exposed signing key drained the X-Bridge to Ethereum, and a flaw in legacy ZRC-2 tokens let an attacker mint unbacked tokens and swap them for ZIL.
On-chain activity shows the adoption challenge: ZilSwap, the project's main decentralized exchange, held $239.5 million in total value locked at its May 2021 peak but now holds only about $61,730. Zilliqa was founded in 2017 by researchers from the National University of Singapore and was an early leader in sharding technology, backed by investors including Polychain Capital.
The team says it will publish further instructions for tokenholders, while compensation for victims of the Ledger thefts is still pending a community vote. Observers will monitor whether the institutional Ethereum Layer 2 can attract the banks, funds, and asset managers it is targeting.
