Ethereum Layer-2 Boom Enters a More Selective Phase
Zero Network’s shutdown has sharpened debate over whether Ethereum has too many layer-2 networks. Industry participants cited by CoinDesk say the pressure is falling hardest on undifferentiated, general-purpose chains rather than on layer-2 technology itself.
What happened?
Zero Network’s shutdown has sharpened debate over whether Ethereum has too many layer-2 networks. Industry participants cited by CoinDesk say the pressure is falling hardest on undifferentiated, general-purpose chains rather than on layer-2 technology itself.
Why it matters
Zero Network’s shutdown last month added to concerns that Ethereum’s layer-2 market has become overcrowded, but industry participants told CoinDesk the issue is more specific: many general-purpose rollups no longer have a clear reason to exist. The debate comes as several projects shift their positioning away from broad blockchain infrastructure and toward focused uses such as payments, stablecoins and tokenized assets.
Zero Network’s shutdown last month added to concerns that Ethereum’s layer-2 market has become overcrowded, but industry participants told CoinDesk the issue is more specific: many general-purpose rollups no longer have a clear reason to exist. The debate comes as several projects shift their positioning away from broad blockchain infrastructure and toward focused uses such as payments, stablecoins and tokenized assets.
The development matters because Ethereum’s scaling roadmap has pushed much of its activity onto layer-2 networks, where rollups process transactions away from the main chain and post compressed data back to Ethereum for settlement and security. That design can lower fees and speed up activity, but it does not automatically solve the harder business problem of attracting users, liquidity and developers.
Ben Fisch, co-founder and CEO of Espresso Systems, described the market as a consolidation phase for general-purpose layer-2s, not for layer-2s overall. CoinDesk cited DefiLlama data showing that Base and Arbitrum account for more than 80% of layer-2 DeFi total value locked, while smaller networks have struggled to keep deposits. Linea’s bridge deposits, for example, fell from $976 million in November 2025 to $367 million in May 2026, according to Token Terminal data cited in the report.
The economics are not the only problem. Ethereum’s 2024 Dencun upgrade lowered the cost of posting rollup data to Ethereum through blobs, making layer-2 operations cheaper in some cases. But Alice Hou, a former Messari research analyst, told CoinDesk that lower operating costs do not replace the need for sustained blockspace demand, user activity or developer traction.
That is pushing the sector toward more application-specific networks. CoinDesk noted that exchanges, stablecoin issuers, tokenized deposit platforms and asset managers with tokenized money-market products may have clearer reasons to operate dedicated layer-2s because they already have distribution, financial activity or product-specific needs.
The broader implication is that Ethereum’s layer-2 landscape may become less about hundreds of interchangeable chains and more about networks tied to concrete businesses, financial products or communities. In that model, Ethereum remains an important settlement layer, but launching another Ethereum-compatible chain is no longer enough to stand out.