The Future of Ethereum's Layer-2 Networks: Survival Challenges Ahead

Most Ethereum L2s May Not Survive 2026 as Base, Arbitrum, Optimism Tighten Grip: 21Shares

Recent forecasts by 21Shares suggest that the majority of Ethereum's Layer-2 (L2) solutions might struggle to survive through 2026.

Key Takeaways:

A significant number of Ethereum L2 networks may collapse by 2026, as user activity continues to concentrate on Base, Arbitrum, and Optimism.
Smaller rollups are quickly becoming "zombie chains," with a dramatic drop of 61% in use.
21Shares predicts that the L2 ecosystem will narrow down to high-performing networks that are either aligned with ETH or backed by exchanges.

The latest "State of Crypto" report by 21Shares indicates that the Layer-2 ecosystem has reached a critical juncture after two years of rapid growth, leaving only a few dominant players with substantial traction.

Dominance of Base, Arbitrum, and Optimism Amongst Declining Ethereum L2s

Presently, over 50 Layer-2 solutions compete for users, liquidity, and developers in the Ethereum ecosystem. By late 2025, however, the market share has largely consolidated around just three networks: Base, Arbitrum, and Optimism. Together, these three platforms accounted for nearly 90% of all L2 transactions, with Base alone processing more than 60%.

Unfortunately, many smaller L2s are fading into irrelevance. The activity within these rollups has plummeted notably, with overall L2 usage down 61% since June, according to the report.

Many of these projects now function as "zombie chains," operating with minimal user engagement and dwindling liquidity.

A number of projects are already facing extinction. Kinto has completely ceased operations, Loopring shut down its wallet service, and Blast experienced a staggering 97% decline in total value locked.

Even prominent DeFi projects like Aave and Synthetix have begun to retract their operations on weaker L2 networks, citing low liquidity and minimal returns as significant concerns.

The Dencun upgrade, which led to a 90% reduction in fees, sparked fierce competitive pricing wars that ultimately left many rollups in financial distress. As of 2025, Base was the only Layer-2 solution reporting profits, earning around $55 million.

21Shares anticipates that a “leaner, more resilient” selection of networks will characterize Ethereum’s scaling layer by the end of 2026.

Designs aligned with ETH, such as Linea, are focusing on long-term sustainability through mechanisms that redirect fees either back to Ethereum via burns or through validator rewards.

High-performance projects like MegaETH are also entering the market, aiming to achieve near-instantaneous execution to compete with fast monolithic chains.

Networks backed by exchanges are changing the game as well. Base from Coinbase and Binance’s BNB Chain demonstrate how centralized platforms can onboard millions directly to the blockchain, setting a trend that Bybit’s Mantle and Kraken’s Ink are expected to follow.

Broader Implications for the Crypto Landscape in 2026

Beyond the challenges facing Ethereum's scaling solutions, 21Shares notes multiple structural shifts that could redefine the digital asset landscape in 2026.

Stablecoins are projected to hit $1 trillion in circulation as they increasingly penetrate payments, remittances, and corporate finance sectors.

Simultaneously, global crypto exchange-traded products (ETPs) are anticipated to exceed $400 billion in assets, placing them in contention with major equity index funds as institutional investor access improves.

Additionally, decentralized finance (DeFi) is forecasted to undergo a revival. 21Shares estimates that the total value locked in DeFi could surpass $300 billion, fueled by declining interest rates, increasing liquidity in stablecoins, and companies moving idle treasury assets into on-chain markets.

Moreover, prediction markets, one of the fastest-growing segments of 2025, might achieve over $100 billion in annual trading volume, driven by political uncertainties and macroeconomic volatility that heighten the demand for real-time event speculation.