Ethereum L2 Networks Are Shrinking: 21 Projects Shut Down in 10 Months

Ethereum's L2 Ecosystem Loses Participants

The number of active Ethereum Layer 2 (L2) solutions with a Total Value Secured (TVS) exceeding $100,000 has declined from 108 to 100 over the past ten months. The data comes from analytics platform growthepie, which notes the decrease occurred even when accounting for newly launched protocols.

A total of 21 projects ceased operations during this period. The list of shuttered networks includes Katana, Lasernet, Pentagon Chain, Pepe Unchained, Arena-Z, OEV Network, Term Structure, Aleph Zero EVM, Edgeless, LaChain, SnaxChain, SuperLumio, Haust Network, Capx, Hala, Mega ETH, Form, ADI Chain, Nillion, and Immutable X.

«Layer 2 consolidation is happening. [...] It should be noted that new L2s are being deployed, but we are seeing a significant reduction in the number of older protocols» — growthepie, original post

Why This Matters

The shrinking number of L2 projects reflects a natural selection process in an oversaturated market. During the scaling solution boom, dozens of teams launched their own networks, but not all managed to attract sufficient liquidity and user activity. Consolidation means resources and engagement are concentrating around the most viable platforms, which could ultimately improve user experience quality and ecosystem security.

Ethereum dApps Are Also Declining, but Activity Is Growing

A similar trend is unfolding in the decentralized application segment. The number of dapps in the Ethereum ecosystem has fallen from a peak of 639 last year to 490 currently.

However, despite the numerical decline, dapp activity has actually increased as market leaders strengthen their positions, according to growthepie. The platform's analysts consider consolidation a normal phenomenon, describing the current wave as "the first of many."

Growthepie, original post

Ethereum On-Chain Metrics Show Recovery

Against the backdrop of L2 landscape restructuring, Ethereum's overall network metrics are recovering from last autumn's downturn. On March 18, daily transaction volume on the blockchain reached 2.6 million.

The number of unique wallets on the network has nearly reached 400 million, indicating continued user base growth regardless of the decline in L2 projects and applications.

Buterin on Rethinking the L2 Concept

The L2 contraction is occurring alongside conceptual shifts within the ecosystem itself. In February, Ethereum founder Vitalik Buterin stated that the original Layer 2 concept had become outdated and proposed a new development model for the ecosystem. The current consolidation trend may serve as practical confirmation that Ethereum's scaling approach needs to be reconsidered.