Layer 2 projects are shutting down as revenue collapses. See why Blast died which L2s face the risk, and what it takes to survive.
Author: Kritika Gupta
Ethereum’s Layer 2 Projects boom promised cheaper transactions and room for millions of new users. Projects raised huge sums, launched tokens, and attracted billions in deposits. However, many now struggle to turn that activity into enough revenue to cover their costs.
The prospect of more Layer 2 projects shutting down raises a difficult question: which networks have built lasting demand, and which still depend on incentives and investor funding? This article examines the revenue gap, the pressures facing smaller chains, and what teams need to change to survive.
On October 2, 2026, Blast announced it would shut down. The Ethereum L2 once held $2.27 billion in total value locked (TVL), but it generated just $1,793 in monthly revenue. Meanwhile, its token had fallen 98%. Running the chain cost more than the chain earned. “We do not see a credible path to making the chain economically sustainable,” the team said.
However, Blast isn’t alone. Across the Layer 2 projects landscape, dozens of chains generate less than $500 a day in revenue while burning through millions in venture funding. That funding buys time, but it cannot replace paying users. As treasuries shrink, the question is no longer whether more L2s will shut down. It’s which ones, and when.
The revenue split shows why smaller chains face such pressure. Base, Arbitrum, and Optimism capture roughly 80% of all L2 sequencer fee revenue, leaving everyone else to divide the remaining 20%. As a result, smaller networks compete for a narrow share of fees while still paying for staff, infrastructure, and maintenance. Without lasting demand or another source of income, they risk following Blast.
Chain revenue, TVL, funding, and shutdown risk
Scroll shows how technical progress can coexist with weak economics. Despite raising $80 million across funding rounds, the chain generates roughly $113 a day in the supplied revenue snapshot. Its TVL once reached $2.1 billion, but now sits near $9 million. At the same time, Scroll achieved Stage 1 on L2Beat, an important decentralization milestone. However, that achievement does not pay developers or cover infrastructure costs. For perspective, $113 for an entire blockchain would make a modest day’s gross takings for a single driver, before expenses.
Similarly, Berachain faces weak revenue, although it operates as a Layer 1 rather than an Ethereum L2. The supplied snapshot puts daily chain revenue at $128 against $142 million in funding from investors including Polychain, Framework, and Hack VC. While TVL peaked above $3.2 billion, it subsequently declined. Meanwhile, the foundation cut most of its retail marketing team, and its lead developer departed. Although Proof of Liquidity gives the network a distinctive incentive model, the team still needs to turn subsidized liquidity into activity that generates sustainable fees.
Compared with those networks, Mode has the smallest disclosed funding base. Its $5.3 million Optimism Foundation grant supported a chain that once attracted roughly $575 million in TVL. Since then, however, liquidity has fallen sharply. DefiLlama now shows about $2 million in DeFi TVL and $10.3 million in bridged TVL. In addition, the latest retrieved snapshot records $69 in daily chain fees, comfortably below $500, although the page does not separately display net chain revenue. Consequently, Mode faces particular pressure if operating costs remain high. Still, historical funding alone cannot establish its remaining runway or prove that a Blast-style closure will follow.
Finally, Manta also falls well below the $500 threshold. DefiLlama’s latest retrieved snapshot shows just $6.88 in daily chain revenue, alongside about $3.1 million in DeFi TVL and $30 million in bridged TVL. Because those measures track different assets, current TVL can look very different across trackers. Nevertheless, the supplied historical snapshot places peak TVL near $671 million, illustrating the scale of the reversal after its incentive campaign. Meanwhile, DefiLlama lists a $25 million Series A. Therefore, the claimed $60 million-plus funding total needs a separate source before publication.
Chain income, funding, TVL, and sustainability risks
Together, these figures expose the gap between attracting capital and sustaining a network. Scroll’s supplied $113 daily revenue figure amounts to roughly $3,390 over 30 days, before broader operating expenses. Even a small team can spend far more than that on staffing alone. Consequently, these chains need repeat users, stronger fee income, or another business that funds operations. Past funding rounds and TVL peaks can buy attention and time, but they cannot pay the bills indefinitely.
ZKsync Era has a substantial funding cushion. Matter Labs raised roughly $458 million, giving it more room to adapt than smaller competitors. However, the supplied TVL figures show a steep decline from a $4.1 billion peak to roughly $405 million. In response, its Prividium initiative targets institutional use, with Deutsche Bank and UBS among the banks associated with that effort. For readers tracking Layer 2 project risks, ZKsync illustrates how a well-funded team can pursue a different market. Still, past fundraising does not reveal how much cash remains or guarantee that institutional projects will generate recurring revenue.
By comparison, Linea relies on support from ConsenSys, although that backing does not give it unlimited runway. ConsenSys itself cut 20% of its staff, showing that the parent also faces budget constraints. As a result, Linea’s future depends partly on whether ConsenSys sees enough strategic value to keep funding it. While corporate support can sustain a chain through weak fee income, priorities can change. If ConsenSys reduces its subsidy, Linea would need to cut costs, grow revenue, or narrow its operations.
Meanwhile, MegaETH has raised more than $108 million and attracted backing from Vitalik Buterin. The supplied figures put peak TVL near $600 million following its February 2026 launch. Although its single sequencer creates a clear centralization risk, the simpler setup can also reduce coordination and operating costs. Despite those advantages, MEGA’s reported 55% first-day decline highlights weak early token performance. That drop alone does not establish the chain’s financial health. Nevertheless, MegaETH still needs to prove that users will stay and generate fees after the launch excitement fades.
First, Ethereum’s March 2024 Dencun upgrade changed rollup economics. Specifically, EIP-4844 introduced blobs, cutting data-posting costs by more than 90% for many Layer 2 projects. Before the upgrade, sequencers earned a margin between user fees and the cost of posting data to Ethereum. At first, lower posting costs improved that margin. Soon, however, competing chains passed the savings to users and pushed transaction fees down. As a result, networks earned less per transaction. Unless additional activity offset that decline, total revenue fell.
Second, too many networks compete for the same users and developers. According to the supplied industry snapshot, 73 L2s operate today, while another 82 sit in the pipeline. Yet more chains do not automatically create more demand for DeFi. Instead, they spread existing liquidity, applications, and trading activity across more ecosystems. In turn, smaller chains must spend heavily to attract users. Even then, those users can already access similar services elsewhere, making retention difficult.
Third, airdrop campaigns attracted deposits that did not stay. Throughout 2024, users bridged assets into L2s to collect points and qualify for token distributions. After claiming their rewards, however, many moved to the next campaign. Consequently, TVL peaks overstated lasting demand. Although large deposits made networks look successful, they did not necessarily generate repeat trading or borrowing. Once incentives ended, teams often lost both liquidity and the activity they hoped would support fee income.
Fourth, Base and Arbitrum have established routes to users. For example, Base benefits from Coinbase’s customer base and fiat on-ramps. Similarly, Arbitrum benefits from years of DeFi development, deep liquidity, and familiar applications. Together, these advantages give users reasons to return beyond token rewards. By contrast, smaller independent L2s must build demand through partnerships, distinctive applications, or costly incentives. Without a compelling advantage, they struggle to persuade users to switch. As a result, established networks can keep attracting activity while smaller competitors fight for attention.
Finally, sequencer fees face constant pricing pressure. Because users can move between networks, operators must balance higher charges against the risk of losing activity. As fees fall, chains need more transactions just to maintain revenue. In response, some teams pursue application income, MEV, or institutional services. However, those revenues do not automatically reach the chain operator. Therefore, teams must establish how each income stream will fund operations. Ultimately, sustained usage only supports survival when the business earns enough to cover its costs.
First, struggling Layer 2 projects need a reliable route to users. For example, Base has Coinbase, Robinhood Chain has Robinhood, and Arc has Circle. Through those relationships, networks gain access to existing customers, payment flows, and applications. By comparison, chains without that advantage need to secure a distribution partner or build products that attract repeat users. Although another points campaign may bring deposits, it cannot replace a reason to stay.
Alternatively, teams can pursue institutional demand. ZKsync’s Prividium initiative, alongside work involving Deutsche Bank and UBS, offers one possible template. If retail DeFi cannot generate enough income, enterprise settlement and financial applications may open another market. However, teams must first turn pilots into paying contracts. Only then can institutional interest produce the recurring revenue that supports long-term operations.
Meanwhile, operators need to reduce spending. Shared sequencers, alternative data-availability services such as Celestia or EigenDA, and leaner teams can extend runway. Nevertheless, each choice brings technical tradeoffs. In addition, application businesses can strengthen demand by giving users reasons to trade, borrow, or open perpetuals positions. Still, their protocol revenue does not automatically fund the chain. Therefore, operators need a clear arrangement that connects application success to infrastructure funding.
Beyond those changes, consolidation could help smaller networks concentrate liquidity and cut duplicated costs. Rather than maintaining separate chains and bridges, two teams serving overlapping user groups may achieve more by combining resources. At the same time, teams must stop treating venture funding as their operating model. While raising $142 million buys time, it does not establish demand. Consequently, a project that always needs another funding round still needs to resolve its underlying economics.
Ultimately, Blast’s shutdown shows what happens when operating costs exceed revenue and the team sees no credible path to close the gap. Other chains face similar pressure, although their treasuries and business models will shape their responses. Over the next twelve months, stronger distribution, recurring income, and institutional contracts could determine which networks endure. To survive beyond that period, teams must show how they will fund operations after incentives end and fundraising headlines fade.
