Layer 2 Market Sees 98% Revenue Drop for Smaller Networks

The Layer 2 (L2) market is experiencing a significant shift as users and developers increasingly favor established networks such as Base, Arbitrum, and Optimism. This trend has resulted in a dramatic decline in revenue for smaller L2 networks, which saw a 98% drop from March to May 2025. The collective revenue for these smaller networks plummeted from a peak of $53.8 million to under $1 million, indicating a substantial change in user activity and developer trust.

This consolidation around the top three L2s is driven by several factors. Users and developers are gravitating toward networks with stronger fundamentals, brand recognition, and consistent updates. This trend is evident in the declining transaction fees and minimal DeFi activity on lesser-known L2s, suggesting that users are either exiting these platforms or engaging at a reduced rate. Additionally, the lack of clear roadmaps, liquidity issues, and fragmented communities in smaller L2s have weakened market sentiment, further driving users and investors toward more established networks.

The technical performance of the leading L2 tokens reflects this market dynamic. Base, for instance, is trading at $0.000003 with highly volatile intraday swings. Despite its low daily volume, which indicates thin liquidity and high price risk, the token's large supply limits its upside potential unless demand spikes dramatically. Arbitrum’s token (ARB) is hovering around $0.3065, showing a V-shaped recovery after dipping to $0.295. The token's resistance levels are at $0.307 and $0.310, with critical support points at $0.295 and $0.300. Despite minor pullbacks, the trend remains stable. Optimism (OP), priced at $0.5717, reflects a bullish accumulation pattern with support at $0.560 and resistance around $0.575. A breakout above $0.575 may lead to a move toward $0.585.

The consolidation in the L2 market is a clear indication of the evolving Ethereum scaling ecosystem. As the broader market matures, users and developers are seeking networks that offer reliability, consistent updates, and integrations with major dApps and protocols. This trend is likely to continue, with smaller L2s facing an uphill battle to regain relevance and attract users and developers back to their platforms. The focus on established networks like Base, Arbitrum, and Optimism underscores the importance of strong fundamentals and brand recognition in the competitive L2 market.