Linea's Resilience in a Collapsing TVL Environment: Capital Efficiency and Staking Strategies in Layer 2s

In 2025, the Ethereum Layer 2 (L2) landscape has become a battleground for capital efficiency and user adoption. As Total Value Locked (TVL) metrics fluctuate amid macroeconomic headwinds, projects like Linea, Arbitrum, Optimism, and Base are testing the limits of their technical and economic models. Linea, in particular, has emerged as a compelling case study in resilience, leveraging innovative tokenomics and capital efficiency mechanisms to retain liquidity even as broader TVL trends decline.

TVL Trends: A Fragmented Landscape

By December 2025, the L2 TVL landscape is highly concentrated. Base dominates with 46.58% of the market, followed by Arbitrum at 30.86%. Linea, while smaller, has seen its DeFi TVL surge to $1.2 billion, driven by the Ignition liquidity incentive program and partnerships with protocols like Aave according to MEXC. However, Linea's TVL faced short-term volatility in December due to a 1.38 billion LINEA token unlock, which introduced selling pressure. Despite this, Aave's $863 million TVL on Linea underscores its role as a critical hub for Ethereum DeFi.

Capital Efficiency: Linea's Dual-Burn Mechanism

Linea's capital efficiency strategy hinges on its Dual-burn mechanism, which allocates 20% of transaction fees to burn ETH and 80% to buy and burn LINEA tokens. This dual approach not only reduces the supply of both assets but also aligns incentives for ETH and LINEA holders. By redirecting fees to liquidity and incentive programs, Linea creates a flywheel effect that retains capital within its ecosystem.

In contrast, Arbitrum and Optimism rely on token-based governance models. Arbitrum's ARB token is used for governance and transaction fees, while Optimism's OP token supports a simpler single-round fraud-proof system. Base, however, lacks a native token, relying instead on Coinbase's user base and subsidized costs to drive adoption . While Base's model excels in consumer dApp growth, it lacks the direct value capture mechanisms that Linea's tokenomics provide.

Staking Strategies: Native Yield and EVM Compatibility

Linea's native yield strategy further enhances its capital efficiency. Through partnerships like Lido, users can stake bridged ETH and earn rewards, which are then reinvested into Linea's liquidity pools. This creates a self-sustaining ecosystem where staking rewards directly fund growth.

Arbitrum's staking strategy is more security-focused, with its multi-round fraud-proof system ensuring robust dispute resolution. Optimism, meanwhile, prioritizes developer experience with faster finality but lacks the same level of native yield generation. Base's staking landscape is less defined, as its reliance on Coinbase's infrastructure reduces the need for token-based incentives.

Resilience in Declining TVL Scenarios

When TVL declines, projects must rely on mechanisms that retain user trust and liquidity. Linea's Dual-burn model acts as a buffer by reducing token supply during downturns, potentially stabilizing its value. Arbitrum's technical sophistication and proven security mechanisms also position it well, as users and developers prioritize trust in volatile markets. Optimism's simplicity and speed may attract users seeking low-friction transactions, while Base's institutional backing provides a safety net through Coinbase's ecosystem.

However, Linea's 66% reduction in gas fees during its Alpha V2 phase gives it a critical edge in user retention. Lower costs make it more attractive for both retail and institutional users, even when broader TVL metrics dip. This aligns with broader trends in 2025, where Ethereum's L2s are consolidating around a few key players that prioritize distribution and real-world usage.

Conclusion: A Model for the Future

Linea's resilience in a collapsing TVL environment stems from its unique blend of tokenomics, capital efficiency, and EVM compatibility. While Base's user base and Arbitrum's technical depth are formidable, Linea's Dual-burn mechanism and native yield strategies create a flywheel effect that sustains liquidity. As Ethereum's L2 ecosystem matures, projects that balance innovation with economic sustainability-like Linea-will likely outperform those relying solely on network effects or institutional backing.

For investors, the key takeaway is clear: Linea's ability to adapt its capital efficiency mechanisms to market conditions positions it as a strong contender in the next phase of Ethereum's Layer 2 evolution.