Are Ethereum Layer 2s Dying? L1 vs. L2 in 2026 and What It Means for Tokens

What is happening to Ethereum Layer 2s in 2026?

Ethereum Layer 2s (L2s) are not disappearing as a category. They face a sorting process: Blast announced a wind-down on October 2, 2026, and Abstract announced a closure plan on October 6. Other networks still attract users. Starknet is considering an independent Layer 1 (L1), not claiming a completed migration. The question for tokenholders is whether activity, security, and a viable token model can persist.

An L2 processes transactions away from Ethereum and uses Ethereum for settlement or data availability, depending on its design. An independent L1 operates its own consensus and security system. Neither label guarantees adoption or token returns. Ethereum’s rollup explanation; Starknet’s October 2026 L1 discussion.

What does the DefiLlama snapshot show?

The DeFillama show Ethereum with 56.13% of the displayed chain-level DeFi TVL pie. In the accompanying table, Ethereum holds about $50.918 billion in DeFi TVL. Solana holds $6.211 billion, Base $6.089 billion, and Arbitrum $1.362 billion. Base and Arbitrum appear alongside L1s because this view ranks networks by DeFi assets deposited in tracked protocols; it is not a ranking of L1 versus L2 security.

There are two lessons. First, an L2 can attract substantial DeFi capital without operating as an L1: Base's displayed TVL is close to Solana's. Second, TVL and trading activity do not measure the same thing. Solana's displayed 24-hour DEX volume exceeds Ethereum's, despite lower DeFi TVL. A temporary rise in asset prices or deposits can also raise TVL without an equivalent rise in users or fee income.

Important measurement limit: DeFi TVL is not L2Beat's total value secured, bridged TVL, revenue, or a measure of decentralization. A chain can appear small in a DeFi TVL table while serving other applications; a large TVL number does not prove that users can exit without operator cooperation. L2Beat’s risk and value methodology.

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Why are some L2s closing?

Launching an L2 is easier than establishing a lasting reason to use one. Teams must attract developers, keep users, support bridges and infrastructure, and pay for operations while offering fees and applications that justify another execution environment. Ethereum's lower-cost blob transactions have helped rollups reduce data costs; this also makes low fees alone a weaker differentiator. The latter point is an inference about competition, not proof of any single project's financial position. Ethereum on EIP-4844 blobs.

Blast: Its team announced on October 2 that it was winding down the L2 and set October 26, 2026, as the deadline for its ordinary withdrawal flow. As of this article’s October 9 publication date, that deadline has not passed. Users should check Blast’s own instructions for specific assets and any subsequent changes. A wind-down announcement is not the same as saying all funds have already been withdrawn.

Abstract: The consumer-focused L2 associated with Pudgy Penguins announced on October 6, 2026, that it intends to end operations on December 15, 2026. Its team cited adoption and operating-cost challenges and instructed users to move assets through official channels. That is a planned closure, not evidence that the chain was already offline on October 9. The decision concerns Abstract’s chain; it does not mean the Pudgy Penguins brand itself is shutting down.

This is not evidence that all L2s are failing. Chains with established applications, distribution, developer tools, and credible exit guarantees may continue to grow. The more useful distinction is between a network with durable demand and one maintained chiefly to support a token narrative.

Is Starknet becoming a Layer 1?

Not yet. In October 2026, Starknet said it was actively considering becoming an L1 as part of work toward post-quantum security. A proposed direction is not a launched network, a completed migration, or a guarantee that users and applications will move. Starknet's existing documentation still describes an Ethereum-settled rollup.

The technical rationale matters. A rollup may change its proof system or account-signature design, but it cannot unilaterally make every security dependency of its base layer post-quantum. An independent L1 could choose more of its own security architecture. It would also need its own validator or sequencer security, credible incentives, network participation, and a plan for bridging assets. Starknet’s staking documentation says the network remains centralized during its phased decentralization process. Independence replaces inherited dependencies with new responsibilities; it does not automatically improve safety.

Starknet's case should therefore be tracked through concrete milestones: a published architecture, audited cryptographic assumptions, validator requirements, migration options, and evidence of user demand. A roadmap headline is not the same as production security.

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What is the path forward for L1s and L2s?

L1s have a direct role as settlement and security layers, but face their own trade-offs. More control over throughput, fees, and cryptography comes with the cost of maintaining consensus, validators, and economic security. A new L1 must persuade users that its security and applications justify moving assets to another ecosystem. Ethereum's current DeFi TVL share suggests continued demand for its settlement ecosystem, but a single snapshot cannot establish future market share.

For L2s, viable paths include applications that need a specific execution environment, distribution into an existing user base, and shared infrastructure that lowers maintenance costs. Their security claims should be examined individually: whether transaction data is available, how withdrawals work, who can upgrade contracts, and what happens if a sequencer stops. L2Beat tracks these risks by project rather than treating every rollup as equivalent. 

There is also a hybrid path: a project can retain an Ethereum-connected deployment while exploring its own settlement environment. That could serve different applications, but it could split liquidity and developer attention. This is a potential trade-off, not a stated outcome for Starknet.

How could an L1 or L2 shift affect token prices?

The label alone does not determine price. Token value depends on what holders actually receive or must use, how much supply enters circulation, and whether real activity persists.

• Existing L1 tokens: More transactions may increase demand for a gas or staking asset, but that effect depends on fee levels, token issuance, staking design, and whether fees accrue to holders or are burned.
• L2 tokens: Governance rights alone may offer limited direct exposure to transaction growth. Check whether the token pays gas, secures sequencing or proving, earns fees, or only governs a treasury. ETH may still be used for some settlement and data costs.
• L1-pivot candidates: A native security role could add token utility if the design is adopted. New validator rewards or subsidies could also expand circulating supply. STRK already has documented fee, governance, and staking roles; a proposed L1 does not, by itself, define new holder returns. 
• Networks winding down: BLAST may lose utility as its network winds down; a price outcome is not predetermined. Abstract did not launch a native chain token. PENGU is associated with Pudgy Penguins, not a token launched by Abstract: the closure does not mechanically end PENGU or set its price.

For a trader, the useful test is a sequence: announcement → audited deployment → user activity → fee generation → defined token value capture → circulating-supply changes. Each link needs evidence. Markets can price expectations before any step is delivered and reverse if the rollout disappoints. Neither the DefiLlama screenshot nor a roadmap provides a reliable short-term price target.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are volatile—always do your own research (DYOR) before making investment decisions.

FAQ

Are all Ethereum L2s shutting down?

No. Blast has announced a wind-down and Abstract a planned closure; other networks continue operating. Evaluate each network's support, exit mechanisms, and official notices separately.

Is Starknet an L1 now?

No. As of October 9, 2026, an independent L1 is under consideration. Starknet's existing rollup remains connected to Ethereum; no completed L1 transition was established in the cited announcement.

Does higher TVL mean a safer network or a stronger token?

No. TVL measures deposited asset value under a particular methodology. It does not prove decentralized exits, recurring revenue, or tokenholder cash flows.

Which is better for tokenholders, an L1 or an L2?

Neither by default. Compare token utility, dilution, fee capture, security costs, and actual users. An L1 can add utility and expenses; an L2 can gain adoption without transferring economic value to its token.