Layer 1 and Layer 2 tokens declined in 2025 as users and capital moved to Bitcoin, Ethereum, BNB Chain and revenue-generating protocols, despite strong developer activity.
Summary
- Low 1 tokens saw major price and user losses in 2025, while Bitcoin remained relatively strong and BNB Chain almost tripled its number of users, while other tokens lost activity.
- Excessive tokenomics, weak value creation, and institutional bias towards BTC and ETH created continued selling pressure on alternative L1 and L2 tokens.
- Stablecoin issuers and derivatives platforms dominated revenue, while generic infrastructure tokens faced consolidation risk and a trend toward irrelevance.
Layer 1 blockchain tokens experienced significant depreciation in 2025, with large assets losing significant value despite continued developer activity, according to a year-end report from OAK Research released this week.
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While Bitcoin maintained relative strength throughout the year, alternative Layer 1 tokens experienced sell-offs that exposed structural weaknesses in tokenomics and market positioning, the report said. The findings show a shift from speculation to fundamental value creation, with the market reacting negatively to protocols that fail to demonstrate economic activity.
The total number of monthly active users fell 25.15% across major chains, according to the report’s blockchain metrics analysis. Solana recorded the steepest decline, losing nearly 94 million users, representing a decline of more than 60%, while BNB Chain nearly tripled its user base by attracting participants from other platforms.
Layer 2 networks experienced a similar divergence. Base showed the strongest growth in Total Value Locked (TVL), strengthening its position thanks to Coinbase’s distribution advantage, the report said. Optimism saw TVL shrink significantly as capital turned to competitors.
The majority of major Layer 1 tokens ended the year with losses, while some newer participants saw extreme declines, the report said. Layer 2 tokens experienced similar performance despite the technical advances. Optimism and zkSync Era showed serious declines, while Polygon and Arbitrum also fell substantially. Only Mantle (MNT) posted a modest gain, which the analysis attributed to concentrated supply management rather than fundamental strength.
The report identified three primary forces behind the decline: excessive tokenomics with continuous unlocking schedules; lack of credible value capture mechanisms that link network usage to token demand; and institutional preference for Bitcoin (BTC) and Ethereum over smaller-cap alternatives.
Despite price declines, developer activity remained robust in select ecosystems, according to Electric Capital data cited in the report. The EVM stack retained the largest developer base, with thousands of contributors, including many full-time developers. Bitcoin posted the strongest two-year growth in full-time developers among major ecosystems. Solana and the broader SVM stack have also grown significantly in two years, demonstrating sustained technical development despite token performance.
The discrepancy between developer activity and token prices revealed the maturation of the market, the report said. Teams continued to build during down cycles, but speculative capital no longer rewarded infrastructure without clear paths to monetization.
Stablecoin issuers dominated revenue generation and were responsible for the vast majority of revenue among the top protocols, according to the report. Tether and Circle together generated significant annual revenue, while derivatives platforms added meaningful fee-based revenue through sustainable models. Generic Layer 1s and Layer 2s without differentiation could not compete, the report said, noting that networks required improvements in speed, cost or security to justify independent existence.
Infrastructure tokens face continued headwinds despite regulatory clarity in key markets, according to the report’s 2026 outlook. The combination of high inflation schedules, insufficient demand for governance rights and concentration of value capture in base tiers signals further consolidation ahead.
Protocols that generate meaningful revenue may stabilize but remain subject to broader market volatility and continued pressure from early investors, the report concludes. The analysis stated that the survival of existing Layer 1 tokens depends on leadership from major platforms and renewed institutional adoption, warning that generic infrastructure tokens will continue to trend toward irrelevance as capital concentrates in protocols that demonstrate economic value rather than just technological novelty.
