Operating a standalone blockchain has traditionally promised total sovereignty.
An independent Layer 1 architecture lets projects dictate their own future, establish consensus rules, run personal validators, and craft infrastructure for their community without depending on an external network.
However, immense authority carries heavy obligations along with steep financial burdens.
Blockchains require sufficient participants, developers, and economic activity to sustain the systems that keep them safe. For certain smaller networks, maintaining a self-contained ecosystem simply fails to make financial sense.
Zilliqa represents the latest entity facing this reality, sharing intentions last week to abandon its L1 design and transition into an Ethereum-powered Layer 2 (L2) network instead:
“We know it’s not great. For nine years we built and ran our own Layer 1. It hasn’t worked.”
“Adoption never scaled to what an independent chain demands,” the update clarified. “Financial backing and liquidity for standalone L1s evaporated. Recent breaches demonstrated the massive effort required to protect a chain independently. The metrics are visible onchain for everyone to review.”
Zilliqa is not alone in this shift.
The Gnosis blockchain ecosystem, historically aligned with Ethereum, is also developing strategies to convert Gnosis Chain into an Ethereum-connected network via its Ethereum Economic Zone (EEZ) program. Its RollupX test environment aims to demonstrate how participating chains can leverage joint Ethereum settlement and synchronous composability as native rollups.
Furthermore, the gaming-centered Ronin blockchain finalized its migration back to Ethereum as an L2 solution in May.
As enthusiasm and funding for alternative L1s dwindle, will we observe an ongoing migration of numerous chains consolidating within the Ethereum network?
The Expense of Operating Independently
Autonomous L1s typically need to support several foundational pillars, encompassing execution, consensus, data availability, and final settlement. They must likewise finance the token rewards utilized to secure their ledgers via staking.
Related: What are native rollups? Full guide to Ethereum’s latest innovation
“It boils down to the viability of a network,” Max Shannon, a senior research analyst at Bitwise, stated to Magazine.
ZIL becomes a Layer 2 on Ethereum. Source: Zilliqa
“Layer 2s only require transaction execution and do not strictly require a native token, rendering them a far more appealing financial and structural option,” he explained.
Shannon noted that the ten largest projects maintain greater economic stability. Layer 2 networks operated by Coinbase and Robinhood collected $48 million and $52 million in transaction fees respectively throughout the previous 365 days, yielding profit margins exceeding 90%. The following eight biggest chains each brought in more than $1 million yearly.
However, starting from the 11th position downward, yearly fee collections dropped below a combined total of $1 million. Consequently, while a protocol might possess ambitious engineering and a passionate following, those factors do not automatically cover operational expenses.
Ethereum frequently faces criticism for surrendering a substantial portion of its profits to Layer 2 platforms, yet that exact dynamic makes building projects there so attractive.
Nevertheless, merely transitioning into an Ethereum L2 does not guarantee profitability for a network. Shannon highlighted Optimism, Katana, and Linea as instances where operational costs surpass fee revenue generation. Protocols such as Blast have already been forced to close operations entirely.
Ethereum Acting as a Liquidity Black Hole
Gnosis has scheduled the spring of 2027 to finish its migration, an upgrade that will see it abandon its independent validator consensus mechanism in favor of Ethereum settlement.
Gnosis Chain will relaunch as an Ethereum Economic Zone. Source: Gnosis
“Two years ago I gave a presentation regarding ‘native rollups’ designed to genuinely expand Ethereum rather than functioning as isolated ledgers,” co-founder Martin Köppelmann noted, adding that RollupX “surpasses even what I had envisioned during that time!”
The Gnosis EEZ strategy aims to permit distinct Ethereum-centric networks to communicate synchronously, allowing a smart contract on one chain to invoke another and utilize its output within a single transaction, bypassing traditional bridge-and-wait procedures.
That outlook has generated considerable optimism among Ethereum supporters, with prominent advocate materkel characterizing the EEZ as a prospective “liquidity sinkhole,” arguing it could enable connected networks to access Ethereum’s total value locked (TVL) and cement its status as a central liquidity hub.
Could network synergies and enhanced cross-chain compatibility pull an increasing number of blockchains into Ethereum’s gravitational pull?
Beyond Simple Cost Reductions
The advantages extend past operational economics alone. Teams can also leverage an established community of applications and developers instead of cultivating those network effects completely from the ground up.
Related: Privacy tools are rising behind institutional adoption, says ZKsync dev
Alex Gluchowski, co-founder and chief executive officer of Matter Labs—the firm behind the Ethereum Layer 2 ZKsync—anticipates that additional L1 developers will keep running their unique chains while relying on Ethereum for final settlement.
“Managing an independent L1 involves maintaining its security alongside creating offerings that individuals actually want to adopt,” Gluchowski shared with Magazine.
“Sharing Ethereum’s protective layer grants a team greater capacity to concentrate on its users. I identify very few consumer requirements that necessitate a standalone L1 instead of an Ethereum-tied chain.”
At the same time, Gluchowski emphasized that operational independence and Ethereum integration are not mutually exclusive, given that networks can preserve authority over their governance rules and protocols while utilizing Ethereum for pooled settlement infrastructure.
Ronin completed migration to Ethereum in May. Source: Ronin
Furthermore, for applications processing sensitive financial information, maintaining a confidential environment under direct supervision can prove critical, he mentioned. Shared settlement protocols do not require exposing private transaction metrics.
The primary barrier right now stems from the fact that all Layer 2 networks remain largely segregated from each other and from Ethereum proper. Navigating between them is certainly feasible, but the experience is far from frictionless and cross-chain compatibility remains weak.
“Fragmentation is already occurring,” Gluchowski remarked, drawing attention to the complexities of interconnecting systems when transactions incorporate privacy features.
Interoperability across private ecosystems will only grow in importance as more protocols attempt to blend confidential operations with open access to public blockchain liquidity pools, he concluded.
Does Every Blockchain Require Ethereum?
Shannon warned against labeling the broader market as experiencing a straightforward consolidation wave around Ethereum exclusively.
Certain major institutions are deploying Layer 2 networks, he observed, such as Coinbase and Robinhood, yet alternative entities continue opting to launch standalone L1s, including Circle’s Arc, Stripe’s Tempo, or Hyperliquid’s application-specific perpetual futures blockchain.
“Consequently, there is no definitive conclusion to the L1 versus L2 debate just yet,” he stated.
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Originally published at https://cointelegraph.com/magazine/are-alt-l1s-over-security-costs-drive-smaller-chains-to-ethereum?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound.
