Layer 1 and Layer 2 tokens sank in 2025 as users and capital shifted to Bitcoin, Ethereum, BNB Chain, and revenue-generating protocols despite strong developer activity.
Summary
- Layer 1 tokens saw significant price and user losses in 2025, while Bitcoin retained relative strength and the BNB chain nearly tripled the number of users as others bled activity.
- Tokenomics overleverage, low value capture, and institutional preference for BTC and ETH have resulted in sustained selling pressure on alternative tokens L1 and L2.
- 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 core assets losing substantial value despite sustained developer activity, according to an end-of-year report from OAK Research released this week.
Altcoins enter the new year with hope
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 results reveal a shift from speculation to fundamental value creation, with the market reacting negatively to protocols unable to demonstrate economic activity.
The total number of monthly active users decreased by 25.15% across top chains, according to the report’s blockchain metrics analysis. Solana saw the biggest decline, losing almost 94 million users, a drop of more than 60%, while BNB Chain nearly tripled its user base by capturing participants from other platforms.
Layer 2 networks have seen a similar divergence. Base demonstrated the strongest growth in total value locked (TVL), strengthening its position thanks to Coinbase’s distribution advantage, according to the report. Optimism saw TVL contract significantly as capital shifted to competitors.
The majority of major layer 1 tokens ended the year with losses, while some new entrants saw extreme declines, the report said. Layer 2 tokens have seen similar performance despite technical advancements. Optimism and zkSync Era saw sharp declines, while Polygon and Arbitrum also fell significantly. Only Mantle (MNT) made a modest gain, attributed to concentrated supply control rather than fundamental strength, according to the analysis.
The report identified three main forces driving the decline: overexploited tokennomics with rolling unlock schedules; lack of credible value capture mechanisms linking network usage to token demand; and institutional preference for Bitcoin (BTC) and Ethereum over smaller-cap alternatives.
Despite the price decline, developer activity remained robust in some ecosystems, according to Electric Capital data cited in the report. The EVM stack maintained the largest developer base, with thousands of contributors, including many full-time developers. Bitcoin saw the highest two-year growth in full-time developers among major ecosystems. Solana and the broader SVM stack also saw substantial growth over two years, demonstrating sustained technical development despite token performance.
The disconnect between developer activity and token prices reveals market maturation, the report said. Teams continued to grow throughout down cycles, but hot money no longer rewarded infrastructure without clear paths to revenue generation.
Stablecoin issuers dominated revenue generation, accounting for the vast majority of revenue among major protocols, according to the report. Tether and Circle have together generated significant annual revenues, while derivatives platforms have added significant commissioned revenues through sustainable models. Generic layers 1 and 2 lacking differentiation could not compete, the report said, noting that the networks required improvements in speed, cost or security to justify independent existence.
According to the report’s outlook for 2026, infrastructure tokens face persistent headwinds despite regulatory clarity in key markets. The combination of high inflation schedules, insufficient demand for governance rights, and a concentration of value capture in the base layers suggests further consolidation to come.
Protocols that generate significant revenue may stabilize, but remain subject to broader market volatility and persistent unlocking pressure from early investors, the report concludes. The analysis indicates that the survival of existing layer 1 tokens depends on the leadership of major platforms and renewed institutional adoption, warning that generic infrastructure tokens will continue to lose relevance as capital concentrates in protocols demonstrating economic value rather than technological novelty alone.
