2026 Ethereum Shift: Projects Return to L1 Amid L2 Challenges

Is L2 eating into L1's value? Is Ethereum losing its global composability?

During the two years when the Rollup narrative was at its peak, this anxiety permeated the entire Ethereum community. The prevailing market logic at the time was that since transaction costs on the mainnet were rising, more applications, assets, and users should be migrated to independent L2s.

However, entering 2026, some interesting changes began to emerge.

From deploying new perpetual futures exchanges back to Ethereum mainnet from Synthetix, to ENS abandoning its long-planned Namechain, to projects like Trueo and Superseed reconsidering their choice of L1, teams appear to feel that maintaining an independent L2 is no longer the optimal solution.

Even some L2s have begun to scale back operations or shut down entirely; for example, in early October, Blast—which once had over $2 billion in TVL—announced a phased shutdown, followed by Abstract’s announcement that it will close its network in December.

On the other hand, the Ethereum Foundation has also advanced its mainnet performance to a new phase of engineered delivery by integrating three strategic pillars: "Scale," "Improve UX," and "Harden the L1." So, what has Ethereum undergone in its journey from "everything can be a Rollup" back to "returning to the Ethereum mainnet"?

Over the past few years, due to the high gas fees on the Ethereum mainnet, building a custom L2 or deploying core operations onto other Rollups has become a standard practice for many leading protocols.

But recently, the on-chain ecosystem has been undergoing an interesting reverse adjustment, with various types of projects reevaluating their choices between L1 and L2 from perspectives such as infrastructure costs, asset security, and ecosystem liquidity.

The most representative of these is ENS.

In 2024, ENS Labs planned a dedicated ZK Rollup for ENSv2 called Namechain, aiming to reduce the cost of domain registration and management through an independent execution environment.

But by February 2026, ENS co-founder Nick Johnson announced that the project would halt development of Namechain, with ENSv2 directly deploying on the Ethereum mainnet, citing a straightforward reason: Ethereum L1's scaling progress had far exceeded expectations from two years prior.

According to data disclosed by ENS Labs, as the Ethereum Gas Limit increased, the average Gas cost for ENS domain registration dropped by approximately 99% over the past year, from nearly $5 to less than $0.05; meanwhile, maintaining a standalone L2 requires not only bearing node and infrastructure costs, but also handling cross-chain resolution, bridging, security audits, and ongoing operational tasks.

If a service can already be performed on mainnet at a very low cost, maintaining a separate Rollup may unnecessarily complicate the product architecture.

Similar changes have also occurred in the DeFi space.

In June 2025, Synthetix, once a major advocate of the Ethereum L2 ecosystem, released "L2s are Dead, Long Live Ethereum," directly stating that the previous L2 scaling approach had caused issues such as liquidity fragmentation and unstable infrastructure for applications. In December of the same year, Synthetix's next-generation perpetuals exchange officially launched on the Ethereum mainnet.

In the second half of 2026, there will be some more specific migration actions:

• Trueo: In September, it announced plans to migrate its primary deployment back from Base to Ethereum L1, aiming to leverage the mainnet’s stronger integration capabilities, network effects, and neutrality to build more trustworthy prediction markets and outcome oracles;
• ShapeShift: On October 1, migrate the rFOX staking program from Arbitrum to Ethereum Mainnet. The reason is practical: the vast majority of FOX tokens are already held on the mainnet, making it unnecessary for users to bridge across chains solely to participate in staking;
• Superseed: Ceased the original L2 network in August, planning to shift the core products of the entire ecosystem to the Ethereum mainnet, no longer relying on independent chain gas fees to support lending and repayment, but instead achieving original product goals through application-layer revenue strategies;
• Nillion: Launching Blacklight L1 in October, migrating node operations previously running on Nillion L2 to Ethereum Mainnet, and planning to phase out the original L2 network;

Of course, these cases shouldn't be simplistically interpreted as all protocols exiting L2s, but they do indicate that an increasing number of projects are re-evaluating their infrastructure based on the actual security, liquidity, and execution efficiency requirements of their business.

More notably, operational pressures on some independent L2s are beginning to surface.

On October 2, Blast announced it would shut down, citing that the cost of maintaining the network had exceeded the revenue generated by the L2, with no viable path to economic sustainability; subsequently, Abstract also announced plans to shut down its network on December 15, despite having integrated over 144 applications and attracting more than 400,000 users—ultimately, insufficient liquidity, a limited DeFi ecosystem, and lack of institutional participation made it unsustainable to operate an independent consumer-grade public chain.

This also shows that for many L2s, having a chain does not equate to having a sustainable business model.

Especially against the backdrop of Ethereum continuously reducing L2 data publication costs and steadily improving mainnet performance, relying solely on low gas fees and token incentives to attract users is becoming increasingly difficult to sustain long-term competitiveness.

Why are project teams no longer focused on maintaining a single "large and comprehensive" L2?

Beyond the financial considerations, there is a more fundamental question: as more applications and liquidity are distributed across different networks, what impact is this having on Ethereum’s original and most important feature of global composability?

In the original rollup-centric roadmap, the division of responsibilities was very clear—L1 handles security, data availability, and final settlement, while L2 focuses on maximum scalability and low gas fees.

In an era when mainnet gas fees routinely cost dozens of dollars, this was nearly the only viable solution.

But the reality has proven far more complex than expected. As of November 2026, ETHBEAT (formerly L2BEAT) has recorded dozens of different types of L2s, yet only a handful have reached Stage 2, with asset volumes nearly negligible. In contrast, major rollups such as Base, Arbitrum One, and OP Mainnet remain at Stage 1.

Ultimately, the pace at which L2 is moving toward Stage 2 has been far slower than expected; meanwhile, L1’s own scaling progress has accelerated rapidly, as Vitalik Buterin summarized: “As the mainnet’s own scaling speeds up, the original vision for L2s and their role within Ethereum no longer holds.”

More importantly, some L2s may actively choose to remain in Stage 1 long-term due to regulatory, business model, or customer control considerations.

This does not mean they are necessarily wrong; for institutional applications requiring compliance with specific regulatory requirements, retaining certain management and upgrade permissions may even be part of the product design. However, long-term reliance on a small number of entities holding critical upgrade and state adjudication powers should not be equated simply with a fully decentralized shard of the Ethereum mainnet.

Therefore, in terms of specific application architecture, a consistent pragmatic approach is to keep assets and critical state on L1, while delegating high-frequency and complex computations to off-chain or other execution environments.

Synthetix’s next-generation perpetuals exchange is a prime example, employing a hybrid architecture where user assets are still held by Ethereum L1 contracts, while order matching is handled by an off-chain high-performance CLOB (central limit order book) engine, with trade results batch-settled back to the mainnet.

This way, users don’t need to bridge large amounts of assets to another chain just to achieve faster trading, while still enjoying order matching experiences close to those of centralized exchanges.

Of course, this does not completely eliminate trust issues—Synthetix still relies partially on off-chain order books for margin management, and the off-chain matching system itself requires scrutiny. However, asset custody and final withdrawals are still secured by mainnet contracts, so users do not need to entrust the entire security of their funds to a single L2 sequencer and bridge system.

This actually offers another perspective: it’s not necessary to move all computations on-chain to achieve true on-chain finance; the key is identifying which环节 must be guaranteed by on-chain rules with irreplaceable trust.

From a longer-term perspective, Vitalik’s research direction on Native Rollups may represent a more ideal solution (see further reading: Understanding Vitalik’s L2 Reflections: Moving Beyond Fragmentation and Correcting Course Toward Native Rollups in the New Phase).

In simple terms, it enables the mainnet to directly verify Rollup EVM execution results using Ethereum’s native ZK-EVM verification mechanism, reducing reliance on external security committees and enabling more trustworthy interoperability and synchronized composability between different Rollups.

Meanwhile, solutions such as the Ethereum Economic Zone (EEZ) are also attempting to achieve tighter synchronized interaction between different Rollups and the mainnet.

These technologies are currently at various stages of development and validation, but they all point in the same direction: enabling users to avoid being forced into fragmented asset, liquidity, and trust systems due to using different execution environments.

Of course, L2 will not disappear; it still holds significant value for high-frequency trading, gaming, privacy computing, and applications requiring autonomous control over their execution environment.

What truly needs to change is the past mindset that viewed "scaling" as the sole core mission of Layer 2.

The previous discussion covered changes in infrastructure and application architecture, but ultimately it comes back to a more practical question: if the Ethereum mainnet becomes stronger and more applications return to L1, will the value proposition of ETH also change?

Over the past few years, the crypto market's valuation of ETH has largely depended on the fee burn mechanism introduced by EIP-1559.

Under this mechanism, the base fee paid by users for transactions is burned, while the priority fee is paid to validators. When network transaction demand is high and block space is scarce, the base fee often increases, leading to a higher amount of ETH being burned.

This was also a key foundation of the previous "Ultrasound Money" narrative: if the network continues to grow, fee burning could offset or even exceed the issuance of new ETH, putting ETH into a net deflationary state.

But the problem lies precisely here.

As upgrades like Dencun and Fusaka continuously reduce the cost of submitting data from L2 to the mainnet, and the mainnet itself continually increases the Gas Limit, the cost per transaction and fee income may subsequently decrease.

Even as the overall trading volume of the ecosystem continues to grow, it does not necessarily mean that ETH burn will increase proportionally. Relying solely on higher gas fees to support ETH’s valuation could impose greater costs on ordinary users and real-world applications, ultimately undermining the network’s long-term competitiveness.

Vitalik Buterin specifically discussed ETH's value proposition, and his view is quite clear: rather than primarily viewing ETH as an asset whose value is derived from fee burning, he believes ETH's positioning as a store of value is more worthy of long-term investment by Ethereum.

Vitalik did not reject EIP-1559, nor did he advocate for eliminating the fee burning mechanism.

In contrast, he believes this mechanism remains sound and should be retained; even if, in the long term, fee burning can only offset less than 10% of the break-even issuance, holders should not be discouraged, as ETH’s value does not stem solely from burning.

Why?

First, the periods with the highest ETH burn volumes were largely driven by speculative activity within the crypto industry itself.

For example, the 2022 Yuga Labs Otherdeed NFT mint generated approximately $180 million in fee burns in a single day, but this revenue does not represent true external demand; if the broader crypto market contracts and users' speculative capacity declines, such transactions and fee income could disappear simultaneously.

Therefore, deriving ETH's long-term valuation solely from historical burn data does not establish a reliable value floor.

Second, if Ethereum is required to generate consistently high fee income to support a hundreds-of-billions-of-dollars ETH market cap, it may need to increasingly invest in research and development, adjust its product direction, and engage in more active governance interventions—much like a large commercial corporation.

This is not entirely consistent with Ethereum's long-standing goals of decentralization and resistance to control.

More importantly, deliberately maintaining high gas fees to increase burn volume could exclude ordinary users who most need privacy, security, and access to open financial services.

So, apart from fee burning, what should the long-term value of ETH be based on?

In Vitalik’s view, the answer lies in Ethereum’s truly unique competitive advantage: decentralization, and the CROPS characteristics he summarized—censorship and capture resistance, open source, privacy, and security.

These attributes ultimately point to a more practical value—stability, and the network’s ability to continue operating despite constantly changing external conditions.

In an era where AI technology is advancing rapidly and traditional finance and digital infrastructure are continuously evolving, the value of a financial infrastructure that can remain neutral, reliable, and resistant to external control over the long term may far exceed the importance of high fee income at any given stage.

From this perspective, the strengthening of L1 is actually reinforcing ETH’s long-term value foundation across three dimensions.

• Core status and settlement capabilities build Ethereum’s most important network effect: while computation itself can continually be commoditized and execution environments can be replicated, a shared settlement layer with substantial assets, mature financial protocols, and deep liquidity is extremely difficult to recreate in a short time. This means ETH’s position as the underlying gas asset, native collateral, and settlement asset has the opportunity to be strengthened as core financial activities once again converge.
• Mainnet scaling allows ETH's value to no longer rely on high per-transaction fees: Over the past two years, Ethereum has been striving to resolve a long-standing contradiction—how to increase throughput without letting node hardware requirements spiral out of control. If a series of technologies continue to mature, Ethereum has the potential to evolve from a previously low-frequency, high-cost settlement network into a global financial infrastructure with higher throughput and lower usage costs.
• The staking mechanism and economic security establish a stronger foundational demand for ETH: from the perspective of the entire network, ETH’s value is forming more diverse support—it serves as the native resource required for network operation, the economic collateral for PoS consensus, and a crucial asset for collateral and liquidity within DeFi and on-chain financial systems; this provides a much more comprehensive explanation of ETH’s long-term value than relying solely on fee burning.

If the past few years of Ethereum's development roadmap were viewed as an experiment in scaling, then the changes in 2026 resemble Ethereum beginning to rediscover the equilibrium of its entire ecosystem.

L2s will not disappear, nor should they; they remain essential components for expanding Ethereum’s use cases, supporting differentiated execution environments, and serving more users.

At the same time, L1 cannot remain indefinitely in a foundational role limited to providing data availability and final settlement.

It needs to strengthen its execution capabilities, its position as a liquidity hub, its resistance to censorship, and its economic security, so that the most important assets and financial states can settle into a sufficiently trustworthy environment.

As Lean Ethereum conveys its philosophy—reducing redundancy and friction, and refocusing the protocol’s core on security, censorship resistance, and state consensus (further reading: One Year Later, 'Lean Ethereum' Sets Out Again: What Is Ethereum Trying to Deliver?).

When the most valuable state and liquidity converge again on the mainnet, a more powerful, uniformly experienced, and fundamentally stronger Ethereum is beginning a new chapter for its next decade.