Layer 1 tokens face pressure as user growth stalls and revenue centralizes
December 21, 2025
Layer 1 token performance challenged by stalled user growth and concentrated revenue
Layer 1 blockchain tokens have long been considered foundational assets within the crypto ecosystem, underpinning networks that support decentralized applications, smart contracts, and a wide range of blockchain services. However, recent market trends reveal that many of these tokens now face structural headwinds related to user engagement and monetization. While the expectation often centers on continuous user growth driving token demand, on-chain data from 2025 suggests a different narrative, where declines in Monthly Active Users (MAUs) and concentrated revenue pools challenge assumptions about Layer 1 network health. This article explores the dynamics affecting Layer 1 tokens by examining usage metrics, tokenomics, developer activity, and sustainability within the broader Ethereum Virtual Machine (EVM) and alternative ecosystem contexts.
Recent on-chain data reflects shifting user distribution and revenue patterns across Layer 1 tokens
Through 2025, OAK Research documented noticeable declines in MAUs across major Layer 1 blockchains, with an aggregate drop of approximately 25.15% year-over-year. Certain chains experienced sharper contractions; for example, Solana (SOL) saw a reduction of nearly 94 million users, representing a decrease exceeding 60%. Conversely, Binance Smart Chain (BNB Chain) nearly tripled its user base, highlighting divergent growth trajectories within Layer 1 ecosystems. Layer 2 networks, often presented as scalability solutions, exhibited similar disparities. Base, leveraging Coinbase’s distribution network, recorded strong gains in Total Value Locked (TVL), while networks like Optimism experienced contractions as capital migrated to competitors.
Underlying these trends is a notable concentration of revenue generation in stablecoins and fee-based derivative platforms, which dominate income among top protocols. Meanwhile, many Layer 1 tokens without intrinsic value-capture mechanisms or differentiated utility underperformed in token price terms despite ongoing developer participation. Overall, the market showcased a rotation of users between protocols rather than broad net adoption, signaling challenges to sustained Layer 1 token value linked to economic activity rather than speculation.
Official observations note tokenomics and institutional preferences influencing Layer 1 token declines
According to public information provided by OAK Research and corroborated by data from Electric Capital, several factors explain the decline in Layer 1 token performance despite resilient developer activity. Continuous token unlock schedules have led to overleveraged supply dynamics, creating downward pressures. The report highlights the absence of effective value-capture mechanisms—linking network usage directly to token demand—as a critical weakness for many Layer 1 projects. Furthermore, institutional participants show a clear preference for established assets like Bitcoin and Ethereum, reducing capital inflows into smaller-cap Layer 1 tokens.
Developer metrics reveal ongoing contributions, particularly within the EVM ecosystem, which maintains the largest developer community. Bitcoin and Solana ecosystems also saw growth in full-time developers over the past two years, indicating sustained ecosystem development. However, this disconnect between active development and token price action reflects maturation within the market, where capital allocation increasingly depends on demonstrable revenue generation and economic fundamentals rather than speculative interest.
Regulatory clarity and market structure contribute to continued pressure on Layer 1 infrastructure tokens
From a structural standpoint, Layer 1 tokens exist within regulatory and market frameworks that influence their sustainability. The 2025 environment saw improved regulatory clarity in key jurisdictions, yet this has not significantly alleviated pressures stemming from token economic design and user behavior. Inflationary token release schedules, coupled with insufficient demand for governance rights, often dilute token value over time, especially in networks that lack distinguishing features in speed, cost efficiency, or security compared to competitors.
Mainstream industry discussions generally acknowledge the need for consolidation among undifferentiated Layer 1 and Layer 2 projects. Without meaningful user growth or revenue streams, such protocols face increased risk of obsolescence. Stablecoin issuers and fee-generating derivative platforms currently dominate revenue within the ecosystem, setting higher bars for other projects aiming for sustainable operational models. This pattern situates Layer 1 tokens within a broader context where economic utility and governance efficacy are critical to long-term viability.
Short-term on-chain activity and trading volume reflect market rotation and valuation adjustments
In the near term, trading volumes for major Layer 1 tokens have demonstrated volatility aligned with broader crypto market sentiment and capital reallocations. Token prices for projects such as Optimism, zkSync Era, Polygon, and Arbitrum saw material declines, whereas some protocols like Mantle recorded modest gains attributable to concentrated token holdings. On-chain movement patterns indicate decreased user interaction but steady developer contributions, reinforcing the notion that technical progress continues even amid muted market participation.
Operationally, no major network downtimes or critical security incidents were reported, suggesting technical robustness across the Layer 1 landscape. However, the overall liquidity contraction and reduced token demand highlight ongoing challenges for network operators seeking to justify independent infrastructures. Areas worth monitoring include governance participation rates, token velocity, and revenue diversification strategies which may influence Layer 1 token trajectories into 2026.
Overall, Layer 1 tokens are experiencing a phase defined by realignment between user activity, tokenomics, and revenue capture mechanisms. These elements collectively shape the evolving landscape of blockchain ecosystems, underscoring the importance of sustainable economic models over mere network size.
