Layer 1 tokens face reckoning as user growth stalls and revenues concentrate

OAK Research says 2025 punished undifferentiated L1 and L2 tokens as users rotated, MAUs fell 25%, and revenue pooled in stablecoins while dev activity stayed resilient.

Layer 1 blockchain tokens experienced significant declines in 2025, with major assets losing substantial value despite continued developer activity, according to an end-of-year report from OAK Research.

While Bitcoin (BTC) maintained relative stability throughout the year, alternative Layer 1 tokens posted steep losses that highlighted structural challenges in tokenomics and market positioning, the report stated. The data revealed a shift in market focus from speculation to fundamental value creation, with protocols lacking demonstrable economic activity facing selling pressure.

The year saw substantial user redistribution rather than net growth, with total Monthly Active Users declining 25.15% across major chains, according to the report’s blockchain metrics analysis. Solana (SOL) recorded the steepest decline, losing nearly 94 million users, representing a drop of more than 60%, while BNB Chain nearly tripled its user base.

Layer 2 networks showed similar divergence. Base posted the strongest growth in total value locked (TVL), benefiting from Coinbase’s distribution network, according to the report. Optimism saw TVL contract as capital moved toward competitors.

Most major Layer 1 tokens finished the year with losses, while Layer 2 tokens also declined despite technical advances, the report found. Optimism and zkSync Era posted severe declines, while Polygon and Arbitrum also fell substantially. Mantle recorded a modest gain, attributed to concentrated supply control, according to the analysis.

The report identified three primary factors behind the decline: overleveraged tokenomics with continuous unlock schedules; lack of value-capture mechanisms linking network usage to token demand; and institutional preference for Bitcoin and Ethereum over smaller-cap alternatives.

Developer activity remained strong across select ecosystems despite price declines, according to data from Electric Capital cited in the report. The EVM stack maintained the largest developer base with thousands of contributors. Bitcoin posted the strongest two-year growth in full-time developers among major ecosystems, while Solana and the broader SVM stack also grew substantially over two years.

The disconnect between developer activity and token prices reflected market maturation, the report stated. Development teams continued building through down cycles, but capital no longer flowed to infrastructure without clear revenue generation paths.

Protocols without revenue streams faced heightened risk, according to the report. Stablecoin issuers dominated revenue generation, accounting for the majority of income among top protocols. Tether and Circle combined generated significant annual revenue, while derivatives platforms added fee-based income through sustainable models, the report noted.

Layer 1 and infrastructure

Generic Layer 1 and Layer 2 networks lacking differentiation struggled to compete, the report found. Networks required substantial improvements in speed, cost, or security to justify independent existence.

Infrastructure tokens face continued pressure heading into 2026 despite regulatory clarity in key markets, according to the analysis. The combination of high inflation schedules, insufficient demand for governance rights, and concentration of value capture in base layers suggests further consolidation ahead, the report stated.

Protocols generating meaningful revenue may stabilize but remain subject to broader market volatility and unlock pressure from early investors, according to OAK Research. The report indicated that survival for existing Layer 1 tokens depends on leadership from major platforms and renewed institutional adoption.