Layer 1 tokens encounter challenges amid stalled user growth and evolving market dynamics
Throughout 2025, a notable shift unfolded in the blockchain ecosystem as Layer 1 tokens encountered pronounced difficulties despite ongoing developer engagement. While the broader crypto market has often emphasized user adoption and token appreciation, recent data indicate that these Layer 1 assets are grappling with structural and fundamental issues resulting in user contraction and concentrated revenue streams. Understanding the dynamics behind these developments requires a detailed examination of user metrics, tokenomic frameworks, and ecosystem strategies across prominent blockchains.
The implications of declining Monthly Active Users and token price divergence in Layer 1 blockchains
According to OAK Research’s comprehensive year-end analysis, the crypto landscape in 2025 was marked by a redistribution rather than an expansion of users across Layer 1 and Layer 2 networks. Total Monthly Active Users (MAUs) declined by approximately 25% across major chains. Within this context, Solana (SOL) experienced a sharp user base contraction of over 60%, losing nearly 94 million users, whereas BNB Chain registered close to a threefold user increase over the same timeline.
Layer 2 networks presented a similarly mixed picture. Base, benefiting from Coinbase’s distribution infrastructure, achieved notable growth in total value locked (TVL). Conversely, Optimism’s TVL contracted amid capital migration to competing platforms. Broadly, most Layer 1 tokens closed the year with significant market losses—even as developer activity persisted, highlighting a divergence between network usage and token valuation.
Official insights attribute token declines to structural tokenomics and market preferences
Based on public reports and statements accompanying the OAK Research findings, several key factors underpin the stress on Layer 1 tokens. Overleveraged tokenomics with ongoing unlock schedules contributed to excessive token supply pressure. Notably, many Layer 1 projects lack robust value-capture mechanisms that tightly align network usage with persistent token demand, thereby undermining long-term token economics.
Institutional investors, according to official market analyses, have shown a clear preference for established networks such as Bitcoin and Ethereum, perceived as lower-risk and higher-quality infrastructure. This preference has created headwinds for smaller-cap Layer 1 tokens lacking demonstrable revenue or differentiated technological features. Governance token demand remains subdued, and inflation schedules continue to outpace organic user-driven demand in many networks.
Regulatory and structural factors continue to shape ecosystem consolidation and revenue concentration
The ongoing regulatory environment and market structure have contributed to an era of consolidation within the Layer 1 ecosystem. Even with increasing regulatory clarity in key jurisdictions, pressures such as prolonged inflationary token release schedules and the absence of compelling governance incentives inhibit the competitive viability of undifferentiated networks.
Furthermore, revenue generation has become increasingly concentrated among protocols tied to stablecoins and fee-based derivatives platforms. Tether and Circle, for instance, dominate revenue figures, highlighting the shift toward income models grounded in stablecoin issuance and transaction fees rather than speculative token appreciation. According to on-chain data, developer engagement has remained resilient, especially within the EVM-compatible stack and Bitcoin ecosystems, signifying a focus on infrastructure development even amid broader market retrenchment.
Market reactions reflect adjustment to matured network economics and investor preferences
The market response to these structural factors is evident in on-chain activity and trading metrics. While Layer 1 tokens have largely depreciated, the disconnect between price and ongoing developer activity suggests a maturing ecosystem less driven by speculation. Trading volume has adjusted to a baseline that favors projects with credible revenue models or strong institutional backing.
Network-level responses include shifting capital toward Layer 2 solutions with clearer value propositions, such as Base, and away from less differentiated chains. These dynamics illustrate potential areas of impact worth monitoring, including token unlocking schedules, governance participation rates, and the evolution of revenue-capturing mechanisms. Overall, exchanges, developers, and investors appear to be recalibrating expectations based on fundamental network utility rather than purely token price appreciation.
