Market shifts reveal misconceptions about Layer 1 token resilience
Layer 1 tokens have often been considered foundational assets underpinning the broader blockchain ecosystem, with expectations of sustained user growth and value appreciation over time. However, the market performance of Layer 1 tokens in 2025 highlights the risks of overestimating their resilience without clear revenue models or demonstrable on-chain economic activity. Despite ongoing developer engagement and infrastructure upgrades, user activity surprisingly contracted, and revenue increasingly concentrated around stablecoin issuers. This trend counters earlier assumptions that Layer 1 tokens would benefit straightforwardly from ecosystem expansion and decentralized application adoption.
Observable declines in user engagement and token performance throughout 2025
A detailed analysis from OAK Research reveals that Layer 1 tokens broadly lost value during 2025, with user metrics indicating a 25.15% reduction in Monthly Active Users (MAUs) across major blockchains. Notably, Solana (SOL) experienced a dramatic user loss of over 60%, amounting to nearly 94 million fewer active wallets. Conversely, BNB Chain diverged with a near tripling of its user base, suggesting heterogeneous outcomes within the Layer 1 landscape. Layer 2 networks exhibited similar divergence; for example, Base saw notable growth in Total Value Locked (TVL), supported by Coinbase’s distribution infrastructure, while Optimism registered TVL contraction as liquidity migrated elsewhere.
These shifts illustrate a redistribution rather than expansion of the core user base, with capital flow and user attention favoring protocols with differentiated offerings or better integration with centralized exchanges. Meanwhile, tokens from various Layer 1 and Layer 2 projects finished the year predominantly in negative territory, except for select cases like Mantle, which maintained modest gains attributable to concentrated token supply and control.
Official perspectives emphasize tokenomics issues and institutional preferences
According to OAK Research’s report, several structural factors have contributed to Layer 1 downturns. One primary issue is overleveraged tokenomics characterized by continuous token unlocks that increase circulating supply without a matching rise in demand. The absence of effective value-capture mechanisms linking genuine network usage to token demand has exacerbated selling pressure on undifferentiated protocols.
The report also points to institutional investor behavior favoring Bitcoin and Ethereum as comparatively liquid and established assets, resulting in decreased appetite for smaller-cap Layer 1 alternatives. Developer activity data from Electric Capital, referenced in the report, indicates ongoing technical commitment, particularly on EVM-compatible stacks where the developer base remains robust. Nonetheless, this engagement has yet to translate into broader market confidence for many tokens lacking sustainable revenue frameworks.
Regulatory clarity and market structure influence ecosystem consolidation
Despite improved regulatory clarity in key jurisdictions during 2025, structural constraints have limited Layer 1 token performance. High inflation schedules embedded in many token release models exert downward pressure on prices amid insufficient demand for governance rights or utility associated with those tokens. This dynamic incentivizes capital consolidation within dominant base-layer networks, which have stronger developer ecosystems, institutional adoption, and established revenue streams.
Social discourse and industry commentary generally acknowledge these pressures while recognizing that network improvements in speed, security, and cost-efficiency remain necessary criteria for differentiation. As a result, generic or undifferentiated Layer 1 chains face increased strain to justify their independent existence within a crowded ecosystem.
Market reactions and ongoing variables to monitor for Layer 1 tokens
Short-term responses to these structural realities include marked declines in trading volumes and token valuations across numerous Layer 1 projects. On-chain data reflect capital flight toward more secure value stores and protocols with fee-generating or sustainable revenue streams, such as stablecoin issuers Tether and Circle, which dominate current protocol revenues. Derivatives platforms have similarly benefited from established fee-based models.
Infrastructure token prices remain volatile amid persistent unlock schedules and uneven demand for governance participation. Platform-level responses, such as network optimizations and announcements, indicate ongoing attempts to stem attrition, though users and investors appear increasingly cautious. Potential areas of impact worth monitoring include shifts in developer engagement, institutional capital deployment, and innovations in layer differentiation or interoperability.
Overall, the Layer 1 tokens’ 2025 performance underscores the importance of aligning tokenomics with clear economic value capture and the growing significance of ecosystem fundamentals within the evolving blockchain landscape.
