Layer 1 tokens have struggled amid stalled user growth and concentrated revenues in 2025
The landscape for Layer 1 blockchain tokens in 2025 presented an important test of sustainability amid broader market maturation. Contrary to earlier years characterized by rapid expansion and speculative interest, Layer 1 tokens broadly suffered notable value declines despite ongoing developer engagement. This points to a more nuanced ecosystem dynamic where tangible economic activity and user retention increasingly determine token performance. Market participants and observers often misunderstand Layer 1 success as synonymous with price appreciation or user growth alone; however, 2025 data suggests that quality of engagement and revenue mechanisms bear greater influence on token viability.
The decline of undifferentiated Layer 1 tokens reflected shifts in on-chain activity and user distribution
Throughout 2025, on-chain data reveals a 25.15% drop in Monthly Active Users (MAUs) across major Layer 1 blockchains, indicating not just slowed growth but user rotation between protocols. For example, Solana lost more than 60% of its users, equating to nearly 94 million monthly active addresses, while BNB Chain’s user base expanded almost threefold. This divergence highlighted a competitive redistribution within the ecosystem rather than wholesale growth. Layer 2 solutions similarly experienced bifurcation: Base, leveraging Coinbase’s distribution network, increased its Total Value Locked (TVL), whereas competitors like Optimism saw contractions.
Official analysis points to tokenomics flaws and institutional preferences influencing Layer 1 token performance
According to the OAK Research annual report, multiple foundational factors contributed to the downturn of many Layer 1 token valuations. First, excessive unlocking schedules led to overleveraged token supplies flooding markets without commensurate demand. Second, many protocols lack effective value-capture mechanisms that link network usage or revenue generation directly to token demand, eroding economic incentives to hold native tokens. Third, institutional capital favored more established Layer 1 platforms like Bitcoin and Ethereum, sidelining smaller-cap L1 projects despite competitive technical improvements.
Regulatory clarity and market structure have shaped ecosystem consolidation and revenue concentration
The ongoing regulatory landscape, particularly in leading jurisdictions, added a layer of structural constraint on Layer 1 token viability. While regulatory clarity can reduce uncertainty, it also concentrates value capture in protocols with clear compliance and established market roles. Stablecoin issuers such as Tether and Circle dominated revenue ecosystems, collectively generating significantly more income than many infrastructure tokens. Derivatives platforms supported fee-based revenue models that reinforced financial sustainability. In this environment, Layer 1 networks without strong differentiation in speed, cost-efficiency, or security found it challenging to justify independent existence, contributing to expectations of further market consolidation.
On-chain activity and market metrics illustrate a disconnect between development and token valuation
Despite price declines, developer activity in key ecosystems remained resilient. Data from Electric Capital highlighted growth in Ethereum Virtual Machine (EVM)-compatible development and full-time contributors, with Bitcoin’s developer community achieving two-year growth rates outpacing many Layer 1 networks. Solana also saw growth among developers built on its Solana Virtual Machine (SVM) stack. This divergence reflects a maturing market where capital allocation prioritizes projects demonstrating robust revenue models over mere infrastructural capacity. Token prices and trading volumes reacted negatively to the absence of clear monetization pathways, reinforcing the importance of sustainable economic design in blockchain ecosystems.
