Ethereum Layer-2 TVL Drops to 3-Year Low
The total value locked (TVL) in Ethereum layer-2 networks has plummeted to around $5 billion, a level not seen since early 2022. This decline marks a significant reversal from 2024, when adoption of layer-2 scaling solutions surged and TVL reached over $10 billion.
The drop in TVL reflects a broader cooling in the decentralized finance sector and reduced capital inflows into Ethereum scaling solutions. Layer-2 networks had attracted significant liquidity during the 2024 bull cycle, but shifting market conditions, lower yields on DeFi protocols, and reduced speculative activity have contributed to capital outflows.
Arbitrum remains the largest layer-2 by TVL, though it has experienced significant outflows alongside Optimism and zkSync. The decline in TVL does not necessarily indicate a loss of user activity, as transaction volumes on some layer-2s have remained stable or even grown.