Ethereum Layer2 TVL Drops Back to $5B Amid Traditional Finance Shift

The total value locked (TVL) on Ethereum layer2 networks has plummeted to around $5 billion, marking a significant decline since its peak in 2024. This downturn coincides with the weakness of Ethereum itself and the departure of several senior leaders from the Ethereum Foundation, including co-executive directors.

The figure is a far cry from the growth seen last year, when layer2 networks such as Optimism, Arbitrum, and zkSync gained attention and drove up TVL. However, even with this decline, Optimistic rollups like Optimism, Base, and Arbitrum still dominate, accounting for $4.8 billion, or 96 percent of the total.

The traditional finance industry's shift towards alternatives to Ethereum is also a contributing factor to the decline in TVL. Companies such as DTCC are exploring tokenizing U.S. Treasuries based on a massive $100 trillion custody base, while JPMorgan has integrated its JPM Coin across multiple public blockchains.

Stablecoins remain an exception, with USDC and USDT still predominantly settled on Ethereum and layer2s. This stability has helped maintain Ethereum's position as a key bridge between crypto and traditional finance.