OAK Research’s end-of-year report paints a stark picture for Layer 1 tokens in 2025: users and capital rotated back toward Bitcoin, Ethereum, BNB Chain and revenue-producing protocols, leaving many L1 and L2 tokens deeply underwater despite ongoing developer activity.
Quick takeaways
- User activity fell sharply: Total Monthly Active Users across major chains dropped 25.15%. Solana bore the brunt — losing nearly 94 million users, a decline of more than 60% — while BNB Chain nearly tripled its user base by capturing migrants from other networks.
- Token prices plunged: Most major Layer 1 tokens finished the year down, with newer entrants seeing extreme collapses. Layer 2 tokens mirrored that weakness: Optimism and zkSync Era posted severe declines; Polygon and Arbitrum also slid. Mantle (MNT) was one of the few token winners, but OAK flags its gain as supply-concentrated rather than fundamentally driven.
- TVL divergence among L2s: Base led TVL gains — helped by Coinbase’s distribution advantage — while Optimism saw TVL contract as capital reallocated to rivals.
Why this happened
OAK attributes the rout to three structural forces:
1. Overleveraged tokenomics: continuous unlock schedules kept selling pressure persistent.
2. Weak value-capture: many protocols lack credible mechanisms that turn real network usage into sustained token demand.
3. Institutional flight to majors: institutions increasingly prefer Bitcoin and Ethereum over smaller-cap alternatives.
Developer activity vs. market prices
Despite price pain, developer momentum didn’t vanish. Electric Capital data cited in the report shows the EVM stack still hosts the largest developer base, and Bitcoin registered the strongest two‑year growth in full‑time developers among major ecosystems. Solana and the broader SVM stack also posted meaningful developer growth — underscoring a growing disconnect between sustained technical work and token-market rewards.
Revenue is king
The market is rewarding protocols that generate real revenue. Stablecoin issuers dominated protocol income — Tether and Circle contributed the lion’s share — while derivatives platforms produced steady fee-based revenues. Generic Layer 1s and Layer 2s that can’t clearly differentiate on speed, cost or security struggled to compete.
Outlook for 2026
OAK warns infrastructure tokens face ongoing headwinds despite regulatory clarity in some jurisdictions. High token inflation schedules, weak demand for governance rights, and concentrated value capture at base layers point toward further consolidation. Protocols that can demonstrate real revenue may stabilize, but they’ll remain vulnerable to macro volatility and unlock pressures from early investors. The report’s blunt conclusion: survival favors platforms that lead in economic value and institutional adoption; generic infrastructure tokens risk sliding into irrelevance as capital concentrates around protocols that actually monetize usage.
Bottom line: 2025 was a rotation from token speculation to economic fundamentals. Builders are still building — but the market is now punishing networks that can’t turn activity into sustainable token demand.
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