Over the past decade, the story of smart contract blockchains has been one of constant reinvention. The industry has moved from purpose-built chains to app-specific networks, through the rise and fall of alternative Layer 1s, and now toward the rapid adoption of Layer 2 rollups. Each phase reflects the sector’s ongoing struggle with scaling, liquidity, and programmability. Tracing these cycles not only helps explain how we got here but also offers a clearer view of where blockchain infrastructure may be headed next.
Early Attempts at Purpose-Specific Blockchains
Ethereum was the first blockchain to enable general-purpose smart contracts, and that distinction proved decisive. Its developer-friendly environment, composable standards, and first-mover advantage drew in builders and liquidity at a scale that no other early project managed to match. Around the same time, a number of alternative networks pursued narrower goals. XRP positioned itself as a payments-focused chain, Hedera targeted enterprise-grade governance and throughput. Despite these efforts, few of these projects achieved broad traction beyond specific use cases.
Part of Ethereum’s strength was the openness of its ecosystem. By providing a shared virtual machine and permissionless developer tools, Ethereum created a feedback loop where new applications attracted liquidity, and liquidity attracted more applications. The other projects, while technically interesting, were not designed to cultivate such an expansive developer economy. At the same time, large companies were experimenting with so-called “enterprise blockchains,” such as IBM’s Hyperledger. These were marketed as private, permissioned systems for supply chain or internal record-keeping. In practice, they failed to gain adoption because they lacked the openness, network effects, and incentive alignment that made public blockchains compelling. Without strong communities or real-world liquidity, these enterprise efforts fizzled, while Ethereum became the default platform for decentralized applications.
App Chains and the Cosmos Model (2019)
Cosmos advanced a vision of a world made up of sovereign application-specific blockchains, each with its own validator set, execution environment, and economics. Interoperability was provided through IBC, a protocol designed to let these chains communicate seamlessly. The model appealed to teams that wanted maximum control over throughput and governance rather than competing for space on a shared mainnet.
One of the most prominent examples came in 2023, when dYdX announced its migration from an Ethereum-based system to a sovereign Cosmos chain. By doing so, the exchange gained freedom to design its order book logic, tailor block production to its needs, and capture more of the value generated by its activity.
Later on, Ethereum adapted the app chain concept into its own ecosystem. Projects began launching dedicated rollups on Ethereum as L2s or even L3s, providing sovereignty over execution while still inheriting Ethereum’s security guarantees and direct access to its liquidity hubs. This evolution allowed teams to customize performance without abandoning the gravitational pull of Ethereum’s network effects.
The enduring trade-off has been clear: sovereignty and control (technical and economic) on one side, shared security and liquidity on the other. Both models continue to coexist, with different projects choosing based on their priorities and user base.
DeFi Summer and the Alt-L1 Boom (2020–2021)
The summer of 2020 marked a turning point. Activity in decentralized finance exploded, gas fees soared, and the first major wave of NFTs added further strain to Ethereum Mainnet. It quickly became clear that the network, in its current form, could not scale fast enough to absorb the surge in demand for blockspace.
In response, a new cohort of alternative Layer 1s: Avalanche, Fantom, Solana, and others emerged, promising faster transactions and lower costs. Many of these chains embraced EVM compatibility to lure developers and applications with minimal friction. Solana took a different path, building a custom runtime optimized for speed and throughput from the ground up. Incentive programs and aggressive marketing campaigns helped these networks attract users and liquidity, and for a moment it looked as if Ethereum’s dominance might be challenged.
But the momentum proved short-lived. When the bear market arrived in 2022, speculative activity in DeFi and NFTs dried up. With far less demand for blockspace, the economic rationale for most of these alt-L1s collapsed. Communities shrank, token prices fell, and many ecosystems retrenched. Solana, though hit hard, managed to claw back momentum thanks to its differentiated technology and a committed developer base. Still, the broader lesson was clear: ecosystems built primarily on incentives and cheap blockspace struggle to retain users when liquidity and culture remain centered elsewhere.
Rise of Layer 2 Rollups (2021-2022)
As the limitations of Ethereum Mainnet became undeniable, attention shifted toward scaling solutions that could extend Ethereum’s capacity without abandoning its security. This gave rise to the Layer 2 rollup model, which has since become the dominant narrative in blockchain infrastructure.
The shared value proposition of rollups is compelling. They allow users to transact at lower cost while keeping ETH as the universal gas token, minimizing fragmentation. They make bridging assets safer by relying on Ethereum’s native security instead of fragile third-party bridges. And they allow developers to continue using familiar EVM tooling, lowering the barrier to adoption. These advantages quickly put rollups in a stronger position than the EVM-based alt-L1s of the previous cycle. With cheaper fees, shared liquidity, and seamless integration into Ethereum’s ecosystem, rollups have become the default scaling path. Challenges remain, such as decentralizing sequencers, reducing data availability costs, and standardizing cross-rollup communication, but the trajectory is clear. Rollups are steadily replacing alt-L1s as the industry’s answer to scaling Ethereum.
The first major rollups began arriving in 2021. Arbitrum One launched publicly on August 31, 2021, quickly attracting DeFi heavyweights like Uniswap, Aave, and Curve to migrate or deploy. Optimism followed later that year on December 16, 2021. Over time, both rollups supported the transition to modular upgrades and introduced governance models (e.g. Optimism’s OP token in May 2022) to fund their ecosystems and align incentives.
Institutional and Corporate Interest in L2 Ecosystem (2023-2024)
As rollups matured, they attracted not only crypto-native projects but also large institutions and corporations that once might have launched their own alt-L1s. The new playbook became clear: build on Ethereum’s security by launching a dedicated rollup, rather than attempting to create a competing base layer.
Coinbase set the tone in 2023 with the launch of Base, an optimistic rollup built on the Optimism (OP) Stack. Base demonstrated how an exchange could integrate a rollup into its existing business, using Ethereum for settlement while offering its users a cheaper, faster environment. The move also signaled confidence that Ethereum’s rollup-centric roadmap would define the industry’s scaling path.
Other corporations soon followed. Sony announced Soneium, a rollup project aimed at integrating blockchain into its entertainment ecosystem. Robinhood revealed plans to launch its own rollup to support trading and fintech applications, and even Deutsche Bank began exploring rollup infrastructure as part of its digital asset strategy. Together, these examples underscored how the rollup model has become the preferred entry point for institutions seeking to participate in blockchain infrastructure without bearing the burden of bootstrapping a new Layer 1.
Returning to Alt-L1s for Stablecoins and Tokenization (2025)
New cycles in crypto have always given rise to fresh Layer 1 contenders, and the latest wave has been no different. Sui, Aptos, Sei, and Hyperliquid each entered the scene with the hope of capturing developer and user attention. What stood out, however, was how few of these networks gained real traction. The clear exception has been Hyperliquid, which established itself as a purpose-built trading chain and quickly climbed into the top tier of exchanges by daily volume. Hyperliquid processes billions of dollars in trades per day, ranking alongside established centralized exchanges despite being a relatively new entrant. That level of adoption highlighted the power of focusing on a specific use case with strong product-market fit.
By contrast, the more generalized smart contract platforms struggled to differentiate. The lesson echoes earlier cycles: it is no longer enough to launch another EVM-style base layer and hope incentives will draw users. Generalized blockspace has become a commodity dominated by Ethereum and its scaling ecosystem, while specialized networks with clear niches have a far better chance of carving out sustainable markets.
This cycle, attention has turned toward stablecoins and tokenization of real-world assets. The backdrop includes renewed policy debates around CBDCs, as well as growing institutional interest in bringing traditional financial products on-chain. BlackRock helped catalyze this wave with the launch of its tokenized T-Bill fund, BUIDL, which quickly attracted attention as a credible example of real-world assets living on blockchain rails.
A number of companies followed with their own initiatives: Circle (USDC) introduced Arc, Stripe (ecommerce payments giant) announced Tempo, and Tether (USDT) backed the launch of Plasma. Each of these efforts aimed to connect stablecoins or tokenized assets with more efficient settlement and distribution mechanisms. A renewed interest in the Layer 1 model is visible. Established companies with proven products and users are becoming reluctant to pay ongoing security fees to Ethereum and would rather operate their own base layer, capturing the full economics of their ecosystem. By controlling the infrastructure end-to-end, they avoid value leakage to a public blockchain and maintain tighter control over how their networks evolve. This incentive helps explain why some teams continue to revisit the L1 approach, despite Ethereum’s entrenched dominance.
Reflection
Looking back over the last decade, one clear theme emerges: the industry continuously cycles through new network narratives, but the gravitational center always returns to where liquidity, security, and developer activity are strongest. Early attempts at purpose-specific chains, the Cosmos app-chain thesis, the wave of alt-L1s, and now the dominance of rollups all illustrate this dynamic. Ethereum and its scaling ecosystem have repeatedly absorbed momentum and consolidated activity, while niche networks have carved out specialized roles when they found genuine product-market fit.
At the same time, every cycle has introduced a flood of new entrants, only for one or two to remain relevant once the dust settles. Solana survived the 2021 alt-L1 wave, while Hyperliquid is emerging as the standout from the most recent crop of new networks. This expansion-and-contraction pattern is almost structural to crypto: the potential upside and hype (no pun intended) attract rapid experimentation and capital, which in turn creates short- lived booms that push technical and market boundaries forward.
What to Expect?
New cycles will always bring new contenders and fresh narratives, but I remain skeptical of generalized base layers trying to compete head-to-head with Ethereum. With rollups, Ethereum has effectively made blockspace abundant and flexible, while maintaining network effects in liquidity, tooling, and developer culture. Any general-purpose L1 trying to win unspecialized blockspace faces a nearly impossible uphill climb against that momentum. Rollups also allow developers to experiment with new virtual machines, execution environments, and business models, while still inheriting Ethereum’s security and liquidity. We’re already seeing Solana Virtual Machine (SVM) rollups and Movement (Aptos/Sui) rollups launch on Ethereum, alongside innovations like Arbitrum’s Stylus, which expands developer languages beyond Solidity.
Where I see promise is in specialization and integration. As the industry matures and larger players become directly involved, the only way to realistically compete with Ethereum’s organic expansion will be through distribution advantages that come from non-crypto native sources. Stripe, for instance, can lean on its massive ecommerce presence and recent acquisitions like Privy and Bridge to integrate blockchain services into existing customer networks. Robinhood can rely on its established retail trading base to bring new blockchain products to millions of users. It will be exciting to see how these companies integrate blockchain into their businesses.
Regulation under the current American administration seems to be unbothered by these corporate chains, but if there is one thing our industry has learned, it is how quickly policy direction can shift depending on the tone at the top. Credibly neutral, decentralized networks remain as relevant as ever, and the decision to build centralized blockchains could come back to haunt these projects if regulatory sentiment hardens.
As in every industry, there will likely be more than one enduring player. Think Coke and Pepsi, Microsoft and Apple. Ethereum seems to have cemented one of those positions for the long run, and Solana appears to be solidifying the other. The rest will need to prove their relevance by carving out specialized niches or risk being remembered as yet another passing narrative in crypto’s cycles. My hope is that new entrants preserve elements of the crypto ethos around openness and permissionless systems, rather than steering the industry toward a closed, dystopian future dominated solely by corporate control.