Security and Cost Pressures Push Alt-L1 Projects Toward Ethereum

Why Zilliqa is leaving the standalone L1 model

Zilliqa’s decision reflects a broader trend: running an independent chain requires more than technical execution. A Layer 1 typically needs to handle multiple core functions—execution, consensus, data availability and settlement—while also funding token incentives used to secure the network through staking.

According to Bitwise senior research analyst Max Shannon, the question ultimately comes down to profitability. In his view, many L2 models only need to maintain execution and do not necessarily require a token in the same way an L1 must, making the operating model potentially more attractive both financially and operationally.

Shannon also highlighted a widening gap between larger networks and the rest. In CoinShares-style fee tracking summarized in the article, the top ten projects generated substantial fee revenue over the past 365 days—enough to support higher margins—while networks outside the largest cohort collectively earned far less annually. The takeaway for investors and builders is that strong community enthusiasm and ambitious roadmaps do not automatically translate into sustainable protocol economics.

At the same time, moving to an Ethereum L2 doesn’t guarantee profitability by default. Shannon pointed to networks where expenses outweigh fee revenue, and noted that at least one project (Blast) has already shut down. For users, this matters because it suggests that “Ethereum integration” can reduce certain costs, but it does not eliminate the need for real demand, reliable execution, and a business model that can cover ongoing development and operational expenses.

Ethereum settlement as the new default—plus the “liquidity” argument

While cost savings are a major driver, the Ethereum pull goes beyond lighter infrastructure burdens. The argument for Ethereum settlement often centers on liquidity and access to an already-established ecosystem rather than building network effects from scratch.

Gnosis illustrates a more ambitious version of this idea. Although the project has long been Ethereum-adjacent, it is working on a transition that targets spring 2027 to complete a move into an Ethereum-based “Ethereum Economic Zone” (EEZ). The plan would replace Gnosis Chain’s own validator-based consensus with Ethereum settlement—effectively shifting where the security anchor sits.

Gnosis’s EEZ initiative, according to the article, aims to allow separate Ethereum-based networks to interact synchronously. The goal is to let smart contracts on one network call another and use the response within the same transaction, without relying on the usual bridge-and-wait process. In practical terms, this is an effort to reduce friction across chains and make composability feel more native.

Ethereum supporters are watching this closely. The article cites ETH bull materkel describing the EEZ concept as a potential “black hole for liquidity,” implying that if interoperability improves, more value and activity could concentrate around Ethereum’s wider onchain liquidity. Whether that happens will depend on execution—especially the ability to coordinate different rollup or chain designs without creating new bottlenecks or complexity.

Shared security without losing sovereignty—where interoperability still breaks

There is also a growing view that Ethereum settlement and chain sovereignty need not be opposites. In the article, Matter Labs co-founder and chief executive Alex Gluchowski—whose company builds Ethereum L2 ZKsync—said he expects more teams to keep their own chains while using Ethereum for settlement.

Gluchowski’s framing is straightforward: running an independent L1 usually means maintaining not only security but also building something users actually want. By contrast, sharing Ethereum’s security can free resources to focus on application-level value. He added that he sees few user needs that require a truly independent L1 rather than an Ethereum-based chain.

But the most significant obstacle is interoperability. The article notes that today’s L2 ecosystems often feel isolated from each other and from Ethereum itself, with jumping between networks possible but far from seamless. Fragmentation becomes especially problematic when privacy is involved, because connecting private execution environments can be difficult.

For applications handling sensitive information, Gluchowski argued that retaining control over transaction privacy and confidentiality may still matter. He suggested that interoperability between private environments will become increasingly important as more apps try to combine confidential activity with access to public blockchain liquidity.

Not everyone is consolidating on Ethereum—and that matters

Despite the momentum behind Ethereum-centric rollups and settlement, the article cautions against assuming a clean, inevitable consolidation of every chain into Ethereum’s orbit. Shannon argued that the market is not yet following a straightforward “L1 loses, L2 wins” path.

He noted that some large institutions are indeed launching L2 networks, citing examples including Coinbase and Robinhood. At the same time, other institutions are continuing to build independent L1s, with the article pointing to Circle’s Arc, Stripe’s Tempo, and Hyperliquid’s purpose-specific perpetual futures blockchain.

The practical implication for readers is that Ethereum’s gravitational pull is real—but competition for builders and institutional support may persist in parallel. The real battleground may be less about which architecture is “pure” and more about which designs can sustain demand, align incentives, and maintain profitability over time.

Going forward, the key question for the industry is whether improved interoperability—especially synchronous interactions proposed by initiatives like Gnosis’s RollupX/EEZ—can translate into durable economic advantages for chains, not just better technical narratives. Investors and users should watch for evidence that these migrations reduce risk and increase usage, while keeping fragmentation and privacy trade-offs under control as more projects consider similar shifts.

This article was originally published as Security and Cost Pressures Push Alt-L1 Projects Toward Ethereum on Crypto Breaking News – your trusted source for crypto news, Bitcoin news, and blockchain updates.