New rollups are being constructed at a pace that exceeds any use of the rollups. Rollups and rollup-as-a-service platforms that are application specific have saturated the market. Majority of the projects do not generate sufficient users or transactions. They become ghost chains which operate without any economic purpose. This foregone conclusion demonstrates that the amount of rollup infrastructure that is being supplied greatly surpasses actual demand, something that industry tends to neglect in the process of raising funds to build new rollups.

Rollup is expensive to operate. Infrastructure companies require between $50000 and above monthly. Most projects never achieve the level of transaction that is required to finance such fees. Venture capital will usually absorb the initial losses in the hope of growing large, yet the vast majority never become profitable. The rollup graveyard consists of technically launched projects that burned capital without becoming sustainable. Statistics indicate that over 90 percent of rollups which are initiated have less than 100 daily active users after two years, thus cannot survive economically.

Starting a rollup is hard. When platforms are already liquid and have apps, their users are attracted in large numbers. A new rollup is created with no liquidity, no users, and an empty ecosystem. The initial few applications to jumpstart usage are difficult to draw. There is no capital and no users available, so rollup deployers are subject to a chicken-and-egg problem: to increase, they require users and liquidity; and to increase, they require users and liquidity.

Rollup proliferation is driven by venture capital even in cases where it is not in line with market demands. The reason why VCs support many competing rollups is that they would desire to make numerous bets, one of which would turn into a huge success. This excess supply will result in five to ten helpful rollups that would serve the market but twenty to thirty being funded which results in fragmentation and confusion. Numerous teams create redundant infrastructure, and each one of them tries to win a small number of users. The incentives provided by investors to platforms that raise funds and achieve technical milestones, irrespective of real user demand, reward it.

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