Many fintech companies, such as Tether, Stripe, and most recently Circle, have officially launched their own Layer-1 (L1) blockchains.
Amidst this wave, the question arises: Why are these companies choosing to develop L1 instead of adopting Layer-2 (L2) solutions? Have L2 blockchains become obsolete?
L1 Adoption Trends
Recently, Circle — the issuer of the USDC stablecoin — unexpectedly announced Arc, an open-source L1 blockchain. Previously, both Tether and Stripe also launched their own L1s. This development has raised questions among analysts about the infrastructure development strategies of traditional financial organizations as they enter the cryptocurrency space.
“This is not an L1, and calling it that is inaccurate. This is a consortium chain, with pre-approved private validators, who even have the authority to reverse transactions through ‘dispute protocols’. They cannot turn it into a real L1 when using USDC as the native token, as there is never an economic incentive to become a loyal validator, and that’s why they have to establish a private consortium,” analyst Adam Cochran commented on Circle’s Arc.
Although L2 networks offer many advantages and inherit the security of Ethereum L1, some companies still choose to build their own L1. Perhaps they desire maximum control over their infrastructure while optimizing integration with their existing ecosystems?
Analyst Materkel believes that it is “pointless” for a stablecoin issuer to develop its own blockchain, arguing that the best interoperability for stablecoins today can only be achieved on an Ethereum L2.
“They want the best interaction with the current stablecoin deployment, and that is only feasible on an Ethereum L2,” materkel commented.
Some opinions suggest that the market does not need “L1 for stablecoins.” To counter this viewpoint, another user argued that companies should have the freedom to use their funds as they wish.
“If they can distribute on their own L1s, that would be great. That would attract more participants to the chain, and everyone (including us) will learn more about what works and what doesn’t,” Haseeb Qureshi, managing partner at Dragonfly, commented.
Some others argue that these companies need their chains to gain control, increase speed, reduce costs, and minimize downtime.
“The future is not just Ethereum, but also many EVM-compatible chains. The payment layer simply shifts to Bitcoin,” another user on X shared.
Is L2 at an impasse?
In reality, the unique security characteristics of the rollup model become less valuable when the underlying assets are stablecoins or real-world assets (RWAs), which have inherent centralization. In other words, when the underlying assets are subject to centralized control, the decentralization advantages of L2 lose their significance, gradually undermining the “L2 thesis.”
In the current context, some analysts believe that Ethereum’s L2s are facing a strategic deadlock. Some even argue that L2 has “died” from a technical standpoint.
“L2 is dead for the engineering industry. Everything happening is just aimed at siphoning liquidity by traditional investors and the pump machine. This is a Trojan horse for regulatory capture,” Marty Party stated.
Looking deeper, the moves by Circle and other organizations indicate a clear trend: instead of relying on Ethereum and L2, major companies are seeking to own their infrastructure to gain more control over technology, business strategy, and regulatory compliance.
This could mark a shift from prioritizing “maximum decentralization” to “efficiency and control.” The future of Ethereum’s L2 now depends on their ability to demonstrate their unique competitive advantages.
