Why Altcoin L1s Are Becoming Ethereum L2s

The financial benefits of transitioning from independent Layer 1 blockchains to Ethereum Layer 2 solutions have become increasingly undeniable. Celo’s remarkable transformation serves as a prime example, having reduced its annual security costs by 99.8%—from $6.9 million to just $13,200. This staggering reduction was achieved by shutting down 110 validators and leveraging Ethereum’s established security infrastructure. Meanwhile, Ronin, the gaming-focused blockchain, has been paying out $35 million in staking rewards since 2023 to maintain its L1 operations, capital that could be redirected toward developer incentives and ecosystem growth.

According to James_gaps, Head of Ecosystem at Ethereum Foundation, the economic argument for becoming an L2 becomes compelling when chains can outsource security to Ethereum for ‘pennies on the dollar instead of millions’ while retaining user bases and maintaining sovereignty. This perspective challenges the traditional blockchain development model where each new chain must build its own security infrastructure from scratch. The cost savings demonstrated by Celo provide a clear blueprint for other EVM-compatible chains considering similar transitions.

Despite the ongoing discussion about L2 migration, Ronin continues to demonstrate impressive operational metrics that underscore its current viability as a gaming-focused Layer 1. The blockchain is processing 350,000 daily active addresses across 1,000 live games, with transaction activity surpassing even the peak of Axie Infinity’s 2.8 million-user era back in 2022. This level of engagement highlights the platform’s robust ecosystem and suggests that the transition discussion isn’t driven by current performance issues but rather by long-term strategic optimization.

The impending Fusaka upgrade promises to further enhance Ronin’s scalability by increasing blob capacity eightfold, addressing one of the key challenges facing gaming-focused blockchains. However, the platform’s strategic shift toward redirecting $35 million in staking rewards from security maintenance to developer funding represents a significant reallocation of resources. This move acknowledges that while the current L1 model functions effectively, the economic benefits of L2 integration could free up substantial capital for ecosystem development rather than security overhead.

Concurrent with these structural shifts in the Layer 1 landscape, Ethereum itself is demonstrating technical strength both in blockchain performance and market positioning. Analyst Luca has noted that ETH price has continued to consolidate around higher timeframe support ranges that previously acted as strong resistance throughout 2024. This flip from resistance to support now aligns with the Weekly Bull Market Support Band, a zone that has served as reliable support over recent months, suggesting underlying market strength.

The current technical setup presents a critical test for Ethereum’s near-term trajectory. According to Luca’s analysis, a decisive break above the resistance range marked in purple—which aligns with the golden pocket between the 0.2 and 0.618 Fibonacci Points of Interest—would confirm bullish continuation. However, should the price fail to hold the Weekly Bull Market Support Band near $3,790 and record a decisive daily close below it, the analyst recommends hedging spot holdings to mitigate short-term downside risk. Until such a breakdown occurs, the mid-term structure remains bullish, with current consolidation appearing to form a healthy base before the next potential move higher.

The experiences of Celo and Ronin point toward a broader trend where, as James_gaps articulated, ‘all EVM L1s are future L2s.’ This perspective redefines the evolutionary path for Ethereum-compatible blockchains, suggesting that integration rather than isolation represents the optimal long-term strategy. The ability to maintain sovereignty while leveraging Ethereum’s security and liquidity creates a compelling value proposition that addresses both economic and technical considerations.

This emerging paradigm shift could fundamentally alter how new blockchain projects approach development and deployment. Rather than building independent security infrastructures from the ground up, projects can focus resources on application development and user acquisition while relying on Ethereum’s battle-tested security model. The dramatic cost reductions demonstrated by Celo, combined with Ronin’s successful redirection of capital from security to development, provide concrete evidence supporting this strategic realignment. As the blockchain ecosystem continues to mature, the economic rationale for L2 integration appears increasingly difficult to ignore for any EVM-compatible chain seeking sustainable growth and operational efficiency.