Over 100 crypto projects have shut down, filed for bankruptcy or gone permanently dark in 2026, according to data from RootData, and the pace is accelerating. Four major firms announced closures or filings within a single week in late July alone: BitMEX, BitMart, Movement Labs and Storj Labs.

The exits span every layer of the industry including exchanges, wallets, DeFi lending protocols, NFT marketplaces and layer-1 blockchains. Even an entire Polkadot parachain — Moonbeam, shut down permanently on July 31, stranding users who hadn’t bridged their assets off the chain in time.

For a while now, Ethereum’s layer-2 ecosystem has been shrinking from its explosive early growth. Layer-2 networks surged in 2023 after advances in the technology dramatically reduced transaction costs and made it easy for companies to launch their own chains. These networks process transactions off Ethereum, bundle them together, and post them back to the main blockchain, allowing them to offer faster and cheaper transactions while still relying on Ethereum for security.

But as launching a chain became easier, the number of general-purpose layer-2s ballooned, creating a crowded market with little differentiation.