Written by: Cathy
On February 3, 2026, Vitalik Buterin published a lengthy article on X and in the Ethereum community, with the core point being just one sentence: The roadmap established five years ago, which viewed L2 as the main scaling solution for Ethereum, is now invalid.
When said by others, this sounds pessimistic; when said by Vitalik, it is a verdict.
At the same time, the market has given its own verdict — mainstream L2 tokens have plummeted over 90% from their historical highs, Bitcoin's market share is close to 60%, and altcoins are collectively bleeding.
A brutal question confronts everyone: Apart from a few cryptocurrencies like BTC and ETH that have launched ETFs, do the tens of thousands of altcoins have a way out?
01 Vitalik's "Backtrack" on L2
For a long time, the valuation of L2 has been built on one core promise — that they can "inherit the security of Ethereum."
But by 2026, the reality is that the vast majority of leading L2s are still stuck in "Stage 1" or even "Stage 0," relying on centralized sequencers and multi-signature bridges.
Vitalik's criticism is straightforward: An EVM chain with a processing capacity of 10,000 TPS, if its connection to L1 relies on a multi-signature bridge, has not truly scaled Ethereum; it has merely established an independent platform based on trust.
In other words, most L2s are not extensions of Ethereum but rather independent kingdoms operating under the Ethereum banner.
Another key factor leading to the strategic downgrade of L2 is the evolution of Ethereum itself. The Fusaka upgrade activated in December 2025 introduced PeerDAS (Peer Data Availability Sampling), allowing validators to confirm availability by randomly sampling part of the Blob data. Through progressive BPO upgrades, the mainnet Blob target capacity has increased from 6 to 14 (with a maximum of 21), and plans are in place to further increase it to 48 by June 2026, significantly enhancing transaction processing capacity compared to the early days of the merge.
The L1 gas limit has been raised to 60 million units, with future plans to further increase it to 100 million or even 200 million units. The Ethereum mainnet can now handle a large number of transactions that previously had to be outsourced to L2, and the costs remain reasonable.
L2 has been downgraded from "Ethereum's scaling crutch" to "specialized plugins." Vitalik's new framework is a "trust spectrum" — L2s are no longer "official shards" of Ethereum but must prove their existence by providing unique value that L1 cannot offer, such as privacy protection, ultra-low latency, and specific application optimizations, rather than just relying on cheap gas fees.
The era where "cheap and fast" could support a valuation of tens of billions has ended.
02 The Institutional Decline of Altcoins
If Vitalik's statement is the needle that punctures the L2 bubble, then ETFs are the pump that drains liquidity from altcoins.
After the approval of spot Bitcoin and Ethereum ETFs in the U.S. in 2024, institutional funds flooded into an extremely narrow channel. By the end of 2025, the asset management scale of Bitcoin ETFs was about $120 billion (with IBIT alone reaching $68 billion), and Ethereum ETFs climbed to about $18 billion.
Hedge funds, pensions, and family offices gained secure exposure without needing to manage private keys. However, this influx of liquidity is exclusive — due to compliance and auditing requirements, institutional funds can hardly touch altcoins outside the top ten by market capitalization.
This is the "pump effect": After allocating core assets, institutions, even when seeking higher risk returns, tend to choose public chains with clear technical barriers and compliance paths (like Solana and Chainlink), rather than spreading across tens of thousands of application layer tokens.
On the other end of the secondary market, the "star altcoins" launched in 2024 are experiencing a collective valuation regression. Most projects were pushed to valuations of billions or even tens of billions in fully diluted valuation (FDV) during seed and private rounds by VCs, but only about 12% of the circulation was released on TGE. A massive token unlock peak is approaching in the second quarter of 2026, with selling pressure looming.
Even more fatal is the lack of development activity. Data shows that the proportion of so-called "blue-chip" projects with fewer than 10 monthly commits on GitHub surged in 2025 — without real developers, no business model, only a token slowly heading to zero.
The plight of L2 tokens is particularly stark. Although L2 networks processed about 95% of the ecosystem's transactions in 2025, the prices of native tokens did not reflect this activity at all.
The reason is simple: After the Dencun and Fusaka upgrades, the data availability costs paid by L2 to Ethereum have dropped by over 90%. User fees have decreased, but L2 can no longer profit from gas price differentials. In 2025, the total revenue of the entire L2 industry plummeted by 53% year-on-year, down to about $129 million, with most of the revenue going to centralized sequencer operators, leaving token holders with nothing.
Tokens like ARB and OP still have their core use limited to governance voting, with no staking rewards and no burn mechanisms, and the market has given them a precise label — "worthless governance assets."
As long as sequencers are still operated centrally by the project parties, L2 tokens cannot play the role of underlying security collateral like ETH. Tokens cannot capture the consensus premium of network operation, and naturally, they become worthless.
03 The Survivor Game
The narrative around altcoins has overall collapsed, but not all sectors are dying. According to JPMorgan analysis, the crypto market saw a record inflow of about $130 billion in 2025, and capital inflows in 2026 are expected to be more dominated by institutional investors rather than the previous retail and corporate treasury activities.
The AI agent economy is forming a technological closed loop. The core narrative of 2026 is no longer the marketing slogan of "AI + Blockchain," but the real implementation of AI agents in autonomous trading and resource procurement.
The x402 protocol (released by Coinbase) allows AI agents to directly use stablecoins to pay for API services, computing power, and data costs via HTTP 402 status codes; ERC-8004 provides on-chain identity and reputation standards for AI agents, and together they form an autonomous trading infrastructure that requires no human intervention.
Decentralized computing projects like Render (RNDR) and Akash (AKT) added AI inference capabilities in 2025, with tokens becoming "hard currency" for AI model training and execution — this demand, supported by physical infrastructure, provides real price support.
RWA tokenization has extended from government bonds to private credit and non-standard assets. BlackRock's tokenization fund BUIDL peaked at nearly $2.9 billion in 2025, and Chainlink's CCIP cross-chain interoperability protocol has covered over 11,000 banks globally through integration with SWIFT, becoming the de facto standard connecting traditional finance with blockchain settlement layers, with its staking mechanism providing about 7% returns to node operators, outperforming most pure application tokens in this cycle.
The differentiated competition among high-performance public chains has given the market another vision. Solana's Firedancer client (launched on the mainnet in December 2025) demonstrated a potential for processing millions of transactions per second in tests, with over 20% of validators migrating, establishing a moat in micropayments, high-frequency trading, and consumer applications. Sui attracted a large number of Asian game developers by utilizing parallel transaction processing and object-oriented architecture, with daily bridging inflows at one point exceeding Ethereum.
The common feature of these projects is that token value is driven by "machine demand" or "real cash flow," rather than retail speculation.
04 Conclusion
Vitalik's "negation" of the L2 strategy does not essentially announce the end of L2, but rather negates the rough model of the past that relied solely on scaling narratives to support token value.
The crypto market in 2026 is undergoing a monetization of cognition. As JPMorgan predicted, it is no longer a question of "whether a bull market will start," but rather "whether one can survive in the restructuring of institutionalization and productivity."
BTC, ETH, SOL, and XRP are consolidating their monopoly positions through ETFs and compliance frameworks. For the remaining tens of thousands of altcoins, if they cannot establish a solid developer ecosystem and real cash flow in 2026, they will be completely marginalized by the tide of institutionalization.
Only those projects that adapt to the needs of AI agents, compliant RWA, and ultra-high-performance computing from the ground up are likely to find their own survival space under the glow of Bitcoin.
The era of narratives has ended, and the era of productivity has begun.
For everyone still in this market, the real question is just one: Does the coin in your hand have anyone using it?
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