The Reality Check on EVM Rollups: Distribution and Specialization Matter
General-purpose EVM rollups are a tough bet. The winners will be those that leverage existing distribution or provide unparalleled technical differentiation.
Ethereum has been facing a wave of FUD lately, with critics questioning its ability to scale effectively against the rising competition from alternative L1s. This brings up an important question: Are EVM rollups still a good idea?
The answer isn't black and white. While Ethereum's rollup-centric roadmap has clear advantages, the broader landscape is shifting. A deeper analysis shows that while EVM rollups maintain critical strengths, their path to success now hinges on distribution and specialization rather than simply scaling Ethereum.
EVM Rollups Still Hold Key Strengths
Despite the concerns, EVM rollups continue to dominate in several fundamental areas:
Developer Mindshare: Ethereum remains the most popular ecosystem for smart contract development, with nearly 9,000 active developers working across its stack.
Infrastructure Investment: 2024 has seen $5.5 billion in VC funding directed at Ethereum scaling solutions, reinforcing strong institutional belief in its long-term viability.
Diverse Applications: The ecosystem now supports a broad range of use cases beyond memes, including DeFi, gaming, and real-world asset tokenization.
This developer dominance and the maturity of Ethereum’s tooling make EVM compatibility likely to remain the standard for smart contract development, even as rollup technology evolves.
(Source: 2024 Developer Report)
The Liquidity Fragmentation Problem
However, the actual value proposition for general-purpose rollups has weakened significantly due to a core structural issue: liquidity fragmentation.
While total value locked (TVL) in Layer 2s has doubled in the past year, that capital is spread thinly across an increasing number of rollups. Each new rollup effectively operates as its own chain, requiring bridges that dilute Ethereum’s network effects. As a result, Ethereum’s growth has stalled relative to competitors:
Solana now sees 5 million daily active users.
The entire Ethereum ecosystem, including L2s, reaches only 3 million daily active users.
(Source: Dune L2s)
This fragmentation threatens Ethereum’s position as the dominant smart contract ecosystem, making rollup sustainability more dependent on differentiated strategies.
Winning Strategies: Built-in Distribution & Specialization
Despite these challenges, specific rollup projects continue to thrive by leveraging two key strategies:
1. Built-in Distribution
Projects with strong distribution channels gain a crucial advantage in user acquisition. Examples include:
Abstract: Uses Pudgy Penguins’ brand power for organic user onboarding while adding NFT-specific features like royalty enforcement.
Base: Directly benefits from Coinbase’s massive retail user base.
Ink: Taps into Kraken’s exchange-driven liquidity and user flow.
Having built-in distribution significantly reduces customer acquisition costs and bootstraps network effects, which are crucial for rollup adoption.
2. Technical Specialization
Generic EVM compatibility is no longer enough—successful rollups are being designed for specific use cases:
Privacy-Focused Rollups: Leveraging zk or FHE for enhanced onchain confidentiality, zero-knowledge proofs, and scalability improvements.
Unichain: Optimized for high-frequency DeFi trading and complex financial applications. This rollup also leverages Uniswap’s existing distribution.
This specialization helps overcome bridging friction by offering unique value propositions that generic rollups lack.
The Road Ahead for EVM Rollups
EVM rollups remain viable investments, but their success now depends on a more focused thesis. Winning projects will not succeed purely on scaling advantages—they will need either strong distribution channels or compelling specialized functionality to differentiate themselves.
General-purpose rollups face an increasingly difficult adoption path, especially as competitors like Solana and Avalanche, which makes it easy to launch custom L1 chains.
The future of Ethereum’s rollup ecosystem isn’t doomed—but it is changing—and Ethereum leadership is acknowledging these challenges. In a recent blog post, Vitalik Buterin outlined Ethereum’s evolving vision, emphasizing new approaches to scaling, security, and decentralization.
The projects that survive will be the ones that adapt to this new reality by prioritizing distribution, specialization, and deeper integration within Ethereum’s evolving roadmap. For investors and developers, the playbook is clear: General-purpose EVM rollups are a tough bet. The winners will be those that leverage existing distribution or provide unparalleled technical differentiation.