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One of the biggest questions shaking up the blockchain industry now is whether successful projects should remain loyal to the Layer 1 (L1) blockchains or strike out on their own and launch their own native chains, a decision that could fundamentally alter the economics of networks like Solana.

Solana, with its high speed and low gas fees, has been on a meteoric rise over the last few years. Its total value locked (TVL) has soared above $11 billion, largely fueled by the success of protocols like Jito, Jupiter, Raydium and other protocols. But here’s the catch: all of this growth hinges on one thing—projects staying put.

What happens if the most profitable applications, the ones driving Solana’s memecoin frenzy and DeFi boom, decide they no longer need the network and migrate to their own chains? Could Solana’s economic model unravel, its once-thriving revenue streams drying up as protocols move to capture more value for themselves?

So, is Solana—and, by extension, other L1s—built for the long haul, or is the golden age of L1 dominance nearing its end?

The Sovereignty Shift: Are L1 Blockchains Losing Their Grip?

L1 blockchains have long been the backbone of crypto, but their continued existence has been partly thanks to the sheer activity driven by the protocols built on them. For instance, five protocols contribute 85% of Solana’s TVL.

Solana’s Total Value Locked Over the Years. Source: DefiLlama

More projects are opting to break free from L1 chains and establish their own dedicated blockchains, driven by the promise of lower costs, greater customization, and full governance autonomy. Instead of being confined to the rules and limitations of a general-purpose L1, they can tailor their infrastructure, control transaction fees, and dictate governance policies without external interference.

Cost efficiency is a major factor in this exodus. On an L1, network fees fluctuate wildly based on demand, making transactions unpredictable and often expensive. For high-frequency traders and DeFi platforms, these costs can add up quickly. Sovereign chains allow projects to set their own economic models, ensuring stable and predictable fees that benefit both developers and users.

Then there’s customization. While L1s like Ethereum and Solana offer robust ecosystems, they force protocols to adapt to predefined network structures rather than optimizing for their unique needs. A project launching its own blockchain gains the freedom to tweak consensus mechanisms, block times, and transaction processing speeds—an advantage that can be game-changing for sectors like gaming, DeFi, and high-speed trading.

But perhaps the most compelling reason for this migration is governance. Protocols built on an L1 remain at the mercy of that network’s core developers and governance decisions. A sudden change in transaction fees, validator incentives, or block production mechanisms can disrupt their entire operation. Moving to a sovereign chain eliminates this risk, allowing projects to make decisions that align solely with their vision and community interests.

Several high-profile projects have already embraced this transition:

dYdX, a leading decentralized derivatives exchange, initially launched on Ethereum but later migrated to a Cosmos-based sovereign chain. The move allowed dYdX to optimize its infrastructure for high-speed trading while gaining full control over governance and transaction costs.
Jupiter, Solana’s second-largest protocol by TVL at $2.814 billion, is currently debating whether to follow suit, with proponents arguing that a dedicated blockchain could enhance performance and mitigate risks tied to Solana’s network congestion or governance shifts.
Polygon, initially launched as an Ethereum Layer 2 (L2) scaling solution, has since expanded into a multi-chain network. With the introduction of Polygon Supernets and the Polygon CDK (Chain Development Kit), the project is encouraging developers to build application-specific chains that function independently while still being interoperable with Ethereum.

DeFi protocols owe much of their success to the ecosystems that nurtured them, yet the very nature of crypto encourages autonomy. The more these projects grow, the more they question whether they need to keep paying rent to L1s when they could own the land outright.

The Counterargument: L1s as the Foundation

The allure of breaking free from Layer 1 (L1) blockchains is undeniable—lower fees, full autonomy, and the ability to fine-tune infrastructure to fit a project’s exact needs.

But is sovereignty really the golden ticket it appears to be?

Stepping away from an established L1 is more than just a technical upgrade; it’s a high-stakes leap that comes with serious trade-offs. While some protocols dream of independence, history has shown that L1s offer a foundation that is incredibly difficult to replace.

One of the biggest reasons protocols thrive on L1s is liquidity. In DeFi, liquidity isn’t just a nice-to-have; it’s the lifeblood of the ecosystem. Ethereum, for instance, boasts over $60 billion in Total Value Locked (TVL)—a deep ocean of capital that only a few blockchains can rival.

When a protocol launches on a major L1, it instantly taps into a ready-made marketplace of traders, investors, and liquidity providers. But the moment it decides to migrate to an independent chain, things get complicated.

Liquidity doesn’t just follow innovation—it follows convenience. Convincing users and liquidity providers to move to a new, unproven network is no easy feat. dYdX had to offer significant incentives to lure users to its new Cosmos-based chain. Without strong incentives, a project risks fragmenting its liquidity, creating thin markets where slippage increases and trading becomes less efficient.

Then there’s security. L1s like Ethereum and Solana have spent years battle-testing their networks, building robust validator participation and secure consensus mechanisms. A protocol that moves to its own chain must either recruit and maintain its own validator set or rely on a shared security model like Cosmos’ Interchain Security. Neither option is simple.

A weak validator set can be disastrous—case in point: Meter (MTRG), a smaller Layer 1 network suffered a $4.4 million exploit in February 2022 due to vulnerabilities in its bridge security. Attackers exploited poor validator incentives, minted extra tokens, and drained the network’s liquidity. Many smaller chains have suffered similar fates, struggling to establish the economic and technical security needed to prevent attacks.

Beyond liquidity and security, L1s provide another crucial advantage: network effects. The beauty of an ecosystem like Ethereum is its composability—protocols don’t operate in isolation; they integrate, stack, and build on each other. A lending protocol can connect seamlessly with a trading platform, a yield aggregator, or a liquidity pool, creating an interconnected web of financial applications. That’s why projects like Uniswap, Aave, and Curve continue to thrive on Ethereum; they are leveraging the collective strength of the ecosystem.

On the other hand, independent chains must build these connections from scratch. Without an active developer community and established infrastructure, they risk becoming isolated islands in an ocean of blockchain networks.

Even if a protocol manages to replicate all these features, one final hurdle remains: user migration. Changing blockchains isn’t just about lower fees or technical improvements—it’s about shifting user habits. People tend to stick with what they know, and unless there’s a compelling reason to switch chains, they won’t. Speed, cost savings, and scalability are great selling points, but they may not be enough to overcome the inertia of a well-established L1 ecosystem.

At the end of the day, protocol sovereignty sounds like a bold step forward, but it’s a gamble with no guaranteed payoff. L1s offer more than just infrastructure; they provide security, liquidity, and a thriving ecosystem that’s incredibly difficult to replicate.

Lessons from the “Layer Wars”

The ongoing debate over protocol sovereignty versus ecosystem dependency is not new. It echoes past discussions about the roles of Layer 1 , Layer 2 , and even the relatively recent one about Layer 3 solutions in blockchain development.

Ultimately, the blockchain industry is not a zero-sum game. Whether L1 chains thrive or fade will depend not just on their ability to retain protocols, but on how effectively they adapt to new models of scalability, governance, and interoperability.

If history is any indication, the future of blockchain will not be defined by a single dominant approach but by a dynamic balance between innovation, sovereignty, and network collaboration. L1s, L2s, and even application-specific chains can coexist, each fulfilling different needs.

The Future: Interoperability as the Answer?

So, will independent chains truly redefine the blockchain landscape, or will they struggle against the gravitational pull of L1 ecosystems? The answer could shape the future of DeFi—and the entire blockchain industry.

Interoperability presents a compelling middle ground. Instead of losing high-value protocols entirely, L1s could pivot to becoming seamless bridges between independent chains, facilitating liquidity flow, governance coordination, and cross-chain composability. This transformation wouldn’t mark the end of L1 relevance—it could be their next great evolution.

Just as the internet thrived by linking disparate networks rather than keeping them siloed, blockchain’s future may lie in connectivity rather than competition. L1s that embrace this shift could secure their place not as walled gardens but as the highways enabling an interconnected, multi-chain world. The question isn’t whether L1s will survive—it’s whether they will adapt fast enough to remain at the centre of blockchain’s next frontier.

Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

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