After Losing Tens of Millions of Dollars, Abstract Shuts Down, Is L2 Facing a Wave of Exits?

Original | Odaily Planet Daily ( @OdailyChina )

Author | Wenser ( @wenser2010 )

On October 7, Igloo, the parent company of the Fat Penguin, officially announced that its L2 project Abstract will shut down on December 15 this year. Once highly anticipated by the Fat Penguin team and numerous NFT players as a "consumer-grade L2 public chain," Abstract has reached its end after nearly two years of operation, which is somewhat regrettable.

After the announcement, market opinions became sharply divided. One side believes that the Fat Penguin team did not choose to "issue tokens for a final harvest" like some previous L2 teams, and thus deserves credit for a responsible conclusion. However, the other side strongly disagrees, arguing that the tens of millions of dollars in operational losses mentioned by Fat Penguin CEO Luca Netz in the announcement, along with the previous introduction of a badge system and other activities that have a "PUA style" of operation, were largely borne by users; prior to this, countless people had hoped for Abstract to issue tokens to recover losses, and now that hope has been completely dashed.

Behind Abstract's shutdown, the hype surrounding the Robinhood Chain has gradually cooled, and Blast has also announced its closure. Following a wave of shutdowns among some centralized exchanges (CEX), more struggling L2 projects may also face a wave of exits.

"Consumer-grade Blockchain Networks" Fail to Attract Buyers, No Progress in DeFi, Meme, or Institutional Funding

Looking back at Abstract's development history, its positioning as a "consumer-grade crypto blockchain network" may not have been a good business from the start.

According to Abstract's official statement, the L2 network previously attracted over 400,000 users and deployed more than 144 applications; Fat Penguin CEO Luca Netz also stated that Abstract had achieved over 325 million on-chain transactions and attracted several global brands such as Disney and Red Bull with its Portal and AGW. From a data perspective, Abstract's performance was decent, but what truly led it into an "operational dead end" may have been a misjudgment similar to the "crypto social + on-chain consumption" strategy adopted by Base in the past two years—failing to follow the grassroots path like Solana and Robinhood Chain to develop its own meme ecosystem, nor deeply cultivating DeFi around institutional and large-scale demand to attract liquidity and complete a self-sustaining business cycle.

Main Reasons for Shutdown: Insufficient DeFi Ecosystem, Low Institutional Participation, High Operational Costs, and Unclear PMF

According to statements from Abstract's officials and Fat Penguin CEO Luca Netz, we can glimpse the "main causes of death" for this L2 network:

First, the DeFi ecosystem is insufficient; although Abstract's official DEX trading volume reached $6 billion, considering its nearly two years of operation, this is hardly an impressive figure. According to Defilama data, Abstract's DeFi TVL is currently reported at around $5.6 million, ranking 90th among major L1 and L2 networks, with a 24-hour decline of about 40%. Despite being significantly impacted by the shutdown news, its DEX trading volume had long hovered between $300,000 and $1 million; the stablecoin market cap has seen a nearly 60% decline over the past week, currently standing at only $4.7 million.

For an L2 network, if the DeFi ecosystem cannot develop, no matter how good other data looks, it almost means limited ecosystem activity and a limited number of real users, making it difficult to generate profits through transaction fees and income.

Second, low institutional participation and limited liquidity. This is one of the important reasons for Abstract's shutdown. Taking RWA asset data as an example, Abstract was even "nowhere to be found" on the RWA asset TVL network, and has almost been absent from institutional investment channels, RWA asset waves, stock tokenization trading, and other major trends in the crypto and traditional financial industries for nearly two years. This represents a serious strategic misjudgment.

Third, operational costs are too high. Aside from the fixed operational expenses of L2 (Odaily Planet Daily note: including sequencer operations, ZK-related data availability and proof costs, bridging and frontend maintenance, infrastructure construction, team operational costs, ecosystem incentives/developer support, etc.), Abstract's partnerships with traditional brands and offline conference activities also require significant expenditure. This indicates that the glamorous L2 path is not as cost-effective as many imagine; early technical development, mid-term growth operations, and long-term ecosystem construction all require continuous financial investment. The shutdown of Abstract also carries a certain meaning of timely loss mitigation.

Fourth, declining demand for related products and unclear PMF. Unlike the previous favorable situation where Fat Penguin leveraged the NFT community, physical toy IP, PENGU token issuance, and the favorable timing of the crypto bull market, the current crypto market's requirements for L2 networks and even L1 public chains are no longer limited to the prosperity of small projects, but rather need ecosystem-level transfer stations like Hyperliquid and Robinhood Chain that realize pre-pricing of traditional financial assets and introduce liquidity and institutional funds from traditional financial markets, thereby achieving "fee harvesting." This is precisely the market that Abstract and many L2 networks are unable to penetrate.

In addition to the above reasons, the homogenization competition among L2 networks and the rapid bull-bear conversion frequency in the crypto market are also factors contributing to Abstract's unfortunate shutdown. The debate surrounding Abstract's closure has also emerged in the market.

Praise and Criticism: Unintentional Harvesting or "PUA to the End"?

After Abstract officially announced its shutdown, the crypto community engaged in intense discussions around this move, with the following being some representative viewpoints:

Yuga Labs VP 0xQuit stated, "Abstract did a decent thing; they could have imitated Blast and directly conducted a TGE project to raise huge funds. Instead, they acknowledged their failure and chose to gradually terminate the project without conducting a TGE. Yes, everyone indeed lost money, but the situation could have been worse. I respect that."

Crypto community member Loki agreed, stating, "Abstract could have conducted a TGE at any point before shutting down, just like countless userless L2 network projects, but they didn’t. Fat Penguin co-founder and CCO @chefgoyardi and CEO @LucaNetz bought the Fat Penguin project out of their own pockets and have never cashed out from the community, and this time they once again demonstrated their integrity through Abstract. The best news is: refocusing on the Fat Penguin project." This expresses continued optimism towards the Fat Penguin team.

However, some expressed extreme dissatisfaction, especially those who invested real money, time, and effort into building the Abstract ecosystem and interacting with the network.

Deep Abstract user Micka posted on X platform, "I participated in @AbstractChain during the testnet period in July 2024. I built the French community, published thousands of tweets about Abstract, and accumulated over 1500 hours of live streaming content related to Abstract's mainnet in 2025. I spent thousands of dollars over a year and ten months, accumulating 4 million Abstract interaction experience points." Now, Abstract has even fallen at the first stage of its roadmap's third phase, leaving him "speechless" and stating he "will no longer trust Luca."

Another community member Chris criticized fiercely, stating, "I sold all my PENGU tokens. The Space live stream they used to announce the shutdown of Abstract was simply terrible, as if it was hastily put together without any prior discussion. I can somewhat understand their actions, as they didn’t want to shut down the project after launching the TGE for the ABS token. But what I truly dislike is the overall narrative framework of this matter; their response was just a cold statement of 'the badge is useless' and 'you once supported our startup project.'** The most fatal blow was when someone asked Luca if any Abstract users would receive rewards from the Fat Penguin ecosystem, he immediately said no without thinking and basically indicated that the content of the ecosystem that users can currently access is all there is.** This matter has dragged on for far too long and was completely unnecessary. As a streamer who once invested a lot of time and effort into participating in activities to push the token to zero, I am very disappointed with the development direction of this matter."

Moreover, someone dug up an interview video of Luca from last year's Paris NFT conference, where he expressed full confidence in Abstract's future development, stating, "Abstract will become the largest L2 network in the future," and urged everyone to stay tuned. Now, many are left waiting for the official notice of Abstract's shutdown.

The harsh reality of the crypto market seems to be playing out repeatedly. Many times, you cannot foresee that your investments in numerous projects will definitely make you a winner at the table, just as you cannot ensure that simply walking will lead you to the South Pole.

Conclusion: After the Wave of CEX Shutdowns, the L2 Shutdown Wave Has Arrived

Having been in the circle for several years, I have seen too many failure stories, including in sectors like NFT, GameFi, and SocialFi, as well as the recent wave of CEX shutdowns. Earlier, I even interviewed Luca Netz around January 2025, at which time he was similar to his state at the NFT Paris conference, filled with ambitions for the future development of Abstract, Fat Penguin, and the Igloo group, and had high hopes for PENGU.

However, the development of things often does not change according to personal will; the success or failure of a crypto project depends on many factors, including the usual sectors, strategies, and directions, as well as funding, business models, ecosystem construction, and the support of participants such as institutions, market makers, and retail investors, sometimes requiring a bit of time and luck.

Just like I wrote in several articles last year discussing "L2 is a detour for Ethereum," the shutdown of Abstract and Blast is by no means the end of the exit for this batch of "on-chain ghost towns" in L2. In the current context where many models and projects have been falsified, projects that cannot establish a relationship with traditional financial markets may need to rethink their future paths and development directions.

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