TLDR:
- Zilliqa is replacing its standalone Layer 1 with an Ethereum-secured institutional Layer 2 network.
- The new Zilliqa network will integrate vLEIs to support institutional identity verification and compliance.
- Liechtenstein’s LTIN will operate the sequencer and become a qualified vLEI issuer for Zilliqa.
- Existing ZIL holders need no immediate action as Zilliqa prepares technical and migration details.
Zilliqa is transitioning to an Ethereum Layer 2 network after nine years of operating as an independent blockchain.
The project announced plans to become the Zilliqa Institutional Layer (ZIL), targeting regulated institutions through Ethereum-secured settlement and built-in compliance features.
The decision follows limited adoption of its standalone Layer 1 and an October 2026 security breach. Meanwhile, existing ZIL holders will not need to take action during the initial transition.
Zilliqa Abandons Standalone Layer 1 Strategy
Zilliqa launched in 2017 after being developed by researchers in Singapore. The project attracted early funding of $22 million and backing from investment firms, including Polychain Capital.
However, the network struggled to achieve the adoption required to sustain its independent blockchain infrastructure.
In its announcement, Zilliqa acknowledged that its nine-year Layer 1 strategy had not delivered the expected results. The team cited limited network usage and declining funding and liquidity for standalone Layer 1 projects. It also pointed to the growing security demands associated with operating an independent blockchain.
The October 2026 exploit involving Zilliqa’s X-Bridge added pressure to its existing infrastructure. The incident reportedly resulted in approximately $800,000 in losses involving the bridge and certain tokens. However, native ZIL and the network’s Ethereum Virtual Machine (EVM) remained unaffected by the incident.
Following these developments, Zilliqa announced its transition into an Ethereum Layer 2 ecosystem. The project intends to retain its existing partnerships, community and ZIL token while changing its underlying network strategy.
According to the announcement, the transition represents a new direction rather than an abandonment of the project.
Zilliqa Institutional Layer Targets Regulated Institutions
The proposed Zilliqa Institutional Layer will use Ethereum’s security for transaction settlement. It will also integrate verifiable Legal Entity Identifiers (vLEIs) to support institutional identity verification and compliance requirements. These features will form the foundation of its proposed regulated financial environment.
Zilliqa plans to begin with a permissioned market where verified institutions can transact with one another. Access will initially remain restricted to approved participants. However, the project intends to expand participation to individuals and autonomous agents at a later stage.
The Liechtenstein Trust Integrity Network (LTIN) will serve as an initial infrastructure partner. The state-backed trust network will operate the Layer 2 sequencer and become a qualified vLEI issuer.
This arrangement places institutional verification and transaction sequencing within the network’s initial operating structure.
Zilliqa also addressed concerns surrounding the transition’s effect on existing token holders. The team confirmed that ZIL holders do not need to take any action immediately. Furthermore, technical details will be published before any changes requiring holder participation take place.
The project directed users to its official website for migration announcements, warning against relying on unofficial claims.
Meanwhile, community reactions have included surprise and questions about ZIL’s future role within the new network, particularly amid an exchange shutdown.