Syndicate Labs, an Ethereum rollup infrastructure startup, will close after five years, citing a shrinking rollup market, Cointelegraph reported on May 21.

According to the report, Syndicate Labs said on social media platform X (Twitter): "The rollup market has fundamentally changed. For each new rollup that comes online, more rollups are quietly shutting down."

Syndicate Labs has developed custom Ethereum appchains and smart sequencers. It raised $20 million in a Series A led by Andreessen Horowitz in 2021.

In Ethereum's scaling ecosystem, the top three players - Arbitrum One, Base and OP Mainnet - hold 75 percent of market share. As activity and capital concentrate at the top, smaller companies are increasingly being pushed out.

According to L2Beat, total value locked (TVL) in the Layer 2 rollup ecosystem has fallen about 36 percent after peaking above $50 billion in October last year. Smaller networks were hit harder as capital shifted to the leading players. 21Shares said in December last year that Layer 2 activity fell 61 percent since June, turning many smaller networks into "zombie chains" with almost no usage.

Before Syndicate Labs, Solana DeFi aggregator Step Finance, DeFi derivatives protocol Polynomial, Balancer Labs and Base-based lending protocol Seamless Protocol have recently shut down.