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Zilliqa is giving up on being its own blockchain. The project plans to become an Ethereum Layer 2 built specifically for regulated institutions.
The new network, called the Zilliqa Institutional Layer, will only process transactions from verified participants.
What Zilliqa is actually changing
Zilliqa announced the shift on November 4–5, 2026. The core change is structural: instead of settling transactions on its own independent Layer 1 chain, Zilliqa will settle on Ethereum.
The defining feature is access control. Only verified participants will be able to transact on the Zilliqa Institutional Layer, which places it firmly in permissioned territory.
Identity checks will run through legal identifier verification, handled in collaboration with the Liechtenstein Trust Integrity Network, or LTIN. The arrangement covers compliance and identity management, including the issuance of vLEI credentials.
For existing holders, the headline message is calm. The ZIL token is not affected by the transition, and holders do not need to take any immediate action.
Technical details of the migration will be shared at a later date.
Why a Layer 1 would give up its independence
Zilliqa was fairly direct about its reasons. The project pointed to problems that have plagued standalone Layer 1 blockchains, including unsustainable economic models, insufficient adoption and rising security risks.
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Put more bluntly, the reasons include dried-up funding, low usage and security challenges, with recent hacks cited as part of the pressure.
A long road from sharding to settlement
Zilliqa launched its mainnet in January 2019. Its original pitch centered on sharding, a technique that splits a network into smaller pieces so it can process more transactions at once.
A major upgrade in 2026 introduced proof-of-stake and full Ethereum Virtual Machine compatibility.
The LTIN relationship also predates the pivot. The partnership deepened in July 2026, when Zilliqa became a shareholder in the Liechtenstein network.
That stake gives Zilliqa more than a vendor relationship with its identity provider. It ties the project financially to the organization responsible for verifying who gets onto the new network.
What this means for ZIL holders and the market
For ZIL holders, the immediate picture is stability. The token stays the same, and no action is required right now.
The regulatory timing matters too. Frameworks such as the EU’s MiCAR are pushing the industry toward compliance, and Zilliqa is positioning itself as a network built for that environment from the start.
There is a trade-off worth naming. Restricting transactions to verified participants may attract regulated players, but it also shuts out the open, anyone-can-join user base that many crypto networks depend on.
The key items to watch are the technical migration plan, the role assigned to the ZIL token, and whether the LTIN-backed identity system can onboard institutions at a pace that justifies the overhaul.
