Zilliqa said it will shut down its standalone layer-1 model and relaunch as the Zilliqa Institutional Layer, an Ethereum-based layer 2 aimed at regulated institutions. The move comes nine years after the network launched and follows the team’s acknowledgement that operating an independent chain "hasn’t worked."

Under the new plan, the network will settle to Ethereum mainnet and initially restrict transactions to wallets tied to a verified vLEI, an identity credential linked to the global Legal Entity Identifier framework. Zilliqa said broader access may come later, but key technical and migration details have not yet been finalized.

A shift away from a standalone chain

The announcement marks a fundamental redesign for one of the industry’s older networks. Rather than continuing as its own base layer, Zilliqa plans to re-emerge as a rollup-style network connected to Ethereum and built around compliance-focused access controls.

The project framed the change as a response to the limits of remaining independent. In a reply cited on Thursday, Zilliqa said the security burden of operating alone had become more expensive than a small network could reasonably sustain.

Identity-gated access at launch

According to Zilliqa’s updated website, only wallets linked to a verified vLEI will be able to transact on the new network at first. A vLEI is a cryptographic extension of the Legal Entity Identifier standard, which is overseen globally by GLEIF and is designed to let software verify which legal entity is involved in a transaction and who is authorized to act for it.

Zilliqa said regulated institutions will be the first users admitted to the network. The project added that other categories of users are expected to gain access later, though it has not yet provided a timeline or operational details for that broader rollout.

Liechtenstein entity to run the sequencer

The sequencer is set to be operated by the Liechtenstein Trust Integrity Network, or LTIN. Zilliqa also said LTIN will issue the vLEIs used for access control while it seeks accreditation as an official issuer.

The project said Telecom Liechtenstein, a state-owned company, holds a majority stake in LTIN. Separately, Crypto Briefing reported that Zilliqa acquired a stake in LTIN in July.

Token stays, but rollout remains undecided

Zilliqa said ZIL will remain the network’s only token and that existing holders do not need to take any action for now. The team is also considering whether institutions may need to hold a minimum amount of ZIL to participate, describing the idea as similar to a Canton-style requirement, but said no decision has been made.

Several major pieces of the relaunch are still unresolved. The project has not yet disclosed the rollup stack it will use, the proof system behind the network, a migration plan for the existing chain, or a launch date. It said a public FAQ is being prepared.

Leadership change and recent setbacks

The strategic reset follows a difficult stretch for the project. Chief executive Alexander Zahnd resigned nine days before the announcement, and the network had recently faced a string of exploits affecting its X-Bridge, which remains paused, as well as several PlunderSwap pools.

Market reaction was negative on the day of the news. The source article said ZIL was down about 11.5% over the previous 24 hours, leaving its market capitalization near $33 million. The next confirmed milestone is the promised FAQ, which is expected to clarify migration and launch mechanics that remain open.

Source: www.bankless.com