Ethereum continues to host the largest concentration of stablecoins and decentralized finance (DeFi) capital, even as successive waves of faster networks emerge.
Newer blockchains have consistently promised higher throughput and lower transaction costs, sparking widespread debate about whether institutional capital might eventually migrate away from Ethereum to these newer, more efficient networks.
Kevin Lepsoe, founder of ETHGas and a former Morgan Stanley derivatives executive in Asia, said he expects Ethereum’s lead to endure. He argues that institutions tend to prioritize capital depth and market maturity over raw performance metrics like transactions per second (TPS).
“[Transactions per second] is the metric that gets engineers excited, but is that what drives capital to the blockchain?” Lepsoe asked in an interview with Cointelegraph. “The capital is on Ethereum; the stablecoins are there. TradFi is looking at where the liquidity is.”
Institutional capital brings scale and stability to a blockchain’s ecosystem. Large asset managers and tokenized fund issuers move capital in volumes that deepen liquidity and anchor stablecoin supply. Their presence can establish a network’s position beyond hype-driven retail activity that surges in bull markets and fades in downturns.
Liquidity Keeps Ethereum Ahead of Faster Rivals
If institutions prefer to operate where most of the money already sits, then simply building a faster blockchain will not pull significant capital away from Ethereum. Over past cycles, performance has often been used as a marketing weapon to attract users.
Solana has emerged as Ethereum’s high-speed alternative, often dubbed an “Ethereum killer,” though that label is heavily debated. It successfully onboarded retail traders through the non-fungible token (NFT) boom and the memecoin frenzy, but that heightened activity proved unsustainable in the long run.
Now, Solana itself faces competition from newer chains advertising even higher theoretical TPS. However, Ethereum’s deep liquidity grants tighter spreads, lower slippage for large trades, and the capacity to absorb institutional-sized transactions without heavily distorting prices.
“I think of Ethereum as like downtown,” Lepsoe said. “You could build a marketplace uptown somewhere in the suburbs and you could get far off market prices there, maybe it’s more convenient or maybe you like the vibe. But if you want the deepest liquidity, you go downtown, and that’s Ethereum.”
Though past crypto booms featured high-stakes retail speculation, the next phase is shaping up to include more institutional capital. As it stands, institutional players have expressed keen interest in practical use cases such as stablecoins and real-world assets (RWAs).
Even the world’s largest asset manager is leaning into RWA products. BlackRock’s USD Liquidity Fund (BUIDL), its tokenized Treasury fund, started on Ethereum and has since branched out to several blockchains. Ethereum still holds over 30% of BUIDL’s market capitalization, according to on-chain data.
Ethereum is also the largest network for stablecoins by market cap, with $160.4 billion, according to DefiLlama. BlackRock’s global head of market development, Samara Cohen, has stated that stablecoins are “becoming the bridge between traditional finance and digital liquidity.”
Ethereum’s L2 Liquidity is Returning to L1
While liquidity depth shapes institutional preference, a network’s efficiency cannot be completely disregarded. Ethereum has been adjusting its own technical profile. Transaction fees that once routinely spiked to unusable levels have fallen significantly, thanks to layer-2 (L2) rollups that eased pressure on the main chain.
These solutions, however, introduced a new problem: they fragmented liquidity across multiple, separate environments.
Lepsoe described this liquidity fragmentation as a blessing in disguise for Ethereum. He argued that if L2s hadn’t taken some liquidity away from the main chain, that capital might have flown permanently to competing layer-1 (L1) networks. “I think it actually saved the liquidity from going to other L1s, where they eventually probably couldn’t have brought it back,” he said.
Recently, Ethereum has shifted its focus back to scaling the main chain. Co-founder Vitalik Buterin said that many layer 2s have failed to decentralize sufficiently, while the main chain is now scaling effectively. “Both of these facts, for their own separate reasons, mean that the original vision of L2s and their role in Ethereum no longer makes sense, and we need a new path,” Buterin said in a recent X post.
Scaling Upgrades Strengthen Ethereum’s Liquidity Advantage
With transaction fees tamed, Ethereum is expected to execute the Glamsterdam fork in 2026. This upgrade will raise the block gas limit from 60 million to 200 million, putting its layer 1 on the road to achieving 10,000 TPS over time.
For Ethereum, this timing coincides with institutions actively evaluating blockchain infrastructure for the next generation of financial services.
Alongside protocol upgrades, infrastructure providers are experimenting with ways to improve execution efficiency. Projects like Lepsoe’s ETHGas aim to optimize Ethereum’s block construction process through off-chain execution and coordination, while Psy Protocol uses zero-knowledge technology to bundle multiple transactions into one.
Marcin Kaźmierczak, co-founder of blockchain oracle RedStone—which supplies data feeds for tokenized assets and institutional blockchain applications—said that Ethereum has the edge because institutions prefer blockchains that are battle-tested and have been around “for a very long time.” However, while institutions are “aggressively” expanding into Ethereum, they’re also shopping around.
“They look at Solana, which is getting good traction. Canton is extremely important for them because it gives them privacy, which they value very, very much,” Kaźmierczak told Cointelegraph.
Lepsoe said he sees “zero threat” from Solana or Canton, arguing that Ethereum still has the deepest liquidity pool, which is the primary draw for large allocators.
For institutional capital, performance improvements may expand Ethereum
