Why Institutions Still Prefer Eth Despite Faster Blockchains

Ethereum Continues to Dominate Stablecoins and DeFi, Defying “Faster” Blockchain Challengers

Despite a growing number of “Ethereum killers” boasting higher throughput and lower fees, the world’s second-largest blockchain remains the undisputed hub for stablecoins and decentralized finance (DeFi). Institutional capital, the true measure of blockchain staying power, continues to flow into Ethereum—not because it’s the fastest, but because it’s where the liquidity is deepest.

Kevin Lepsoe, founder of ETHGas and a former Morgan Stanley derivatives executive in Asia, argues that while engineers obsess over transactions per second (TPS), capital moves where the market is most liquid. “The capital is on Ethereum; the stablecoins are there. TradFi is looking at where the liquidity is,” he told Cointelegraph.

Why Liquidity Trumps Speed for Institutions

Institutional capital doesn’t just bring big numbers—it brings stability, scale, and the kind of deep liquidity that can absorb massive trades without wild price swings. This is what separates Ethereum from networks that thrive on retail hype during bull runs but fade in bear markets.

Ethereum isn’t the fastest chain, but its DeFi liquidity is the deepest. Source: DefiLlama

Even as newer blockchains like Solana have attracted retail traders through NFT booms and memecoin frenzies, they haven’t managed to pull institutional capital away from Ethereum. Solana, once hailed as an “Ethereum killer,” has seen its retail-driven activity wane, while Ethereum’s liquidity moat only grows wider.

“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.”

Real-World Assets and Stablecoins Cement Ethereum’s Lead

The next wave of blockchain adoption is being driven by real-world assets (RWAs) and stablecoins—both of which are flourishing on Ethereum. BlackRock’s USD Liquidity Fund (BUIDL), the tokenized Treasury fund, started on Ethereum and still holds over 30% of its market capitalization there. Ethereum also leads the industry in stablecoin market cap, with $160.4 billion, according to DefiLlama.

Ethereum has been widening its lead as the distribution layer for RWAs, excluding stablecoins. Source: RWA.xyz

BlackRock’s global head of market development, Samara Cohen, has said stablecoins are “becoming the bridge between traditional finance and digital liquidity.” For institutions, Ethereum isn’t just a blockchain—it’s the on-ramp to the future of finance.

Layer 2s: Blessing or Curse?

Ethereum’s layer-2 (L2) rollups have dramatically reduced transaction fees, but they also fragmented liquidity across multiple environments. Lepsoe sees this as a “blessing in disguise.” If L2s hadn’t taken liquidity from the main chain, he argues, it would have flowed to competing L1s—and likely never returned.

Recently, Ethereum has shifted its focus back to scaling the main chain. Co-founder Vitalik Buterin has said many L2s have failed to decentralize, while the main chain is now sufficiently scaling. “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 set to execute the Glamsterdam fork in 2026, raising the block gas limit to 200 million from 60 million and putting its layer 1 on the road to 10,000 TPS over time. For institutions evaluating blockchain infrastructure, this timing couldn’t be better.

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, while Psy Protocol uses zero-knowledge technology to bundle multiple transactions into one.

Marcin Kaźmierczak, co-founder of blockchain oracle RedStone, said that 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,” he told Cointelegraph.

But Lepsoe remains bullish on Ethereum’s dominance. “I see zero threat from Solana or Canton,” he said, arguing that Ethereum still has the deepest liquidity pool—the primary draw for large allocators.

The Bottom Line: Liquidity Wins

For institutional capital, performance improvements may expand Ethereum’s capacity, but liquidity remains its defining advantage. In blockchain markets, speed can attract users during booms, but capital tends to stay where the deepest markets already exist.

As the crypto industry matures, Ethereum’s role as the liquidity epicenter is only becoming more entrenched. While newer blockchains may offer faster transactions, they can’t match the capital depth, stability, and institutional trust that Ethereum has built over a decade.

Tags: Ethereum, DeFi, stablecoins, institutional capital, liquidity, layer 2, scaling, BlackRock, BUIDL, Solana, memecoins, NFTs, RWAs, blockchain adoption, TPS, gas fees, Glamsterdam fork, Vitalik Buterin, ETHGas, Psy Protocol, RedStone, Canton, crypto trends, TradFi, blockchain infrastructure

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• “For institutional capital, performance improvements may expand Ethereum’s capacity, but liquidity remains its defining advantage.”

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