Ethereum maintains the largest concentration of stablecoins and decentralized finance (DeFi) even as successive waves of faster networks emerge.
Newer blockchains promise higher capacity and lower costs, raising questions about whether institutional capital could eventually move away from Ethereum.
Kevin Lepso, co-founder of ETHGas and former derivatives executive at Morgan Stanley in Asia, said he expects Ethereum’s advance to be sustained as institutions tend to prioritize capital depth over flashy performance.
“(Transactions per second) is the metric that excites engineers, but is it what drives capital to blockchain?” Lepso asked in an interview with “Cointelegraph” reporter.
“The capital is in Ethereum; the stablecoins are there. TradFi is looking at where the liquidity is,” he said.
Institutional capital brings scale and stability to the blockchain ecosystem. Large asset managers and issuers of tokenized funds are channeling capital into volumes that deepen liquidity and strengthen stablecoin supply. Their presence can establish the network’s position outside of retail activity, which increases in bull markets and declines in recessions.
Liquidity puts Ethereum ahead of faster competitors
If institutions prefer to operate where most of the money already resides, then simply building a faster blockchain will not drive capital away from Ethereum.
Over the past few years, performance has become a weapon of user engagement. Solana has emerged as a high-speed alternative to Ethereum that has been called the “Ethereum killer”, although this label is disputed. It brought retail traders through the boom in non-trivial token (NFT) and memecoin craze, but the increased activities were not sustainable in the long term.
related to: Can Solana ditch his memecoin icon in 2026?
Solana now has its own breed of “Solana killers” who advertise theoretically higher transactions per second (TPS). But Ethereum’s liquidity provides tighter spreads, less slippage for large trades, and the ability to absorb institutional-sized transactions without extreme price distortion.
“I think of Ethereum like downtown,” Lepso said.
“You can build a market somewhere on the outskirts of the city, where you can get away from the market prices, maybe it’s more convenient or maybe you like the virtual. But if you want deeper liquidity, you go to the center of the city, and that’s Ethereum.”
While past crypto booms have featured high retail speculation, the next phase is shaping up to include institutional capital. As is well known, institutional players have focused on practical use cases such as stablecoins and real assets (RWAs).
Even the world’s largest asset manager relies on RWA products. BlackRock’s USD Liquidity Fund (BUIDL) is its tokenized treasury fund that started on Ethereum and has been split into several blockchains. Ethereum has over 30% of BUIDL’s market capitalization.
Ethereum is also the largest stablecoin network for stablecoins, which BlackRock’s global head of market development, Samara Cohen, said “is bridging the gap between traditional finance and digital liquidity.”
According to DefiLlama, Ethereum leads the industry in stablecoin market size with $160.4 billion.
L2 Ethereum payment back to L1
Although Lepso said the depth of liquidity shapes institutional priorities, the effectiveness of the network cannot be completely ignored.
Ethereum is adjusting its technical profile. Transaction fees, which once regularly reached practically unviable prices, have been reduced dramatically as layer-2 layers have eased the pressure on the main chain. This solution created new problems of its own. A set of distributed liquidity in different environments.
related to: 2026 is the year Ethereum begins to scale exponentially with ZK technology
Lepso described the liquidity split as a blessing in disguise for Ethereum. He argued that if L2s did not remove liquidity from the main chain, capital would flow to competitors.
“I think it actually saved the liquidity from going to other L1s that ultimately they probably couldn’t get back,” he said.
Recently, Ethereum has shifted its focus back to scaling the main chain. Founder Vitalik Buterin said that many layers of 2 failed to decentralize, while the main chain now has enough scale.
“Both of these facts, for their own 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 improvements reinforce Ethereum’s liquidity advantage
With transaction fees, Ethereum is expected to perform the Glamsterdam fork in 2026, increasing the block gas limit from 60 million to 200 million and putting its Layer 1 on track for 10,000 TPS.
For Ethereum, the timing coincides with institutions evaluating blockchain infrastructure for the next generation of financial services.
Along with protocol upgrades, infrastructure providers are experimenting with ways to improve performance. Projects like Lepsoe’s ETHGas aim to optimize the Ethereum block building process by executing and coordinating offchain, while Psy Protocol uses zero-knowledge technology to merge multiple transactions into one.
Marcin Kazmierczak, co-founder of blockchain oracle RedStone, which provides data for tokenized assets and institutional blockchain applications, said Ethereum has an advantage because institutions prefer blockchains that have been tested and “have been around for a very long time.” However, while institutions are “aggressively” expanding into Ethereum, they are also shopping around.
“They’re looking at Solana where there’s going to be good traction. Canton is extremely important to them because it gives them privacy, which they value a lot,” Kazmierczak told Cointelegraph.
Lepso said he sees “zero threat” from Solana or Canton, arguing that Ethereum still has a deep pool of liquidity, which is a primary attraction for large distributors.
For institutional capital, performance improvements may expand Ethereum’s strength, but liquidity remains its defining advantage. In blockchain markets, momentum can attract users during booms, but capital tends to stay where the deepest markets exist.
Magazine: 6 Big Challenges Bitcoin Faces on the Road to Quantum Security
Cointelegraph Features and Cointelegraph Magazine publish long-form journalism, analysis and narrative reporting produced by Cointelegraph’s internal editorial team and selected external contributors with subject matter expertise. All articles are edited and reviewed by Cointelegraph editors in accordance with our editorial standards. Contributions by external writers are attributed to their experience, research or perspective and do not reflect the views of Cointelegraph as a company unless expressly stated. The content published in Features and Magazine does not constitute financial, legal or investment advice. Readers should do their own research and consult with qualified professionals as needed. Cointelegraph maintains full editorial independence. The selection, commissioning and publication of the content and content of the magazine is not influenced by advertisers, partners or commercial relationships.
