Opinion by: Matt Mudano, CEO of Arch Labs 

Ethereum is struggling, and decentralized finance (DeFi) is struggling in consequence. Layer-2 (L2) choices have fractured liquidity, making capital inefficient. In search of greener pastures, the neighborhood has turned to Solana — solely to find a memecoin-driven ecosystem fueled by pump-and-dump schemes, attracting liquidity extractors, and turning the chain proper right into a playground for speculation and fraud.

DeFi desires a reset that returns to first concepts and aligns with Satoshi’s genuine imaginative and prescient of a decentralized financial system. The solely neighborhood capable of sustaining the next evolution of DeFi isn’t Ethereum or Solana. It’s Bitcoin.

DeFi is struggling on Ethereum 

Ethereum was as quickly because the undisputed dwelling of DeFi, nevertheless as we converse, it’s clear that the ecosystem is struggling. The neighborhood’s roadmap all the time modifications, with no clear path in direction of long-term sustainability.

L2 choices had been presupposed to scale Ethereum. Instead, they’ve fractured DeFi into isolated liquidity silos. While L2s have lowered transaction fees, they now compete for liquidity pretty than contributing to a unified financial system. The end result? A fragmented panorama that makes capital inefficient and DeFi protocols extra sturdy to scale.

Ethereum’s proposed decision — chain abstraction — sounds promising in precept nevertheless fails in apply. The fundamental drawback is a structural misalignment of incentives, and in consequence, Ethereum is step-by-step dropping its aggressive edge in DeFi.

It’s time to ask: Can DeFi’s future lie in a fragmented Ethereum?

Solana isn’t the reply

With Ethereum dropping its aggressive edge, many builders and prospects have turned to Solana. The blockchain has seen an 83% increase in developer activity year-over-year, and its decentralized exchanges (DEXs) have outperformed Ethereum’s for five consecutive months. 

There’s a fundamental draw back: Solana’s DeFi progress isn’t constructed on sustainable financial features — a memecoin frenzy fuels it.

The present surge in train isn’t pushed by innovation in decentralized finance nevertheless by speculative trades. Following the TRUMP memecoin craze, your entire extracted price from Solana’s memecoins ranged between $3.6 billion and $6.6 billion. This isn’t DeFi progress — it’s a liquidity extraction engine the place short-term speculators cash in and switch on.

Solana has precise strengths. Its tempo and low transaction costs make it excellent for high-frequency shopping for and promoting, and its ecosystem has made important strides in decentralized bodily infrastructure networks (DePINs), AI and decentralized science, or DeSci. But the dominance of memecoin speculation has turned the chain proper right into a playground for fraud and pump-and-dump schemes. That’s not the inspiration DeFi desires.

Solana isn’t the reply if the aim is to assemble a long-lasting financial system.

Bitcoin DeFi is prospering

It’s time to return to first concepts and assemble DeFi on the distinctive blockchain: Bitcoin — basically probably the most trusted, decentralized neighborhood backed by the soundest money inside the digital financial system.

This shouldn’t be solely theoretical. Bitcoin DeFi is already experiencing explosive progress. Consider the numbers: Total price locked (TVL) in Bitcoin DeFi surged from $300 million in early 2024 to $5.4 billion as of Feb. 28, 2025 — a staggering 1,700% improve. The Bitcoin staking sector is dominating, with protocols like Babylon ($4.68 billion TVL), Lombard ($1.59 billion) and SolvBTC ($715 million) major the price. This demonstrates the rising demand for Bitcoin to alter right into a productive asset pretty than a passive retailer of price.

Recent: Bitcoin DeFi takes center stage

Bitcoin-native DeFi isn’t merely copying Ethereum’s playbook — it’s pioneering new financial fashions. Advancements inside the space have launched twin staking, allowing prospects to stake Bitcoin (BTC) alongside native tokens to spice up security and earn yields. Meanwhile, novel approaches to tokenizing Bitcoin’s hashrate flip mining power into collateral for lending, borrowing and staking, further growing Bitcoin’s financial utility.

In addition, Ordinals and BRC-20 tokens have pushed record-high transaction train, with inscriptions reaching 66.7 million and producing $420 million in fees — highlighting the rising demand for tokenized property on Bitcoin.

It is clear that Bitcoin shouldn’t be merely digital gold — it’s turning into the inspiration for the next a part of decentralized finance.

The means ahead for DeFi is on Bitcoin

The means ahead for DeFi lies with Bitcoin, the place incentives align with long-term price creation. Unlike Ethereum’s fragmented model and Solana’s speculative financial system, Bitcoin-based DeFi is constructed on institutional-grade liquidity and sustainable progress.

As the most important and most liquid crypto asset, Bitcoin boasts a $1.7 trillion market cap and $94 billion in exchange-traded fund (ETF) holdings. Even a fraction of this liquidity migrating into DeFi could be a game-changer. Bitcoin holds over $1 trillion in untapped liquidity and continues to attract sturdy curiosity from institutional merchants and sovereign wealth funds, with governments already exploring it as a potential reserve asset.

Several initiatives are already establishing on Bitcoin, establishing a sustainable ecosystem the place prospects can preserve basically probably the most trusted digital asset whereas making it productive via DeFi mechanisms. 

Ethereum had its second. Solana had its hype. It’s Bitcoin’s flip to actualize Satoshi’s genuine imaginative and prescient of a decentralized financial system.

Opinion by: Matt Mudano, CEO of Arch Labs.

This article is for fundamental information features and is not speculated to be and should not be taken as licensed or funding suggestion. The views, concepts, and opinions expressed listed below are the author’s alone and do not basically mirror or symbolize the views and opinions of Cointelegraph.

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