Opinion by: Matt Mudano, CEO of Arch Labs
Ethereum is struggling, and decentralized finance (DeFi) is struggling in consequence. Layer-2 (L2) options have fractured liquidity, making capital inefficient. In search of greener pastures, the group has turned to Solana — solely to discover a memecoin-driven ecosystem fueled by pump-and-dump schemes, attracting liquidity extractors, and turning the chain right into a playground for hypothesis and fraud.
DeFi wants a reset that returns to first ideas and aligns with Satoshi’s authentic imaginative and prescient of a decentralized monetary system. The solely community succesful of sustaining the subsequent evolution of DeFi isn’t Ethereum or Solana. It’s Bitcoin.
DeFi is struggling on Ethereum
Ethereum was as soon as the undisputed residence of DeFi, however right now, it’s clear that the ecosystem is struggling. The community’s roadmap always adjustments, with no clear path towards long-term sustainability.
L2 options have been speculated to scale Ethereum. As an alternative, they’ve fractured DeFi into remoted liquidity silos. Whereas L2s have lowered transaction charges, they now compete for liquidity fairly than contributing to a unified monetary system. The outcome? A fragmented panorama that makes capital inefficient and DeFi protocols tougher to scale.
Ethereum’s proposed resolution — chain abstraction — sounds promising in idea however fails in apply. The basic challenge is a structural misalignment of incentives, and in consequence, Ethereum is progressively shedding 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 shedding its aggressive edge, many builders and customers 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 5 consecutive months.
There’s a basic drawback: Solana’s DeFi development isn’t constructed on sustainable monetary functions — a memecoin frenzy fuels it.
The latest surge in exercise isn’t pushed by innovation in decentralized finance however by speculative trades. Following the TRUMP memecoin craze, the whole extracted worth from Solana’s memecoins ranged between $3.6 billion and $6.6 billion. This isn’t DeFi development — it’s a liquidity extraction engine the place short-term speculators money in and transfer on.
Solana has actual strengths. Its velocity and low transaction prices make it perfect for high-frequency buying and selling, and its ecosystem has made significant strides in decentralized bodily infrastructure networks (DePINs), AI and decentralized science, or DeSci. However the dominance of memecoin hypothesis has turned the chain right into a playground for fraud and pump-and-dump schemes. That’s not the muse DeFi wants.
Solana isn’t the reply if the aim is to construct an enduring monetary system.
Bitcoin DeFi is prospering
It’s time to return to first ideas and construct DeFi on the unique blockchain: Bitcoin — probably the most trusted, decentralized community backed by the soundest cash within the digital economic system.
This isn’t simply theoretical. Bitcoin DeFi is already experiencing explosive development. Take into account the numbers: Whole worth 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) main the cost. This demonstrates the rising demand for Bitcoin to change into a productive asset fairly than a passive retailer of worth.
Latest: Bitcoin DeFi takes center stage
Bitcoin-native DeFi isn’t merely copying Ethereum’s playbook — it’s pioneering new monetary fashions. Developments within the area have launched twin staking, permitting customers to stake Bitcoin (BTC) alongside native tokens to boost safety and earn yields. In the meantime, novel approaches to tokenizing Bitcoin’s hashrate flip mining energy into collateral for lending, borrowing and staking, additional increasing Bitcoin’s monetary utility.
As well as, Ordinals and BRC-20 tokens have pushed record-high transaction exercise, with inscriptions reaching 66.7 million and producing $420 million in charges — highlighting the rising demand for tokenized belongings on Bitcoin.
It’s clear that Bitcoin is now not simply digital gold — it’s turning into the muse for the subsequent section of decentralized finance.
The future of DeFi is on Bitcoin
The future of DeFi lies with Bitcoin, the place incentives align with long-term worth creation. In contrast to Ethereum’s fragmented mannequin and Solana’s speculative economic system, Bitcoin-based DeFi is constructed on institutional-grade liquidity and sustainable development.
As the biggest 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 draw sturdy curiosity from institutional buyers and sovereign wealth funds, with governments already exploring it as a potential reserve asset.
A number of tasks are already constructing on Bitcoin, constructing a sustainable ecosystem the place customers can maintain 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 authentic imaginative and prescient of a decentralized monetary system.
Opinion by: Matt Mudano, CEO of Arch Labs.
This text is for common data functions and isn’t meant to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas, and opinions expressed listed below are the writer’s alone and don’t essentially mirror or signify the views and opinions of Cointelegraph.
