Source: Cointelegraph
Original: “The Future of DeFi is Not on Ethereum (ETH), But on Bitcoin (BTC)”
Author: Matt Mudano, CEO of Arch Labs
Ethereum is facing a dilemma, and decentralized finance (DeFi) is suffering as a result. Layer-2 (L2) solutions have led to a liquidity breakdown, making capital inefficient. The community, seeking better opportunities, has turned to Solana, only to find an ecosystem driven by “meme coins,” filled with speculative “pump and dump” behavior that attracts liquidity extractors, turning the blockchain into a paradise for speculation and fraud.
DeFi needs a reset, a return to its fundamental principles, realigning with the decentralized financial system originally envisioned by Satoshi Nakamoto. The only network capable of supporting the next phase of DeFi development is neither Ethereum nor Solana, but Bitcoin.
DeFi Struggles on Ethereum
Ethereum was once the undisputed home of DeFi, but today, it is clear that this ecosystem is struggling. The network's roadmap is constantly changing, lacking a clear path to long-term sustainability.
L2 solutions were supposed to scale Ethereum, but in reality, they have fragmented DeFi into isolated liquidity islands. While L2 has reduced transaction fees, they are now competing for liquidity rather than contributing to a unified financial system. What is the result? A fragmented landscape that makes capital inefficient and makes it difficult for DeFi protocols to scale.
The proposed solution from Ethereum—chain abstraction—looks promising in theory, but has failed in practice. The fundamental issue lies in the structural misalignment of incentive mechanisms, resulting in Ethereum gradually losing its competitiveness in the DeFi space.
It is time to ask ourselves: Can the future of DeFi exist in a fragmented Ethereum?
Solana is Not the Answer
As Ethereum gradually loses its competitiveness, many developers and users have turned to Solana. Developer activity on this blockchain has increased by 83% year-over-year, and its decentralized exchanges (DEX) have surpassed Ethereum for five consecutive months.
However, there is a fundamental problem: Solana's DeFi growth is not built on sustainable financial applications, but rather driven by meme coin frenzy.
The recent surge in activity is not driven by decentralized financial innovation, but by speculative trading. Following the frenzy around the TRUMP meme coin, the total value extracted from Solana's meme coins ranged from $3.6 billion to $6.6 billion. This is not DeFi growth—this is a liquidity extraction engine where short-term speculators quickly leave after making profits.
Solana does have its strengths. Its speed and low transaction fees make it very suitable for high-frequency trading, and it has made meaningful progress in decentralized physical infrastructure networks (DePINs), artificial intelligence (AI), and decentralized science (DeSci). But the dominance of meme coin speculation has turned this chain into a playground for fraud and “pump and dump” schemes. This is not the foundation that DeFi needs.
If the goal is to build a lasting financial system, Solana is clearly not the answer.
Bitcoin DeFi is Thriving
It is time to return to the fundamentals and build DeFi on the original blockchain—Bitcoin, the most trusted and decentralized network in the digital economy, backed by the most solid currency.
This is not just a theoretical view. Bitcoin DeFi is experiencing explosive growth. Look at the numbers: the total locked value (TVL) of Bitcoin DeFi surged from $300 million at the beginning of 2024 to $5.4 billion by February 28, 2025—a staggering increase of 1,700%. The Bitcoin staking space has become dominant, with protocols like Babylon ($4.68 billion TVL), Lombard ($1.59 billion), and SolvBTC ($715 million) leading the trend. This indicates that more and more people want Bitcoin to be a productive asset, not just a passive store of value.
Bitcoin-native DeFi is not merely replicating Ethereum's model—it is pioneering entirely new financial models. Progress in this field has introduced dual staking, allowing users to stake Bitcoin (BTC) alongside native tokens to enhance security and earn yields. Meanwhile, innovative Bitcoin hash rate tokenization methods are transforming mining capacity into collateral for lending, staking, and borrowing, further expanding Bitcoin's financial utility.
Additionally, Ordinals and BRC-20 tokens have driven record trading activity, with the number of inscriptions reaching 66.7 million, generating $420 million in fees—highlighting the growing demand for tokenized assets on Bitcoin.
Clearly, Bitcoin is no longer just digital gold—it is becoming the foundation for the next phase of decentralized finance.
The Future of DeFi is on Bitcoin
The future of DeFi belongs to Bitcoin, where incentives align with long-term value creation. Unlike Ethereum's fragmented model and Solana's speculative economy, Bitcoin-based DeFi is built on institutional-grade liquidity and sustainable growth.
As the largest and most liquid crypto asset, Bitcoin has a market capitalization of $1.7 trillion and $94 billion in ETF holdings. Even if a small portion of that liquidity enters DeFi, it would be a game changer. Bitcoin also holds over $1 trillion in untapped liquidity and continues to attract strong interest from institutional investors and sovereign wealth funds, with governments exploring it as a potential reserve asset.
Currently, multiple projects are being built on Bitcoin to create a sustainable ecosystem where users can hold the most trusted digital asset while making it more productive through DeFi mechanisms.
Ethereum once had its glorious moments. Solana once had its hype. Now it is Bitcoin's turn to realize Satoshi's original vision of a decentralized financial system.
Author: Matt Mudano, CEO of Arch Labs
Related: Nigeria's Cryptocurrency Future: Balancing Innovation and Regulation
This article is for general informational purposes only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in the article are solely those of the author and do not necessarily reflect or represent the views of Cointelegraph.
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