The future of DeFi is not on Ethereum (ETH), but on Bitcoin (BTC)

Source: Cointelegraph Original text: "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) has consequently been affected. Layer-2 (L2) solutions have led to liquidity breakdowns, making capital inefficient. The community, seeking better opportunities, turned to Solana, only to discover an ecosystem driven by "meme coins" that is rife with speculative behavior of "pump and dump," attracting liquidity extractors and turning the blockchain into a paradise for speculation and fraud.

DeFi needs a reset, a return to the most basic principles, realigning with Satoshi Nakamoto's original vision of a decentralized financial system. The only network that can support the next phase of DeFi development is neither Ethereum nor Solana, but Bitcoin.

DeFi is struggling 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 achieve 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 instead of contributing to a unified financial system. What is the result? It is a fragmented landscape that makes capital inefficient and makes it difficult for DeFi protocols to scale.

The proposed solution by Ethereum—chain abstraction—looks promising in theory, but has failed in practice. The fundamental problem lies in the structural mismatch of the incentive mechanisms, resulting in Ethereum gradually losing competitiveness in the DeFi space.

It is time to ask yourself: 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 are turning to Solana. The developer activity on this blockchain has increased by 83% year over year, and its decentralized exchange (DEX) has surpassed Ethereum for five consecutive months.

However, there is a fundamental problem: the growth of Solana's DeFi is not built on sustainable financial applications, but is driven by the frenzy of "meme coins".

The recent surge in activity is not driven by decentralized finance innovations, but rather by speculative trading. Following the frenzy around the TRUMP meme coin, the total value extracted from Solana meme coins ranged between $3.6 billion and $6.6 billion. This is not DeFi growth — it is a liquidity extraction engine where short-term speculators quickly leave after making profits.

Solana indeed has 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). However, 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 sustainable financial system, Solana is clearly not the answer.

Bitcoin DeFi is thriving.

It is time to return to the most fundamental principles 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 perspective. Bitcoin DeFi is experiencing explosive growth. Look at the numbers: the total value locked (TVL) in Bitcoin DeFi surged from $300 million at the beginning of 2024 to $5.4 billion on February 28, 2025—a staggering increase of 1700%. The Bitcoin staking sector has taken the lead, 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, rather than just a passive store of value.

Bitcoin's native DeFi is not just 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. At the same time, innovative methods of tokenizing Bitcoin's hash rate convert mining power into collateral for lending, staking, and borrowing, further expanding Bitcoin's financial utility.

In addition, Ordinals and BRC-20 tokens have driven record trading activity, with the number of inscriptions reaching 66.7 million and 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 of 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 cryptocurrency, Bitcoin has a market capitalization of $1.7 trillion and an ETF holding of $94 billion. Even a small portion of this liquidity entering DeFi 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 assets while making them more productive through DeFi mechanisms.

Ethereum has had its glorious moments. Solana has experienced its hype. And now it's Bitcoin's turn to realize Satoshi Nakamoto's original vision of a decentralized financial system.

Author: Matt Mudano, CEO of Arch Labs

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This article is for general informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in the text are solely those of the author and do not necessarily reflect or represent the views of Cointelegraph.