Opinion: Matt Mudano, CEO of Arch Labs
Ethereum is struggling, and as a result, decentralized finance (defi). Layer-2 (L2) solutions destroy liquidity and make capital inefficient. Looking for green pastures, the community turned to Solana. Fueled pumps and dump schemes, we found a Memocoin-driven ecosystem that attracts liquidity extracts and turns the chain into a playground of speculation and fraud.
DEFI requires a return to first principles and a reset that matches Satoshi’s original vision of a decentralized financial system. The only networks that can maintain the next evolution of defi are not Ethereum or Solana. It’s Bitcoin.
Defi is struggling with Ethereum
Ethereum was once an uncontroversial home for defi, but it is clear that today the ecosystem is struggling. The network’s roadmap is constantly changing, and there is no clear path to long-term sustainability.
The L2 solution was supposed to expand Ethereum. Instead, they destroyed the obstacles into isolated fluid silos. L2 has reduced transaction fees, but now they compete for liquidity rather than contributing to a unified financial system. result? A fragmented landscape that makes capital inefficient and makes it difficult to extend the defi protocol.
Ethereum’s proposed solution – chain abstraction – sounds promising in theory, but in practice it fails. The fundamental problem is the structural inconsistency of incentives, which results in Ethereum gradually becoming less competitive in defi.
It’s time to ask: can defi’s future lie to fragmented Ethereum?
Solana is not the answer
As Ethereum is losing its competitiveness, many developers and users have turned their eyes to Solana. On blockchain, developer activity has increased by 83% year-on-year, with its decentralized exchange (DEX) surpassing Ethereum for the fifth consecutive month.
There is a fundamental problem. Solana’s debt growth is not based on sustainable financial applications.
The recent surge in activity is driven by speculative transactions rather than diversified financial innovation. Following the Trump Memocoin trend, the total extracted value from Solana Memecoin ranged between $3.6 billion and $6.6 billion. This is not Defi’s growth. This is a liquidity extraction engine that short-term speculators cash out and move on.
Solana has real strengths. Its speed and low transaction costs are ideal for high frequency trading, and its ecosystem has made meaningful advances in distributed physical infrastructure networks (Depins), AI and distributed science, or Desci. But Memecoin’s speculation advantage has transformed the chain into a playground for fraud and pump and dump schemes. That’s not the foundation’s defi needs.
Solana is not the answer if the goal is to build a permanent financial system.
Bitcoin Defi is thriving
It’s time to go back to the first principle and build the original blockchain, defi: Bitcoin – the most reliable and decentralized network backed by the soundest money in the digital economy.
This is more than just theoretical. Bitcoin Defi is already experiencing explosive growth. Let’s think about the numbers. Bitcoin Defi’s total value (TVL) increased from $300 million in the first half of 2024 on February 28th to $5.4 billion, an astonishing 1,700% increase. It is dominated by the Bitcoin staking sector, with protocols such as Babylon (4.68 billion TVL), Lombard ($1.59 billion) and SOLVBTC ($715 million) leading the billing. This shows the growing demand for Bitcoin to become a productive asset rather than a valuable passive reservoir.
Recent: Bitcoin Defi is the center
Bitcoin Native Defis is not just copying Ethereum’s Playbooks, but is pioneering a new financial model. Advances in space have introduced dual staking, allowing users to wager Bitcoin (BTC) along with native tokens to increase security and earn yields. Meanwhile, a novel approach to tokenizing Bitcoin’s hashrate mining power to lend, borrow and staking as collateral will further expand the financial utility of Bitcoin.
Additionally, ordinals and BRC-20 tokens drove record-high transaction activity, with inscriptions reaching $66.7 million, generating a fee of $420 million.
It is clear that Bitcoin is no longer digital gold, but the foundation for the next stage of decentralized finance.
The future of defi lies in Bitcoin
The future of Defi lies in Bitcoin, where incentives coincides with long-term value creation. Unlike the fragmented model of Ethereum and the speculative economy of Solana, Bitcoin-based Defi is built on institutional grade liquidity and sustainable growth.
As the largest and most liquid cryptocurrency, Bitcoin boasts a market capitalization of $1.7 trillion and a $94 billion exchange trade fund (ETF) holding. Even some of this liquidity is a game changer to move to defi. Bitcoin holds over $1 trillion in undeveloped liquidity, and continues to attract strong interest from institutional investors and sovereign wealth funds, and the government is already investigating it as a potential reserve asset.
Several projects are already built on Bitcoin, creating a sustainable ecosystem that allows users to be productive through definitional mechanisms while retaining the most reliable digital assets.
Ethereum had that moment. Solana had that hype. It is Bitcoin’s turn to realize Satoshi’s original vision of a decentralized financial system.
Opinion: Matt Mudano, CEO of Arch Labs.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
