Why Institutions Remain Loyal to Ethereum Even as Faster Blockchains Emerge
By [Your Name]
February 28, 2026
Ethereum continues to dominate the cryptocurrency landscape when it comes to institutional capital. Despite the rollout of newer networks promising higher throughput and lower fees, large asset managers, tokenized‑fund issuers, and stable‑coin providers still view the Ethereum ecosystem as the most attractive venue for deploying sizable volumes of capital.
Deep Liquidity Trumps Raw Speed
The primary draw for institutional investors is not the number of transactions per second a chain can process, but the depth of liquidity it can furnish. Ethereum hosts the majority of stable‑coin value—more than $160 billion according to DeFi analytics—and retains the largest share of decentralized‑finance (DeFi) capital. This concentration allows traders to execute multi‑million‑dollar orders with tighter spreads and minimal slippage, something that fragmented markets on newer chains struggle to deliver.
Kevin Lepose, founder of the ETHGas platform and a former derivatives executive at Morgan Stanley, likens Ethereum to a “downtown financial district.” He argues that while peripheral markets may offer appealing features or lower fees, the most efficient price discovery and execution remain in the core network. In practice, this means that even if a competitor can theoretically handle 100k TPS, the liquidity advantage of Ethereum keeps large‑scale capital rooted there.
Institutional Use Cases Favor Established Networks
Stablecoins and real‑world asset (RWA) tokenization are the two pillars underpinning institutional interest. BlackRock’s USD Liquidity Fund (BUIDL)—a tokenized Treasury‑backed product—originated on Ethereum and still derives roughly 30 % of its market cap from the network. The firm’s market‑development lead has highlighted stablecoins as “the bridge between traditional finance and digital liquidity,” underscoring why the chain’s dominance in that segment matters.
Other asset managers are following suit, allocating funds to Ethereum‑based protocols that can handle the regulatory and operational rigor required for institutional deployment. The presence of these players creates a feedback loop: deeper liquidity attracts more capital, which in turn amplifies the network’s market‑making capacity.
Layer‑2 Solutions: A Double‑Edged Sword
Ethereum’s scalability challenges have been mitigated by a suite of layer‑2 rollups that off‑load transaction processing from the base chain. While fees have dropped dramatically as a result, the dispersion of liquidity across multiple rollups initially raised concerns about market fragmentation.
Lepose contends that this fragmentation may have inadvertently protected Ethereum’s liquidity from fleeing to rival layer‑1 chains. By keeping capital within the broader Ethereum ecosystem—albeit spread across rollups—institutions are able to experiment with faster execution without abandoning the network’s deep order books.
The ecosystem’s recent shift back toward main‑chain scaling, championed by Vitalik Buterin, reflects a belief that the base layer is now capable of handling higher volumes without sacrificing decentralization. The upcoming “Glamsterdam” fork, slated for later in 2026, will raise the block gas limit to 200 million, paving the way for a theoretical throughput of up to 10,000 TPS on layer 1.
Competing Chains: Niche Appeal, Limited Threat
Solana has positioned itself as a high‑speed alternative and has attracted retail interest through NFT launches and meme‑coin speculation. However, its liquidity remains shallow compared with Ethereum, leading to higher price impact for large trades. Similar observations apply to Canton, a privacy‑focused chain gaining attention for its confidential transaction capabilities.
Industry insiders, such as RedStone co‑founder Marcin Kaźmierczak, note that while institutions are watching these networks, they prioritize battle‑tested platforms that have weathered multiple market cycles. The consensus among several observers is that any competitive advantage offered by speed or privacy will be secondary to the liquidity premium that Ethereum provides.
Key Takeaways
| Insight | Implication |
|---|---|
| Liquidity depth outweighs TPS | Institutional allocators choose networks where large orders can be filled with minimal slippage, even if transaction speed is lower. |
| Stablecoin and RWA dominance | Ethereum’s control of the stablecoin market and growing RWA tokenization creates a network effect that further entrenches institutional usage. |
| Layer‑2 rollups act as a liquidity buffer | By keeping capital within the Ethereum ecosystem, rollups prevent a mass exodus to competing layer‑1 chains. |
| Protocol upgrades boost scalability | The 2026 Glamsterdam fork and other scaling initiatives aim to raise block limits, reducing fees while preserving decentralization. |
| Alternative chains remain niche | Faster networks attract retail speculation but lack the deep markets needed for institutional-grade trading. |
Overall, Ethereum’s entrenched position as the primary conduit for institutional digital finance appears resilient. While speed and cost improvements are welcome, the decisive factor for large capital providers remains the ability to transact in a deep, liquid market—a niche where Ethereum continues to excel.
Source: https://cointelegraph.com/news/institutions-prefer-eth-faster-blockchains?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
