Ethereum keeps institutional edge

Kevin Lepsoe, founder of ETHGas and a former Morgan Stanley derivatives executive in Asia, said institutional capital tends to follow where the money already sits, arguing that throughput benchmarks matter less to professional allocators than the ability to execute large trades with tight spreads and low slippage.

“[Transactions per second] is the metric that gets engineers excited, but is that what drives capital to the blockchain?” Lepsoe said, adding that “the capital is on Ethereum; the stablecoins are there,” and that traditional finance is watching where liquidity is deepest.

The liquidity argument has kept Ethereum ahead of rivals that market speed as the main advantage. Lepsoe likened Ethereum to a downtown financial district: markets can pop up elsewhere, but the largest pools and most consistent pricing remain where activity is concentrated.

That concentration is visible in stablecoins and DeFi capital, which the interview described as remaining most heavily clustered on Ethereum even as alternative networks compete on performance and cost. The same dynamic has played out across cycles as new chains try to win users during hot markets, while larger pools of capital tend to remain anchored to the most liquid venues.

The interview also framed Ethereum’s lead as increasingly tied to institutional use cases such as stablecoins and tokenized real-world assets, areas where large asset managers and issuers can bring volume that supports deeper markets and consistent stablecoin supply.

One example highlighted was BlackRock’s USD Liquidity Fund (BUIDL), a tokenized Treasury product that started on Ethereum and later expanded to multiple chains. Ethereum still accounts for more than 30% of BUIDL’s market capitalization, according to figures referenced in the interview. 

The discussion also pointed to stablecoins as a key bridge for institutions assessing tokenized settlement and onchain liquidity. BlackRock’s global head of market development, Samara Cohen, was cited describing stablecoins as “becoming the bridge between traditional finance and digital liquidity.”

By market size, Ethereum remains the largest stablecoin network, with $160.4 billion in stablecoin market capitalization cited in the interview. The same piece described Ethereum as the dominant venue for DeFi liquidity, reinforcing the point that institutions evaluating infrastructure tend to focus on where they can transact at scale without moving prices sharply.

Still, the interview emphasized that efficiency and cost cannot be ignored entirely, particularly for payment-like flows and high-frequency activity. Ethereum’s fees have fallen from prior peaks as layer-2 rollups reduced congestion on the main chain, though the scaling approach introduced a separate challenge: liquidity fragmentation across multiple rollup environments.

Lepsoe argued that fragmentation may have helped Ethereum hold onto activity that might otherwise have migrated to competing layer-1 networks, because L2s offered cheaper execution without forcing users and builders to exit Ethereum’s ecosystem.

More recently, the interview said Ethereum’s focus has been shifting back toward scaling the main chain. Ethereum co-founder Vitalik Buterin was cited saying many layer 2s have struggled to decentralize and that the main chain is now scaling enough that the original L2 vision “no longer makes sense,” requiring a new path.

Protocol upgrades are also part of the pitch to institutions weighing long-term infrastructure choices. Ethereum is expected to execute the Glamsterdam fork in 2026, with a planned increase in the block gas limit to 200 million from 60 million and a longer-term target of 10,000 TPS over time.

Alongside core upgrades, the interview described infrastructure efforts aimed at improving execution and settlement efficiency. Lepsoe’s ETHGas is positioned as an attempt to optimize block construction through offchain execution and coordination, while Psy Protocol was cited using zero-knowledge techniques to bundle transactions.

Other institutional-facing builders in the interview suggested Ethereum’s appeal also comes from longevity and operational history. Marcin Kaźmierczak, co-founder of oracle provider RedStone, said institutions tend to prefer infrastructure that is battle-tested and has been around “for a very long time,” while noting that institutions are expanding aggressively into Ethereum but also evaluating alternatives.

Kaźmierczak said some institutions are watching Solana’s traction, and also highlighted Canton as important for firms that prioritize privacy. Lepsoe, however, said he sees “zero threat” from Solana or Canton, reiterating that Ethereum’s liquidity remains the primary draw for large allocators.

The overall message from the interview was that speed can help a network attract users during boom periods, but institutions typically place greater weight on market depth, stablecoin density and the ability to execute large transactions predictably. In that framework, Ethereum’s advantage is less about being the fastest chain and more about being the most liquid venue for stablecoins, DeFi and tokenized assets at scale.