Bitcoin DeFi TVL Surges 1,700% as Ethereum Faces Challenges
1min read Ethereum, once the undisputed leader in decentralized finance (DeFi), is now facing significant challenges. Layer-2 (L2) solutions, intended to scale the network, have instead fragmented liquidity, creating isolated silos that make capital inefficient and hinder the scalability of DeFi protocols. The constant changes in Ethereum's roadmap and the lack of a clear path toward long-term sustainability have further exacerbated these issues. Chain abstraction, Ethereum's proposed solution, has failed to address the fundamental misalignment of incentives, leading to a gradual loss of its competitive edge in DeFi.
In response to Ethereum's struggles, many developers and users have turned to Solana. The blockchain has seen an 83% increase in developer activity year-over-year, and its decentralized exchanges (DEXs) have outperformed Ethereum's for five consecutive months. However, Solana's growth is not driven by sustainable financial applications but by a memecoin frenzy. The recent surge in activity is fueled by speculative trades, with the total extracted value from Solana's memecoins ranging between $3.6 billion and $6.6 billion. This speculative environment has turned Solana into a playground for fraud and pump-and-dump schemes, making it an unsuitable foundation for a lasting financial system.
Ask Aime: What is the future of Ethereum's DeFi protocols after the challenges it faces?
Bitcoin, the original blockchain, is emerging as a viable alternative for DeFi. Bitcoin DeFi is experiencing explosive growth, with the total value locked (TVL) surging from $300 million in early 2024 to $5.4 billion as of Feb. 28, 2025 — a staggering 1,700% increase. Protocols like Babylon, Lombard, and SolvBTC are leading the charge, demonstrating the growing demand for Bitcoin to become a productive asset. Bitcoin-native DeFi is pioneering new financial models, such as dual staking and tokenizing Bitcoin's hashrate, which turn mining power into collateral for lending, borrowing, and staking. Additionally, Ordinals and BRC-20 tokens have driven record-high transaction activity, highlighting the growing demand for tokenized assets on Bitcoin.
Bitcoin's institutional-grade liquidity and sustainable growth make it an ideal foundation for the future of DeFi. With a $1.7 trillion market cap and $94 billion in exchange-traded fund (ETF) holdings, even a fraction of this liquidity migrating into DeFi would be a game-changer. Bitcoin holds over $1 trillion in untapped liquidity and continues to attract strong interest from institutional investors and sovereign wealth funds. Several projects are already building on Bitcoin, creating a sustainable ecosystem where users can hold the most trusted digital asset while making it productive through DeFi mechanisms. Ethereum had its moment, and Solana had its hype, but it is now Bitcoin's turn to actualize Satoshi's original vision of a decentralized financial system.
