Why are institutions still choosing IT despite its fast blockchain?

Ethereum continues to host the largest stablecoins and decentralized finance (DeFi) capital even as a series of rapid waves of networks emerge.

New blockchains promise high utility and low costs, which raises questions about whether institutional capital may eventually migrate from Ethereum.

Kevin Lepso, founder of ETHGas and a former Morgan Stanley derivatives executive in Asia, said he expects Ethereum's lead to persist as institutions prioritize capital depth over outstanding performance.

“[Transactions per second] It's the metrics that excite engineers, but is that what drives capital to blockchain?” Lepso asked in an interview with Cointelegraph.

“The capital is on Ethereum; there are stable coins out there. TradFi is looking at liquidity,” he said.

Institutional capital brings balance and stability to the blockchain ecosystem. Large asset managers and tokenized fund issuers mobilize capital through volume that enhances liquidity and stabilizes coin supply. Their presence can establish a network position beyond the mass-driven retail movement that cycles through bull markets and fades in recessions.

Liquidity puts Ethereum ahead of fast rivals

If the institutions choose to operate where most of the money is stored, simply making a faster blockchain will not pull capital away from Ethereum.

Over the past several cycles, performance has become a tool to attract users. Solana has emerged as a high-speed alternative to Ethereum, dubbed the “Ethereum killer”, although the label is controversial. Retailers were on board with the non-exploding token (NFT) and memecoin frenzy, but the booming moves were not sustainable in the long run.

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Solana now has a generation of “Solana killer” that introduces higher theoretical transactions per second (TPS). But Ethereum's liquidity offers tight spreads, low slippage for large trades, and the ability to handle institutional-sized transactions without price manipulation.

“I think of Ethereum as downtown,” Lepso said.

“You can build a market in the suburbs and you can go away from the market prices, maybe it's more convenient or maybe you like the vibe. But if you want deep liquidity, go downtown, and that's Ethereum.”

Although past crypto booms have provided high retail valuations, the next phase is involving more institutional capital. In the current scenario, institutional players have shown interest in functional use cases such as stablecoins and real-world assets (RWAs).

Even the world's largest asset manager is leaning towards RWA products. BlackRock USD Liquid Fund (BUIDL) is a treasury fund launched on Ethereum and distributed across multiple blockchains. Ethereum accounts for over 30% of BUIDL's market capitalization.

BlackRock's head of global market development, Samara Cohen, said Ethereum is the largest network for statscoins, “it's becoming a bridge between traditional finance and digital finance.”

Ethereum leads the industry in statcoin market capitalization, at $160.4 billion, according to Defillama.

Ethereum L2 liquidity is returning to L1.

Although Lepso argues that the depth of liquidity creates institutional choice, network efficiency cannot be completely ignored.

Ethereum has been adjusting its technical profile. Because the Layer-2 package eases the burden on the main chain, transaction fees that were once unusable have fallen dramatically. These solutions brought their own new problems. Distributed liquidity in multiple areas.

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Lepso described the liquidity split as a blessing for Ethereum. He argued that if L2s had not taken liquidity from the main chain, capital would have flown to competitors.

“I think it saved the liquidity from going to other L1s and eventually they probably couldn't bring it back,” he said.

Recently, Ethereum has shifted its focus to balancing the main chain. Co-founder Vitalik Buterin said that many layers 2 could not be decentralized, the main chain is now expanding enough.

“Both of these facts, for their own reasons, the original view of L2s and its role in Ethereum no longer make sense, and we need a new way,” Buterin said in a recent X post.

A measure upgrade reinforces Ethereum's liquidity advantage.

By taming transaction fees, Ethereum is expected to execute the Glamsterdam fork in 2026, raising the block gas limit from 60 million to 200 million and putting Layer 1 on track to 10,000 TPS over time.

For Ethereum, the time corresponds to institutions evaluating the blockchain infrastructure for the next financial service.

Alongside protocol improvements, infrastructure providers are also trying ways to improve performance efficiency. While projects like Lepso's ETHGas seek to streamline Ethereum's block building process by executing and coordinating it off-chain, Psy Protocol uses zero-knowledge technology to bind multiple transactions into one.

Marcin Kavumierczak, founder of blockchain oracle Redstone, which provides data feeds for tokenized assets and institutional blockchain applications, says Ethereum has an edge because institutions prefer blockchains that are battle-tested and around for the “longer term.” However, as institutions “aggressively” expand into Ethereum, they are also buying.

“They look at Solana, which is getting good traction. Canton is very important to them because it gives them privacy, which they value very, very much,” Kazamirchak told Cointelegraph.

Lepso said it sees “zero risk” from Solana or Canton, adding that Ethereum still has a deep liquidity pool, which is a primary draw for large distributors.

For institutional capital, performance improvements may expand Ethereum's potential, but liquidity remains its key advantage. Speed ​​in blockchain markets may attract users as they grow, but capital stays where there are already deep markets.

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