Synopsis: This article mentioned that Ethereum is preferred by many institutions even though there are better and faster blockchains. Read on to understand why it is highly preferred by many institutions.
Many institutions prefer Ethereum even though many newer blockchains claim to be faster and cheaper. The main reason is simple: most of the money and financial activity in crypto is already there.
Kevin Lepsoe, founder of ETHGas and a former derivatives executive at Morgan Stanley, explained this idea in an interview with Cointelegraph. He said that engineers often focus on speed, like transactions per second (TPS). But big investors care more about where the largest pools of money and liquidity already exist. Right now, that exists in Ethereum.
In finance, liquidity means how easy it is to buy or sell large amounts of assets without changing the price too much. Institutions such as large asset managers, banks, and funds move huge amounts of money. They need markets where there is already deep liquidity. Ethereum has built that over many years.
A big part of this advantage comes from stablecoins and decentralised finance (DeFi). Ethereum hosts the largest amount of stablecoins in the industry. Stablecoins are digital dollars used for trading, payments, and financial services on blockchains. Because so many stablecoins and DeFi projects are already on Ethereum, institutions naturally go there.
Other faster networks
Some faster networks have tried to compete. For example, Solana became popular during the NFT boom and the memecoin trading frenzy. Its speed and low fees attracted many retail traders. However, a lot of that activity slowed down after the hype faded. Fast technology alone did not permanently pull large institutional money away from Ethereum.
Lepsoe compared Ethereum to a busy downtown financial district. Smaller markets might exist elsewhere and sometimes be cheaper or faster. But when people want the deepest and most reliable market, they go downtown. For crypto right now, Ethereum plays that role.
Track record
Another reason institutions trust Ethereum is its track record. It has been running for many years and has handled huge amounts of value. Large investors usually prefer systems that have been tested over time rather than brand-new platforms.
More products
Major financial companies are also building products on Ethereum. For example, BlackRock launched a tokenized Treasury fund called BUIDL that started on Ethereum before expanding to other blockchains. Even after expanding, a large share of the fund still remains on Ethereum. This shows that institutions often start there because the ecosystem is already strong.
Improvement of Technology
At the same time, Ethereum is trying to improve its technology. In the past, transaction fees sometimes became very expensive. To fix this, developers introduced layer-2 networks that process transactions more efficiently. Now the main network is also working on scaling upgrades.
Scalability
Ethereum co-founder Vitalik Buterin has said the network is adjusting its scaling strategy. Future upgrades aim to increase how many transactions the main network can handle, possibly reaching much higher capacity over time.
Even with these improvements, the main reason institutions stay is still liquidity. Big investors want markets where they can move large sums safely and efficiently. Faster blockchains may attract attention during hype cycles, but capital usually stays where the largest and deepest financial ecosystem already exists.
In simple terms: speed can attract users, but money tends to stay where most of the money already is—and today, that place is Ethereum.
Written by Parvati Anilkumar
