DeFi
Data contradicts the narrative: Ethereum continues to dominate the Layer 1 sector
Ethereum leads in smart contracts, Layer 1 revenue, and DeFi TVL.
Ethereumbilled as the world computer, continues to occupy the first place among blockchain networks.
According to compiled data According to CoinMarketCap, Ethereum dominates the smart contract industry with 62% of the $695 billion market cap, the highest level ever as of 2024. Additionally, the network leads in revenue, accounting for 70% of revenue collected by layer 1s, and has doubled its Challenge total value locked (TVL) since the beginning of the year.
DeFi TVL Distribution
BNB Channel Ethereum follows in the smart contracts space with $85 billion, followed by Solana with $59 billion. The ranking is the same for DeFi TVL, with BNB Chain accounting for $5 billion in Q2 and Solana hosting $4 billion.
These numbers, however, contradict the prevailing narrative that Ethereum has lost its grip on the industry and allowed other ecosystems like Solana to claim some of its market share.
Which give?
“Most of the narratives on Twitter about cryptocurrencies are driven by VCs, and VCs can’t charge 2% carry fees and 20% performance fees to hold ETH, but they can for SOL,” the pseudonymous person said. Milliemember of the Synthetix Spartan Council.
Milli told The Defiant that on Ethereum, activity is primarily related to DeFi, while Solana’s activity is entirely seasonal and fueled by the speculative nature of coins“The Solana blockspace is filled with belligerence around memecoins that any serious analyst would be very skeptical of,” Milli said.
Solana wins on some criteria
Analysts report that in some areas of the market, Ethereum is down while Solana is up.
Mert MumtazHelius Labs CEO, told The Defiant that Solana has surpassed Ethereum in terms of economic activity “multiple times,” noting that MEV+ priority fees are higher, as well as validator revenue.
His views are supported by Blockworks’ research, which indicates that Solana is experiencing its most profitable months in terms of block space. It is also closing the gap with Ethereum in terms of trading volumes on decentralized exchanges (DEXs).
Asked whether the activity could be fueled by an unsustainable trend like memecoins, Mumtaz dismisses it. “The model of low-fee activity combined with high volume has now been proven empirically,” he said. “It doesn’t matter what the source is.”
“Extremely shocked” to see Ethereum lose its dominance
Millie said she would be extremely shocked to see Ethereum lose its dominance in smart contracts, revenue, and DeFi TVL. But the network doesn’t have the same grip on these three metrics.
“L1’s revenue is tricky because we don’t know how long this memecoin business is going to last,” Milli told The Defiant. However, for smart contracts and TVL, she believes that “the chances are slim” because the network has optimized the readability, auditability and openness of the channel.
That last point is an important feature, she explained. Closed-source protocols pose less risk than open-source networks, but that culture, Millie said, is also becoming a major barrier to TVL’s appeal.
Even Mumtaz is skeptical that Solana will overtake Ethereum for DeFi TVL.
According to Llama ChallengeEthereum’s TVL stands at $58 billion, while Solana has $4.5 billion. In the middle, Tron comes in second with $7.7 billion, and in third place is BNB Chain with $4.8 billion.
It is interesting to note Ethereum’s continued dominance in the L1 sector despite the influx of users to L2s in recent months. Millie believes this apparent disparity is due to whale activity.
She said that Layer 2s are “still way too permissioned for the majority of ETH whales” because they don’t yet provide adequate censorship resistance.
She also explained that low gas fees are also a symptom of L2s taking the majority of the activity while whales continue to transact on the base chain, especially in terms of lending and borrowing.
“Whale movements like lending and borrowing don’t require heavy computation and aren’t really time-sensitive,” Millie said. “Plus, when volatility is low, DEX volumes are also low, which in turn drives most of the gas fees.”