Sentra’s tweet arrived like a cold spray across DeFi feeds on Thursday: “Ethereum DeFi TVL is still dominant and has become increasingly dominant over the last year. Do you expect this trend to continue, or could other chains start to catch up?” The chart he attached is a stacked share graphic from DeFiLlama that illustrates the point in one candid visual. The blue color representing Ethereum makes up more of the image than any other protocol family, and after a tumultuous 2021-2022, Ethereum settled into a dominant market share from 2023-2025.
This rise did not happen by chance. Ethereum’s advantages stem from its deep liquidity, established developer ecosystem, and network effects of composability. Anything built on Ethereum can easily interoperate with a vast number of smart contracts, wallets, oracles, and tools. Once a large pool of assets exists in a protocol on-chain, market makers, yield aggregators, and traders will follow. These trends attracted more builders and users, making it difficult for rivals to break this virtuous cycle.
This chart suggests two important phases. In the early days, many chains were carving out a piece of the pie that was fixed in aggregate value as cheaper and faster alternatives to Ethereum emerged. However, in the most recent year shown, the blue band has widened again, suggesting reintegration of capital at layer 2 of Ethereum and Ethereum native. This consolidation reflects a broader industry realignment. While many players once chased low fees, they increasingly prioritize liquidity and security, and those qualities tend to remain where most of the assets and developer attention is.
Still, chart dominance is actually not inevitable. Competing chains and layer 2 networks are not standing still. Many rollups and alternative smart contract platforms have spent the past two years improving their developer tools, growing their ecosystems, and developing niche use cases. Some companies have been successful in attracting liquidity by offering aggressive incentives and differentiated UX for specific verticals such as gaming, NFTs, and fast payments. The exodus of innovators means market share can change if users and builders decide the trade-off is worth it.
Ethereum blue wave
What will determine whether other chains catch up? Cost and speed are important, but so are configurability and capital depth. New chains can offer near-zero fees and fast finality, but without deep liquidity, their lending markets and AMMs will remain shallow. Bridges and cross-chain liquidity protocols can alleviate that, but bridges come with their own security risks and fragmentation. Developers are also weighing the ease of use of Ethereum tools against the future potential of the emerging platform. The costs of transition are not only technical, but also social and economic.
Regulatory clarity also plays an important role. Institutional investors and risk-averse liquidity providers tend to prefer environments that feel safer from a compliance perspective. Change could accelerate if regulators draw clearer boundaries or if competing networks create easier entry for fiat currencies and financial institutions. Conversely, if market participants view Ethereum as a safer default, regulatory pressure on alternative chains could strengthen Ethereum's dominance.
Layer 2 complicates the story in important ways. Many of the benefits shown in the Ethereum band are both related to the base chain itself, as well as rollups and scaling solutions that sit on top of Ethereum. If Layer 2 adoption continues to accelerate, Ethereum’s share of global DeFi TVL could be maintained while users benefit from lower costs and faster transactions. In that sense, “Ethereum” in charts increasingly refers to the broader Ethereum stack, not just the base layer transactions reflected in gas fees.
So will this trend continue? In the short to medium term, the safest bet is that Ethereum and its Layer 2 ecosystem remain central to DeFi. But the industry is dynamic. Chains that offer a good user experience, solve liquidity without undue centralization, and deeply integrate with Web2 rails are likely to still capture significant market share from incumbents. This competition isn't about a single breakthrough moment, it's about accumulating wins, developer mindshare, security credibility, organizational participation, and user demand in part.
Mr. Sentra's question is exactly the kind of provocation that preserves the integrity of the market. The chart gives you an idea of where the value stands today. Next year will reveal whether these blue bands are the beginning of a multi-year hegemony or just the current shape of a still-moving market. In any case, the DeFi map will likely look very different in five years than it does today, but whether it will become more integrated or more fragmented is a debate that will unfold in real time.
