As institutional interest in tokenized assets and regulated DeFi accelerates in 2024, Ethereum Layer 2 (L2) networks such as Base are capturing a growing share of experimentation and live deployments, sharpening the contrast with high-throughput rival Solana. The divergence is increasingly visible in where large asset managers, banks and infrastructure providers choose to launch products, shaping the battle for institutional DeFi between Ethereum’s scaling stack and Solana’s monolithic high-performance chain.
Key Facts
- Major tokenization initiatives from firms like BlackRock and major banks have launched on Ethereum, with L2s positioned as the next step for scalability and cost reduction.
- Base, Coinbase’s Ethereum L2, has rapidly grown in users and total value locked (TVL) since its 2023 launch, benefitting from direct integrations with Coinbase’s institutional services.
- Solana offers higher throughput and lower fees at the base layer, but continues to face institutional questions around historical outages, governance and long-term stability.
- Regulatory clarity, tooling maturity and ecosystem depth around Ethereum and EVM chains are key reasons cited by institutional players for favoring Ethereum-based infrastructure.
Context: Why Institutional DeFi Is Choosing a Side
The institutional DeFi landscape is no longer purely experimental. Tokenized money market funds, on-chain repos and collateralized lending are moving from pilots to early production, forcing large financial institutions to decide where to build. This matters because once core infrastructure, standards and liquidity pools coalesce around a particular stack, network effects make it harder for alternative chains to catch up.
Ethereum’s L2 ecosystem – including Base, Arbitrum, Optimism and others – is emerging as the default venue for compliant DeFi and tokenization, even as Solana leads in retail-driven activity such as meme coins and high-frequency trading. The “why now” is driven by the convergence of regulatory developments, the rollout of US spot Ethereum exchange-traded funds (ETFs) in 2024, and the first large-scale tokenization products shifting from proofs of concept to revenue-generating offerings.
Details: Where the Money and Infrastructure Are Going
Official moves favor Ethereum and its L2s
BlackRock’s BUIDL tokenized fund, launched in March 2024 on Ethereum, has become a flagship example of institutional tokenization choosing the Ethereum stack, according to the firm’s SEC filings and public documentation. JPMorgan’s Onyx platform has run multiple pilots on Ethereum or permissioned Ethereum variants, while other asset managers have tokenized funds on Ethereum-compatible networks like Polygon.
Base, incubated by Coinbase and built on the OP Stack, has quickly positioned itself as a bridge between TradFi and DeFi. Coinbase has integrated Base into its consumer and institutional products, enabling direct access via Coinbase Wallet and institutional custody. While Base still represents a fraction of Ethereum’s overall TVL, on-chain data tracked by analytics platforms shows it consistently ranking among the largest L2s by daily transactions and DeFi activity since early 2024.
Market metrics: Ethereum dominance vs Solana momentum
According to DeFiLlama and similar analytics services, Ethereum continues to account for the majority of DeFi total value locked globally, with Ethereum L2s steadily increasing their share. Solana has posted strong growth, especially following renewed ecosystem activity in late 2023 and 2024, but still represents a smaller share of overall DeFi TVL.
Institutional flows tell a similar story. Ethereum underpins regulated futures on CME and, from 2024, US-listed spot ETFs, enabling more straightforward institutional exposure and hedging. Solana-related products exist on some exchanges and structured-product platforms, but ETH’s derivatives depth and regulatory acceptance remain significantly higher.
Stakeholder perspectives
BlackRock CEO Larry Fink has repeatedly described tokenization as “the next generation for markets,” and the firm’s first large-scale implementation chose Ethereum as its base layer. Coinbase leadership has framed Base as part of its long-term strategy to migrate more functionality on-chain, highlighting the importance of Ethereum compatibility for developers and institutions already integrated with EVM standards.
By contrast, many institutional players view Solana as technically impressive but still emerging from reputational damage tied to the FTX collapse and a history of network outages. The Solana Foundation and ecosystem teams have emphasized reliability improvements and upcoming validator client diversity (including the Firedancer client), but some risk committees remain cautious.
Technical factors shaping institutional choices
Ethereum L2s like Base inherit Ethereum’s settlement security while offering sub-cent transaction fees following the rollout of proto-danksharding (EIP-4844) in early 2024. For compliance-focused institutions, the ability to anchor proofs to Ethereum’s highly decentralized Layer 1, while operating programmable logic and high-volume activity on an L2, is seen as aligning with internal risk frameworks.
Solana’s architecture delivers higher raw throughput and fast finality on a single layer, which is attractive for trading-focused use cases. However, its distinct virtual machine and developer tooling require separate integrations and expertise, whereas Ethereum L2s allow institutions to reuse existing EVM-based contracts, security audits and custody setups.
Analysis: Why Ethereum L2s, and Base in Particular, Have the Edge
The emerging pattern suggests that Ethereum’s L2-centric roadmap is winning institutional DeFi not solely on technology, but on a bundle of advantages: regulatory familiarity, auditability, ecosystem depth and risk comfort.
Base plays a pivotal role in this dynamic. As an L2 closely tied to a publicly listed, regulated US exchange, it offers institutions a perceived “on-ramp” into on-chain activity with a recognizable counterparty. Integration with Coinbase’s KYC, custody and brokerage infrastructure potentially simplifies onboarding compared with building directly on a public chain with fewer institutional intermediaries.
For conservative institutions, the ability to deploy on a chain that is EVM-compatible, settles to Ethereum and is supported by a major US-regulated platform can outweigh the performance and fee advantages advertised by Solana. The result is a growing bifurcation: Ethereum L2s as the default venue for tokenized funds, on-chain treasuries and compliant lending, and Solana as a hub for high-speed trading and retail speculation.
That does not mean Solana is excluded from institutional use. Some trading firms and market makers already operate heavily on Solana, and the chain’s low-latency design may be attractive for future institutional market-structure products. But for broad-based institutional DeFi involving regulated funds and traditional securities, Ethereum’s L2 ecosystem currently appears to hold the strategic advantage.
Background: How Ethereum and Solana Reached This Point
Ethereum launched in 2015 and became the foundational platform for DeFi, stablecoins and NFTs, at the cost of congestion and high fees during peak cycles. The ecosystem responded with a rollup-centric scaling roadmap, spawning L2s such as Arbitrum, Optimism and later Base, launched by Coinbase in August 2023.
Solana, which went live in 2020, pursued a different path: scaling at the base layer using a high-performance architecture centered on proof-of-history and parallel transaction processing. This design enabled high throughput and low fees but exposed the network to complex engineering challenges, including several well-documented outages between 2021 and 2022, which the core team has since sought to address.
Meanwhile, regulators and traditional financial institutions gradually became more comfortable with Ethereum. The approval of regulated ETH futures, the transition to proof-of-stake in 2022, and the 2024 launch of spot ETFs in the US reinforced Ethereum’s status as the primary institutional smart contract platform. L2s like Base represent the next layer of that story: scaling and specialized functionality without abandoning the established Ethereum trust model.
What’s Next: Institutional DeFi’s Likely Trajectory
In the near term, more tokenized funds, repo facilities and collateral markets are expected to launch on Ethereum and its L2s, with Base positioned as a key venue for Coinbase-linked institutional flows. Additional banks and asset managers are likely to follow BlackRock’s and JPMorgan’s lead in choosing EVM-compatible infrastructure to minimize integration friction.
Solana’s roadmap, including the rollout of the Firedancer validator client and further reliability upgrades, could make the chain more palatable to institutional compliance teams over time, particularly for trading and payments use cases. However, dislodging Ethereum L2s from their emerging role as the default institutional DeFi stack would require not only technical success but also changes in regulatory perceptions and market structure.
For now, the balance of evidence suggests that Ethereum L2s – and Base in particular — are building a durable lead in institutional DeFi, while Solana consolidates its position as a high-performance alternative with a stronger tilt toward retail-driven and trading-centric activity.
