The Cornerstone of Ethereum DeFi's Sustainability: PoS Transition and Layer 2 Scaling
Ethereum, as a core pillar of the decentralized finance (DeFi) sector, has garnered significant attention for its sustainability and growth potential. Since its successful transition to the Proof-of-Stake (PoS) mechanism via "The Merge" in September 2022, Ethereum's energy consumption has decreased by approximately 99.95%, significantly enhancing its environmental sustainability. This fundamental change has laid a green foundation for the long-term development of the DeFi ecosystem.
Concurrently, the rise of Layer 2 (L2) scaling solutions, such as Arbitrum, Optimism, zkSync, and Base, has greatly alleviated congestion on the Ethereum mainnet and reduced transaction costs. As of 2026, over 60% of Ethereum transactions are settled on L2s, with transaction fees generally falling below $0.05. This marks a structural shift in Ethereum's usability, providing a more cost-effective infrastructure for the widespread adoption of DeFi applications.
Key Network Upgrades and Roadmap
Ethereum's continuous development relies on a series of critical network upgrades. The Dencun upgrade in March 2024 introduced Proto-danksharding (EIP-4844), significantly reducing Rollup transaction costs. Subsequent upgrades, Pectra (May 2025) and Fusaka (December 2025), further enhanced scalability, optimized transaction fees, and improved user experience. Looking ahead, the Glamsterdam upgrade planned for the first half of 2026 and the Hegota upgrade in the second half of 2026 will continue to focus on scalability, user experience, and network security, including increasing the Gas limit to over 100 million, accelerating transaction processing, and developing more advanced zero-knowledge proof technologies.
DeFi Ecosystem Status and Key Data
- Total Value Locked (TVL): As of Q1 2026, Ethereum L1's DeFi TVL was approximately $78 billion, and L2s' TVL was about $45 billion, totaling $123 billion. Although it peaked at over $150 billion in 2021, Ethereum DeFi still maintains a dominant position of approximately 54% among all crypto networks (as of June 2026).
- Transaction Costs: Historical data shows that during the NFT craze in 2021, Ethereum's average Gas fees soared to over 500 gwei. However, after the PoS merge and Dencun upgrade, average Gas prices have significantly decreased. As of December 2025, the average transaction fee was approximately $0.30-$0.33, while transaction fees on L2 solutions were typically below $0.10. As of Q1 2026, Uniswap V3 transaction fees on the Ethereum mainnet ranged from $2-$10, and on L2s, they were $0.10-$0.50.
- Activity and Transaction Volume: As of June 2026, Ethereum's monthly active addresses increased by 15% year-over-year to 8.4 million. Smart contract deployments increased by 74% year-over-year to over 1.3 million. The total daily transaction volume, including L2s, can exceed 12.5 million (2025 data).
- ETH Staking and Stablecoins: As of March 2026, approximately 37 million ETH (33% of the total supply) was staked, with an annualized yield of about 3-4%. The Ethereum network dominates the stablecoin ecosystem, responsible for approximately 57% of the total stablecoin issuance. As of March 2026, stablecoins on Ethereum exceeded $158 billion.
Growth Potential and Future Drivers
Ethereum DeFi's growth potential is driven by multiple factors:
- Institutional Interest: As of August 2026, spot Ethereum ETFs have seen net inflows of $697 million, indicating growing interest from traditional financial institutions in Ethereum. Morgan Stanley also plans to file for an Ethereum ETF by the end of 2026, signaling the influx of more institutional capital.
- DeFi Protocol Innovation: Continuous innovation in areas such as liquid staking, restaking, and advanced liquidity mechanisms is shaping the future of decentralized financial services, attracting more users and capital.
- Real-World Asset (RWA) Integration: Bringing real-world assets on-chain is seen as a key driver for DeFi's future growth, with the potential to significantly expand DeFi's scale and application scenarios.
- Market Expectations: Industry experts are generally optimistic about Ethereum's future growth, believing that continuous network upgrades, improved scalability, and the ongoing expansion of the DeFi and NFT ecosystems will attract more investors and users. For example, cryptocurrency analyst Arthur Hayes once predicted that if Bitcoin reaches $200,000, Ethereum could reach $20,000 to $30,000, showing optimistic expectations for ETH's future performance. As of August 25, 2026, the current price of ETH is $2474.06.
Challenges and Competition
Despite its promising outlook, Ethereum DeFi also faces challenges. Some experts worry that the PoS mechanism could lead to network centralization, and an increase in the number of validators might lead to higher overall energy consumption. Additionally, Ethereum faces fierce competition from other Layer-1 blockchains like Solana and Tron in terms of transaction speed and stablecoin issuance. While the potential of real-world assets (RWA) on-chain is immense, it also requires establishing robust trust mechanisms and legal frameworks.
Conclusion
Overall, Ethereum DeFi demonstrates strong sustainability and significant growth potential, thanks to its successful PoS transition, mature Layer 2 ecosystem, continuous technical upgrade roadmap, and growing institutional interest. Despite challenges such as centralization, competition, and RWA integration, Ethereum DeFi is expected to continue to solidify its leadership in the global decentralized finance sector through continuous innovation and optimization.
