Ethereum’s DeFi Market Share Falls to 54% as Layer-2 Chains Absorb Activity
Ethereum (ETH) has seen its share of total decentralized finance value locked fall to approximately 54% as of May 2026, down from 63.5% at the start of 2025 and approaching the lowest reading the network has recorded since DeFi tracking became standardized. The drop reflects a structural shift in where users and developers deploy capital, with Ethereum-native layer-2 networks and independent layer-1 chains both pulling activity away from the Ethereum mainnet.
The Numbers Behind the Shift
DeFi, or decentralized finance, refers to financial applications built on blockchain networks that allow users to lend, borrow, trade, and earn yield without traditional intermediaries.
Total value locked, the standard measure of how much capital is deposited in these protocols, sits across dozens of chains. Ethereum’s 54% share means roughly 46% of all DeFi capital is on other networks, a proportion that has grown steadily for six consecutive quarters.
The chains gaining ground include Arbitrum (ARB) and Optimism (OP), both of which are layer-2 networks that inherit Ethereum’s security while processing transactions faster and at lower cost.
Layer-2 networks settle transaction batches back to Ethereum’s mainnet, meaning Ethereum retains indirect economic benefit from activity that no longer appears directly in its TVL figures. Solana (SOL) has also captured DeFi share, particularly in perpetual futures and memecoin trading volume.
Also Read: Solana Holds Rank 7 as Developer Activity and DeFi Volume Support the Network’s Position
Why This Matters for ETH Holders
The fee relationship between Ethereum and its users is direct. Higher mainnet activity means more ETH burned through the network’s base fee mechanism, reducing circulating supply and supporting the token’s price.
As activity migrates to layer-2 networks, mainnet fee revenue compresses. Ethereum’s blob fee market, introduced in early 2024 to reduce layer-2 settlement costs, was designed to keep layer-2 chains economically tied to Ethereum.
In practice, blob fees have run very low, limiting the ETH burn that validators and holders had anticipated. That dynamic is part of why ETH has underperformed Bitcoin over the past 12 months despite Ethereum’s technical roadmap remaining active.
Also Read: Aave at $2 Billion in Deposits: Inside the DeFi Lending Protocol Holding Top 60
Background
Ethereum held above 80% DeFi market share as recently as 2022, a period when layer-2 networks were nascent and competing layer-1 chains had not yet built deep liquidity.
The launch of the Arbitrum mainnet in 2021, followed by Optimism (OP) Mainnet in 2021 and Base in 2023, progressively moved Ethereum-compatible DeFi activity off the mainnet. Solana’s recovery from the FTX collapse in late 2022 and its memecoin trading surge in 2024 added a non-EVM competitor that drew users who prioritized speed and low fees over Ethereum compatibility.
The 54% figure represents a market that has genuinely fragmented rather than a market where Ethereum is losing to a single dominant rival.
No single chain has absorbed the lost share. Arbitrum, Solana, Base, BNB (BNB) Chain, and a handful of newer networks each hold a portion.
Also Read: Chainlink Holds Rank 18 as Cross-Chain Data Oracle Expands Real-World Asset Use Cases
What to Watch
Ethereum’s Pectra upgrade, scheduled for May 2026, introduces changes to validator mechanics and blob capacity that developers say will improve layer-2 economics and potentially draw more settlement activity back to mainnet.
Whether that translates into a reversal of the TVL share trend depends on user behavior rather than technical parameters alone. If blob fees rise as a result of higher demand, ETH burn could accelerate, supporting the token price.
If DeFi activity continues dispersing, the 54% figure may fall toward 50% before the end of 2026. Protocol-level metrics from DefiLlama will be the first indicator of which direction the trend moves after Pectra activates.
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