The Great Ethereum Puzzle: Staking Climbs, TVL Plateaus
The Great Ethereum Puzzle: Staking Climbs, TVL Plateaus! Over the past year, Ethereum has continued to evolve as the dominant smart contract platform, but a curious divergence has emerged that’s puzzling analysts and builders alike: staking is hitting all-time highs, while Total Value Locked (TVL) in DeFi remains largely stagnant.
This divergence highlights a deeper shift in user behavior, market dynamics, and how value is being captured in the Ethereum ecosystem.
Staking Surge: Confidence or Complacency?
Ethereum’s transition to proof-of-stake (PoS) marked a major milestone. As of mid-2025, over 31 million ETH is staked—nearly 26% of the total supply. This sharp rise reflects increasing confidence in Ethereum’s security and longevity. Staking provides yield with relatively low risk, especially when compared to the often volatile and exploit-prone world of DeFi.
Institutional investors and retail users alike are drawn to the predictable returns from staking. With liquid staking platforms like Lido, Rocket Pool, and EigenLayer offering flexibility, users no longer face the lockup dilemma. They can earn staking rewards and still participate in DeFi—at least in theory.
TVL Plateau: Are DeFi Users Moving On?
In contrast, Ethereum’s DeFi TVL has remained relatively flat, hovering around $60–70 billion despite bullish market sentiment and ETH price increases. This stagnation raises questions:
- Are users pulling liquidity out of DeFi protocols due to risk concerns?
- Has the excitement around yield farming, liquidity mining, and leverage cooled off?
- Are newer chains like Solana, Base, and Layer 2s draining activity from the Ethereum mainnet?
Several factors contribute to this plateau:
- Security Fatigue: High-profile hacks and exploits continue to haunt DeFi, discouraging new entrants and causing long-term users to consolidate into safer, less interactive positions like staking.
- Risk-Adjusted Yield: DeFi protocols often offer higher returns than staking, but they come with significantly more risk. In a maturing market, capital tends to flow toward safer yields.
- Scaling Migration: A growing share of DeFi activity has moved to Layer 2 solutions (e.g., Arbitrum, Optimism, Base), where gas fees are lower and user experience is better. However, TVL metrics are often siloed by chain and don’t reflect the full activity across Ethereum’s broader ecosystem.
- Changing Use Cases: Some of Ethereum’s native value is being redirected into restaking (EigenLayer), DePIN infrastructure, AI agents, RWAs (Real World Assets), and even off-chain integrations. These applications may not be accurately captured by traditional TVL metrics.
A Shift in Value Capture
The key takeaway from this puzzle isn’t that DeFi is dying—it’s that Ethereum is changing.
- The growth in staking suggests Ethereum is maturing into a financial backbone—secure, reliable, and yield-bearing.
- The TVL plateau reflects a cooling speculative phase and the emergence of more utilitarian, real-world-focused use cases.
- Many “users” are no longer humans, but agents, DAOs, and bots—shifting the definition of network activity.
Conclusion: Beyond the Numbers
Ethereum’s TVL may have plateaued, but its importance as a settlement layer has never been greater. The surge in staking points to a growing trust in Ethereum’s future, even as DeFi faces a reckoning of its own.
This isn’t a contradiction. It’s a realignment. As Ethereum grows into a multipolar ecosystem of L2s, restaking, real-world integrations, and modular components, old metrics like TVL tell only part of the story.
The Great Ethereum Puzzle isn’t a problem—it’s a preview of the chain’s next phase.
