Tezos EVM and Etherlink's 2025 Upgrades: A Catalyst for High-Conviction DeFi Growth

The Tezos ecosystem has emerged as a formidable contender in the decentralized finance (DeFi) space, driven by a series of strategic upgrades to its EVM compatibility layer, Etherlink, and its foundational Layer 1 (L1) protocol. As the blockchain industry grapples with scalability, composability, and institutional adoption, Tezos' 2025 roadmap has positioned it as a unique platform for high-conviction DeFi growth. This analysis unpacks the technical and economic implications of these upgrades, supported by granular data on transaction volumes, TVL trends, and protocol-level innovations.

The Evolution of Tezos' Ecosystem: L2 Breakthroughs with Etherlink

Etherlink, Tezos' EVM-compatible Layer 2 (L2) solution, has been the linchpin of the ecosystem's 2025 growth narrative. By Q2 2025, Etherlink had already processed over 20.5 million transactions and hosted 203,000 smart contract deployments. This surge was further amplified by the Kernel 4.1 upgrade, which doubled the gas throughput to 4 million per second and refined gas estimation mechanisms. These improvements directly address a critical pain point for DeFi users-predictable and low-cost transaction execution-making Etherlink an attractive alternative to Ethereum and other EVM chains.

The Seoul upgrade in September 2025 added another layer of institutional-grade functionality, including native multisig support, aggregated attestations, and a streamlined unstaking process. These features not only enhance security but also reduce operational friction for DeFi protocols and institutional participants. The results speak for themselves: Etherlink's TVL surged to $84.4 million by the end of Q3 2025, a 56.4% quarter-over-quarter increase, driven by protocols like Curve, Spiko, and Uranium.io.

L1 Innovations and DeFi Synergy

While Etherlink dominates the spotlight, Tezos' L1 upgrades have laid a robust foundation for cross-layer DeFi activity. The Rio upgrade, which reduced staking cycle times from three days to one, has democratized participation in staking and baking, enabling more dynamic capital allocation. This flexibility is particularly valuable for DeFi protocols that rely on liquid staking derivatives to optimize yield strategies.

Meanwhile, the introduction of RISC-V rollups signals Tezos' pivot toward a modular architecture, a trend that aligns with Ethereum's own rollup-centric vision. This modularity allows developers to deploy specialized rollups tailored for high-throughput DeFi applications or real-world asset (RWA) tokenization, further diversifying the ecosystem's use cases.

DeFi activity on L1 has also shown resilience, with TVL reaching $45.1 million in Q3 2025-nearly 70% of which was attributed to Youves, a lending protocol. This demonstrates that while Etherlink captures the bulk of DeFi innovation, L1 remains a critical hub for foundational financial primitives.

Future Roadmap and Investment Implications

Looking ahead, Tezos' 2026 roadmap promises to amplify these growth dynamics. Modular rollups and cross-layer composability are set to enable seamless interaction between L1 and L2 protocols, unlocking new possibilities for yield aggregation, liquidity sharing, and RWA integration. For investors, this means a compounding effect: as Etherlink's TVL grows, it will feed into L1's infrastructure, creating a flywheel of value accrual.

The FA2 Fellowship program, which incentivizes smart contract development in art and DeFi, further underscores Tezos' commitment to ecosystem expansion. This focus on developer incentives and creative use cases could catalyze a new wave of DeFi applications, particularly in niche markets like NFT-based finance and tokenized real estate.

Conclusion: A High-Conviction Case for Tezos

Tezos' 2025 upgrades have transformed it from a niche proof-of-stake chain into a DeFi powerhouse with dual-layer scalability and institutional-grade security. The interplay between Etherlink's EVM compatibility and L1's modular upgrades creates a unique value proposition: a platform that balances innovation with stability. For investors, the data is clear-TVL growth, transaction volume, and protocol adoption are all trending upward, supported by a roadmap that prioritizes both technical excellence and ecosystem inclusivity.

As the DeFi landscape becomes increasingly competitive, Tezos' ability to deliver tangible upgrades with measurable economic impact positions it as a high-conviction opportunity. The question is no longer whether Tezos can scale-it's how quickly the rest of the industry will catch up.