Ethereum's Smart Contract Edge: Why Institutional Treasuries Favor It Over Bitcoin

In the evolving landscape of institutional crypto treasuries, Ethereum has emerged as a clear favorite over Bitcoin, driven by its programmable infrastructure, yield-generating capabilities, and DeFi integration. While Bitcoin remains a digital gold standard, Ethereum's active treasury strategies—enabled by smart contracts and staking—offer institutions a more dynamic and productive asset class. This shift is reshaping blockchain adoption, with Ethereum's ecosystem outpacing Bitcoin in institutional allocation and innovation.

The Yield Advantage: Staking and DeFi as Institutional Tools

Ethereum's transition to proof-of-stake (PoS) in 2022 unlocked a critical edge: the ability to generate yield. By staking ETH, institutions earn annual returns of 3–5%, a stark contrast to Bitcoin's zero-yield modelForbes, *Why Ethereum Treasuries Could Be The Next Big Business Strategy*^[1]. This has transformed Ethereum from a speculative asset into a revenue-generating tool. For example, 19 public companies now hold 2.7 million ETH for active yield generation, with protocols like EigenLayer and Lido Finance enabling staked ETH to support multiple services while retaining liquidityBitget, *Ethereum's Institutional Adoption and Treasury Dynamics*^[2].

DeFi further amplifies this advantage. Ethereum's Total Value Locked (TVL) surged to $223 billion in Q3 2025, driven by protocols like Aave and Uniswap, which allow institutions to lend, borrow, and trade without selling their holdingsThe Currency Analytics, *Ethereum Treasuries Surge Amid Institutional Adoption*^[3]. In contrast, Bitcoin's TVL remains negligible, as its scripting limitations restrict it to passive storage. According to a report by The Currency Analytics, Ethereum-based ETFs attracted $1.83 billion in inflows in July 2025, dwarfing Bitcoin ETFs' $171 million, underscoring institutional preference for yieldForbes, *Why Ethereum Treasuries Could Be The Next Big Business Strategy*^[4].

Programmability: Beyond Staking to Treasury Innovation

Ethereum's smart contracts enable far more than staking. Institutions leverage its programmability for stablecoin integration, algorithmic yield farming, and tokenized real-world assets. For instance, MakerDAO's DAI stablecoin and OpenSea's NFT marketplaces operate seamlessly on Ethereum, offering liquidity and diversificationCoinGape, *Top DeFi Protocols To Use 2025*^[5]. This flexibility is absent in Bitcoin, whose Script language is limited to basic transactions.

The Dencun upgrade in March 2024 exemplifies Ethereum's adaptability. By reducing Layer 2 (L2) transaction costs by 10x, it incentivized institutions to deploy capital across L2s like Arbitrum and Optimism, optimizing efficiency while retaining mainnet securityIntoTheBlock, *2024 Onchain: 5 Key Trends*^[6]. Meanwhile, Bitcoin's fixed supply and lack of smart contract functionality position it as a hedge against inflation but limit its utility in active treasury managementVariWealth, *Bitcoin vs. Ethereum: Analyzing Performance*^[7].

Institutional Use Cases: From Staking to Dual Strategies

Public companies and sovereigns are increasingly adopting Ethereum-centric strategies. SharpLink Gaming and Bit Digital allocate significant ETH reserves to staking and DeFi, generating returns while maintaining liquidityCoin Telegraph, *Ether vs. Bitcoin Treasuries*^[8]. Even dual-strategy portfolios—combining Bitcoin's stability with Ethereum's productivity—are gaining traction. The U.S. Strategic Crypto Reserve, for example, holds both 198,000–207,000 BTC and 60,000 ETH, balancing long-term value preservation with active yield generationAmbCrypto, *Bitcoin vs Ethereum: Why Public Companies Choose Both*^[9].

Regulatory clarity has further accelerated Ethereum's adoption. The SEC's 2025 approval of in-kind creation and redemption mechanisms for Ethereum ETFs enhanced liquidity, while acts like CLARITY and Genius Act reinforced its utility-token statusForbes, *Why Ethereum Treasuries Could Be The Next Big Business Strategy*^[10]. In contrast, Bitcoin's regulatory path remains contentious, with the SEC's scrutiny of staking derivatives complicating institutional integrationCoindesk, *Ether ETFs and Institutional Staking*^[11].

On-Chain Metrics: Ethereum's Growing Institutional Footprint

On-chain data validates Ethereum's institutional ascent. As of Q3 2025, 70 organizations hold over $17 billion in ETH directly, with another $25 billion through ETFsForbes, *Why Ethereum Treasuries Could Be The Next Big Business Strategy*^[12]. Ethereum's deflationary dynamics—driven by EIP-1559 burns and staking—have contracted its supply, creating a valuation floorBitget, *Ethereum's Institutional Adoption and Treasury Dynamics*^[13]. Meanwhile, Bitcoin's exchange outflows, though significant ($9.4B in 2024), reflect passive accumulation rather than active deploymentIntoTheBlock, *2024 Onchain: 5 Key Trends*^[14].

Risks and the Road Ahead

Ethereum's treasury strategies are not without risks. High leverage in DeFi protocols like EigenLayer and liquid staking tokens (e.g., stETH) introduces volatility, as seen during a 15% ETH price correction that triggered $4.7 billion in liquidationsThe Currency Analytics, *Ethereum Treasuries Surge Amid Institutional Adoption*^[15]. However, these risks are mitigated by Ethereum's robust institutional-grade infrastructure, including custodial solutions from Coinbase and FigmentKenson Investments, *Ethereum Staking in Institutional Portfolios*^[16].

Bitcoin's simplicity may appeal to risk-averse treasuries, but Ethereum's programmability and yield potential align with the evolving needs of institutional investors. As the U.S. and Europe finalize regulatory frameworks, Ethereum's role in treasury management is poised to expand, cementing its position as the blockchain of choice for active, income-generating portfolios.