ETH Earnings Report Q3 2025

Transcript

Hey everyone, good morning. This is uh Friday, October 7th. I'm joined by Michael Nato. This is Ryan Sean Adams. I'm uh today's moderator. I guess we are doing an Ethereum Q3 2025 quarterly report. Q3 went by in a flash and we are reporting out Ethereum I guess you might call this like a an Ethereum earnings call or the equivalent of a a network report. Uh Mike and I have started to do these every single quarter. This is like imagine if ETH had a quarterly earnings call for token holders and it was presented in a more cryptonative way. That's the data that Mike at the DeFi report has compiled and

that's what we'll be going over today. A few things before we get in. Um the full quarterly report for Ethereum is available at the defire.io. There'll be a link in the notes here. Um, all of the data that is provided in this report is compiled by public onchain data sets prepared by Micas team at the DI report and additional data partners. This is live streamed right now on X. It's also on YouTube. There'll be an archive on X and YouTube so you can get it later. If you are watching this live, we might be taking some questions depending on what comes in and the quality of your questions. So,

reserve those for the end. You can put them in the chat somewhere. One of our moderators will pick those up, get them to Mike and myself. We'll probably run this for about 40 minutes or so, maybe a little bit less. And the agenda goes like this. First, we'll get some opening remarks remarks from Mike on Ethereum's Q3. We'll do state of the network, including all of the data, maybe some questions towards the end, and some closing remarks. One last thing before we get in. Got to thank our friends and sponsors over at Bit Digital for partnering with us to prepare this report and all of this information. So, Bit Digital, if you're not familiar, ticker is BTBT.

They are public company. They went all in on Ethereum. They're digital asset treasury company. They used to be a Bitcoin mining company. sold all of their Bitcoin and now hold over 150,000 ETH, staking it all on institutional grade validators. So, every Block Stream's fresh rewards straight to their balance sheet. Of course, you guys know that digital asset treasuries for Ethereum were a massive theme in Q3 and continue to be a major theme coming into Q4. So, we want to thank them. They're uh a huge supporter of Ethereum. They're mega bullish on ETH. They're racing to go acquire $1 billion dollars worth of ETH. Uh, and so we uh we we I guess

celebrate them on that journey. You can learn more about them at bitdigital.com. All right, Mike, I've spoken so much already. Give us the executive summary for Ethereum's Q2. What was good about it? what was kind of different, I guess, from previous quarters. How would you summarize this? >> Yeah. No, thanks for having me, Ryan. Excited to to go through a bunch of charts today. And just maybe a little preface on this. Like, if you're an ETH holder, this is who we built this report for. We think we're solving a big problem in in the market with with transparent onchain data. And we designed the report so that it's easy for ETH holders to understand how

Ethereum's network economics impact them as a holder and as a staker um on the network. Um so exact summary. So this was a this was sort of a like mini revival I would say for for Ethereum in in Q3 >> like a good quarter then. Is that what that mean? >> Mostly it was a good quarter. So most of the charts that we are going to share today I think almost all of them Ethereum's performance improved uh in Q3 versus Q2. Um, so that's that's a positive thing. And what was interesting is we saw sort of like this renewed interest of using the L1 uh in Q3. So active users on L1 were up 25% on the quarter and that sort of drove most of the the economic performance in terms of

the real economic value, how that impacts, you know, real yields. Uh we look at we're going to go through network fundamentals and stable coins and token economics here today and all of those uh metrics were looking pretty good during the quarter. Ethereum added 30% um of it grew its stable stable coin supply 30% during the quarter up to >> 30% in one quarter. >> 30% in one quarter up to 178 billion. Uh 58% of all stable coin supply is on the L1. And when you add in L2, you're over 60%. Um, so yeah, let's let's let's hop into the the details here.

>> Okay, so overall a bullish quarter on the numbers and let's get into maybe uh what you call operating performance. We'll start with this metric and I'm going to get you Mike to maybe explain some of these metrics a little bit for us as we get into the rhythm of these um you know quarterly reports. So the first one you have is real economic value and we're looking at a plus 17 on the quarter from Q2 to Q3 we've got a plus 17% right am I reading this correctly >> that's correct that's correct >> but it's negative 58% versus the prior quarter so 2024 Q3 >> that's right >> what what is real economic value >> yeah so what we're looking at here is a chart you know since uh September of 23

so going back two full years and it's pulling in the base fees, the priority fees, the MEV and the blob fees. That's that's what's making up real economic value um on the network. And you know what we can see in the chart is there's quite a bit of pink. You know, if you go back towards more towards 2023, 2024, those are base fees, right? So the base fees on the Ethereum network have are sort of coming down uh over time. we do see pretty pretty solid consistency in terms of the MEV and and and the priority fee payments. U but I think this is just a trend of what we're seeing is this line is sloping you know down into the right and then what you see is user activity sloping up and to

the right on on the layer 2 which which we'll get to uh a little bit later. >> This is basically revenue though, right Mike? >> This is that goes to stakers. This is revenue that's going to go to validators which then pass that on to to stakers. Yeah. Um and this if you're an ETH holder, what you know, why is this important? Well, this is going to impact the the staking yield which which we'll get to in a minute here. >> Yeah. Re revenue I guess is important for ETH holders. It's it's really block space sales revenue. both the ordering of the blocks which is me and then uh the transactions in the block space themselves which is I guess the priority fees and this is both generated by users on the L1 and then also in the form of

blob fees on the L2 it's interesting that blob fees are negative 99% on the quarter right because >> rev is such an interesting story uh for me for for layer ones because we're doing two things here right you rev is only generated when demand exceeds supply, but supply continues to increase, right? Uh the layer 1 block space and Ethereum expanded. We had a gas hike um this cycle, so we got larger blocks and of course blob space continues to expand at a frenetic pace.

It's going to continue to expand and so we have more supply available, but we only generate rev when demand exceeds supply. And yet it's part of the goal is to scale Ethereum layer 1 blob uh block space and layer 2 blob space. And so these sort of things seem at odds. What do you make of that? >> There is sort of a tension here. And I think this is a that's a great question and I like the way you're phrasing this. there's a tension between uh essentially adding enough supply so that L2s and and users can come onto Ethereum and not have to pay really high gas fees and and also you know keeping Ethereum's economics in to a level that is supporting the supply side of the

network and the security of the network. I think they've done a pretty good job of of balancing these two things. And what we'll get to uh in a minute here that ETH holders and stakers should also be paying attention to is actually the the token economics and how some of this feeds into that, right? If if you're viewing Ethereum or E the asset as a store of value, that is extremely important in addition to the the potential yield that you're going to get from the the network's economic activity. Um but we have seen, you know, blob fees are down 99%. This is driven by the Petra upgrade which happened in May and that increased the blobs per block up to up to six. And we'll get to

this in a little bit, but we we haven't actually hit that that target just yet. That's when state contention will pick up. Blob fees should pick up again. And I would imagine next quarter that we'll see, you know, actually growth uh in blob fees. How does that filter into this next measure which is total onchain yield which is uh down 7.5% versus last quarter and down 13% versus prior year. These are related metrics, are they not? >> They are. They are. So um and people may be wondering, you know, wait a minute, you just showed a chart that showed that real economic value is up 17%, priority fees are up 30% uh on the quarter.

Shouldn't the total onchain yields be up, right? that those user payments be flowing to to stakers. Uh the the answer there is they are flowing to stakers. So the the increase in revenue did go uh to validators and stakers. But what happened during Q3 was we actually added uh 1.3% to the ETH staked supply. And so when you when you do that, you're sort of like you're you're diluting the amount of that revenue that can go to each uh validator and staker on the network. And so that's why the yield >> so issuance goes down basically is what you're saying.

>> Well issuance well not not issuance going down actually when ETH staked uh increases issuance also will increase right >> but but but when you increase the uh sort of revenue on the network but you also increase the amount of ETH staked just the amount of revenue that's being dispersed you know sort of rat that that's sort of what reduced the yield there >> and we're at 3% now. So does that basically mean if I'm a staker that's kind of the is this a real yield metric by the way I'm getting 3% in real yield or how would you differentiate real versus nominal in this system? Yeah. So this is uh this is the total onchain yield. And so this is including uh priority fees, me payments, and also the

issuance uh and that's the the consensus rewards that the network pays out to the supply side. So 93% of that 2.98% came from issuance uh during the quarter. So that's that's network inflation. uh the other 7% came from priority fees uh and the me payments from from actual user user activity. >> This is nominal onchain yield denominated in ETH. I guess if you wanted to get some real yield metric then maybe you could like subtract the amount of total ETH issuance over the year and just count that whatever that 7% that was just rev.

>> That's right. So we don't have we have this chart in the report. We're not we don't have it uh for this presentation. Um but the the real onchain yield is not going to include the issuance. So it's just going to have the priority fees plus the me the actual user payments that that acrue to validators and stakers. Um and here we're including the the issuance and you know last quarter the issuance was 88% of the total yield. It went up uh to 93% in this quarter. >> Okay, let's get to some more broad network economy metrics. This one I love which is uh GDP. So we are up on the quarter 32% in terms of GDP um at you'll have to what are we the total number is 2.3 billion

>> that's 2.3 billion correct correct yes >> so for the quarter GDP Q3 um ETH GDP was 2.3 billion that is up 32% versus previous quarter up 25% versus prior year remind us again what GDP P is measuring. I I assume we want GDP to continue to go up, but explain this some more. >> This is a really important metric. Uh we get this from uh token terminal. So shout out to those guys. This is aggregating the total fees on all the applications within the Ethereum ecosystem. So it's essentially similar to how you would think about GDP GDP of a country. It is essentially the the goods and services sold by all the

applications within the Ethereum economy. So it does not include Ethereum itself. It includes all the apps on top of Ethereum. >> Basically all the revenue and fees that those apps are generating. >> Yes. That that Ethereum is essentially providing security for uh so the economic activity that Ethereum is providing security for. U 2.3 billion strong quarter. So up 32% on the quarter mostly driven by I mentioned you know sort of this little mini revival we saw for L1 during the quarter. Um most of that is playing out within DeFi right. So, a lot of the sort of blue chip D5 protocols had a good quarter. A um fees were up 120%. Lido fees uh were up almost 62%. Unis swap was up 45%. Uh and then the stable coin uh providers also

had a pretty good quarter. So, so this is a really positive sign. We've we've looked at a lot of different like sort of correlation, you know, analysis and try to figure out what what is the what are the key metrics that drive ETH's price. You know, we just talked about real yield that that is not super correlated actually to east price, which is a little bit counterintuitive. But what we do find stronger correlation is on metrics like like GDP. >> Interesting. Does this include say revenue generated by D5 protocol like aerodrome on base? >> Uh no, this is Ethereum L1 only. L1 only. Yep.

>> Very good. Um real world assets on chain. So this is up bigly. Uh 9.6 billion 9.6 billion in real world assets on chain. This excludes stable coins. I would imagine >> this ex we do not have stable coins on here. So this is most of this uh so about 57% of this is US treasuries. Um and commodities are the other second largest category about a little over two billion on on commodities and and yeah so this is just a you know strong growth. I think the the sort of standout thing for this quarter was public equities. So that's a massive you know number in terms of percentage change

there on the quarter six over 6,000%. It the actual number >> what's that? >> That's stocks. That's public equities. That's stocks getting tokenized. This is what everybody's been waiting for. This is the first quarter that we saw it basically, you know, we we we saw sort of the the first major sort of uh move here. >> 6,000% increase, right? But that but that base number was really tiny. I was in the single digit millions or something like this. >> Right. The base number was tiny. We're up to about 300 million or so. So, it's still a small number uh even relative to the rest of the assets that have been tokenized on chain. But something, you know, something to watch for. Um, in terms of issuers of of these assets, so Black Rockck, uh, has issued over 2

billion of that 9.6 billion. So, you know, we're starting to see Wall Street uh, become more more engaged. And this is to me the sort of growth story for Ethereum probably over the next few years with regulation, with the SEC's project crypto coming. Um, this is the the most important thing. and and we could probably, you know, I don't want to go on too much of a tangent, but there's a lot to talk about with what what could start to play out with public equities um on chain. >> And if you fear we miss stable coins, don't worry, we got an entire section on this, right, Mike, coming up. But but first, staked ETH. Anything to take away on this? So you're doing this as a percent of circulating supply I believe and then also the total amount of ETH

but maybe we'll talk about in the percent of circulating supply hit all-time highs this quarter. Is that correct? >> That's right. Yeah. So as a percentage of cir um the total circulating supply uh we were at 29.8% for for Ethereum and we were up about 1.2% 2% in terms of the total ETH staked as of 930 when compared to to Q2. And you know if you're a an ETH holder like why is this important to you? This this is as we covered earlier um you know as a network starts to increase its economic activity. Um that activity is going to get paid out to you. However, if this amount of staked ETH is going up, your Prora share of

that is going down. That is going to impact uh your yield. And that's something we we sort of saw play out a little bit this quarter. Um another interesting takeaway just on in the staking sector is most of the growth we're seeing is coming from these institutional providers. So, Figment uh and Black uh Block Damon, Black Demon on there um saw significant growth. We think this is related to treasury companies seeking out institutional partners to to access staking. Um and so another positive development for the network.

>> One thing that I always find fascinating is still even at like 29 30% ETH as a percentage of the network that's staked is a lot lower than other proof ofstake networks. you get something like a Salana, let's say, or a Cardano, what's that? Like, you know, 70 to 80% something like that. And I'm not sure exactly what that reflects, but it is uh interesting in that more of um Ethereum's base money, ETH, is kind of out in the wild as well. Um total value locked. So, explain this metric. We are at 88 billion on the quarter which is a 40% 42% increase from last quarter and an 83%

versus prior year. Uh is this total value locked in DeFi? Essentially >> this is total value locked in DeFi. It's uh the dollar value of all assets deposited, staked or locked in DeFi protocols. This does not uh include stable coins. We will get to to stable coins in a minute here. Um so for the quarter yeah 88.8 8 billion we finished the quarter at up 42%. I always you know tell people uh when you when you observe TVL which I think is a good high level metric uh however it it is dependenced by the price of the underlying assets and so you know there is quite a bit of ETH that is in in locked in DeFi. Uh on the quarter we were up 42% in terms of

the dollar value of TVL the ETH price was up 66%. So, so that tells you that maybe there wasn't as much like new ETH or new assets that were actually moved in and most of that increase came from just the the dollar um to to crypto asset price, you know, conversion. >> Now, this chart doesn't go back to like 2021 and 2022, but my understanding from other charts I've seen is we're essentially at all-time highs in terms of total value locked. Is that correct? >> That's correct. We are just um I I'm not sure if we actually crested it this quarter. I'll have to go back, but yeah, we're very close to kind of where we were peeking out uh in, you know, November 21 or so.

>> Now, you said GDP is often correlated with price. You you kind of like that as a correlative for ETH price. How about total value locked? Are do you find that that's a good correlation with ETH price? So, total value locked go up, then ETH number go up. >> Yes. Uh and but the the I guess the issue here and we're getting deeper into a lot of this type of work the because of what I just mentioned there with the price of ETH uh being so or TVL being influenced by the price of ETH so much that when the price of ETH goes up >> of course it would be correlating that's a one to one correlation.

>> Yeah. Yeah. So, so it's it maybe not as much of a signal as you know looking at sort of transaction velocity or DEX volume or GDP things like that >> but we are getting a lot of the real world assets that are not cor stable coins for instance no correlation with ETH price as stable coin you know goes number go up does that is that causal with ETH price >> we we have seen that um there's a relationship between basically this is and those stable coins are getting getting factored into the sort of ecosystem uh TVL. We've done some analysis on this when we actually add in the stable coins which are actually more than uh more value almost 2x the value

of this TVL. So, so stable coins are 178 billion. You add that to TVL which is 88 billion. We start to see more of a correlation actually um which which is interesting. >> Well, that brings us to stable coins. So, banger quarter for stable coins. We're now on Ethereum looking at uh finishing Q3 with 178 billion worth of stable coins. That's up 30% in one quarter. That's up 92% versus previous year. What's the story here? And what are some of the big uh big big growers stable coin growers on ETH?

>> Yeah, so really good quarter for stable coins on on Ethereum. This has been the big narrative uh I think over the last few quarters. Um so up to 178 billion. This is 58% of the total you know crypto asset stable coin supply. That's L1 only. When we factor in L2 you're at like 62% of the the total supply within the Ethereum ecosystem. Um and the biggest grow the largest um growth for these some of these issuers this quarter was uh Athena. So, Athena had a really good quarter. It did have run into some issues a few weeks or about a week ago with with this um the liquidation chaos.

Uh however, it was up 177% up got up to 15 billion of stable coin, you know, value or that's been issued. Um one of the largest one of the best growth stories in the stable coin sector uh this this year. Uh PayPal up 165% during the quarter. They've got multiple billions of stable coin supply out there now. Uh Tether was up was up 28%. Tether is about 53% of all stable coins on the Ethereum L1 today. >> Uh and we saw a little uh resurgence of D, which was nice to see. Up 27%. Uh they've got about 3% of the total stable stable coin supply on Ethereum. And uh maybe the final uh metric I'll throw at

you is just the stable stable coin supply on L1 is about 2x the TVL uh of the of the network >> stable coin supply on L1 is 2x >> twice the size of the total value locked in DeFi if you Yeah. So, stable coins, stable coins are the story. And this along with kind of the public equity story, I think, is is a thing to pay attention to. And what I'm really looking for is just uh how can we get more wallets into people's hands? And then what are the use cases that are going to get people moving stable coins?

Is it payroll? Is it merchants, you know, starting to adopt, you know, this for point of sale? Um, but this is the key thing. And then once everyone has a wallet and some stable coins on it, now you're you've sort of left the the legacy system. Um so yeah, >> believe the broad narrative that we're going to grow. Bessant says we're going to grow to trillions in stable coins basically. And so if you believe that I guess the thing to watch is what portion of those stable coins end up in the Ethereum ecosystem, particularly on ETH layer 1. Are they able to maintain that 50 to 60% of market share capture?

>> That is that's going to be the interesting thing to watch for especially as some of the banks, you know, start to tokenizing and and uh issuing stable coins. That is going to be I think the thing to watch for. But I I do buy what he's saying in terms of hey, we're going to push this. I I view stable coins as sort of like the the new petro dollar system in some ways with with Tether and and how they're growing the network effect, the dollar abroad. And so I think this is going to be pushed. I think Tether is becoming very aligned with the US government. And this is uh this is a way to grow the network effect of the dollar, you know, new buyer treasuries, all of that. So big story with stable coins unfolding story that I think is going to get even more

interesting as we go. >> What is uh stablecoin transfer volume add to this story? >> So yeah, not only was the actual supply up 30% but we we saw increased you know velocity. So more more transaction volume on chain as well. also up 41%. Um the the interesting thing here and this is going to evolve over time but most of this activity is still playing out on on decentralized exchanges. This is mostly trading you know volume where a stable coin is being used as a trading pair. Um what what we will start to see more as we get more use cases and maybe payroll and things like this for stable coins is that percentage of the transaction volumes should start to slide down um and we should see it being used more for

payments and just you know kind of everyday commerce and so that's something that that we're looking for but DEX volumes were up in the quarter so that impacted sort of the velocity of uh stable coin transactions as well >> certainly and I'd expect to see almost some different behaviors on the L1 with lower transaction throughput versus L2s as well and what those stable coins are doing. >> Let's turn to some economics around Ether the asset and token economics you might call this or monetary policy uh circulating supply of Ether that's gone up of course. Um how would you kind of explain this? What's sort of the uh I guess the annual annualized issuance of ETH at this point in time? Yeah. So, I

think if you're an ETH holder, you always want to be paying attention to the the supply and uh this is one of the strongest elements I think of of Ethereum. And I think the Ethereum Foundation really got this sort of monetary policy correct. And you can see this by looking at this chart and that pink line is basically going straight across. And this is going happening during a period where um you know we've been going through sort of a lot of protocol upgrades, a lot of transitioning happening with user activity from L1 to L2 and there they've sort of stabilized the network in terms of its token economics but I think it's a strong signal um to the to the market.

Uh how is this calculated? So Ethereum has uh an issuance policy. So it issues new ETH to validators uh and that's how they compensate the supply side of the network for providing the security and that issuance is dependent on the total amount of ETH staked. So as ETH staked rises issuance is going to rise with that. Um on the other side of that you have burned ETH and that's coming from uh base fees and also blob fees. So, so when you can if you can get a lot of activity on L1 via base fees, you're going to ramp up your your burn uh and and potentially actually offset the the issuance and you're actually

deflationary at that point, which is very interesting in terms of store of value narrative for for Ethereum. >> It's like an algorithmic issuance policy with multiple levers here. It's not fixed in the way that bitcoin is just 120 or sorry 21 million I should say uh with you know decreasing rewards every four years it is algorithmic but it is um it is low right you know annualized issuance is less than a you 1%. It's it for the quarter it was uh actually so if we go to the next chart we can get into that. Uh so we call it the net dilution rate. This is essentially the you know issuance issuance rate or the inflation rate of the network. And the thing to to

keep in mind here for ETH holders is you know if you are staking your assets you are you're not being diluted by the network. So the network is issuing new tokens to pay for the security. Um, but if you're staking your assets, that's being paid to you, right? So, this is different uh from sort of being diluted with a stock where the actual stockholder doesn't have the ability to not be diluted. If you don't want to be diluted, you just stake your assets. This applies more towards to non-stakers. Um, and the net dilution rate, you can think of this as inflation rate of the network, um, was 78. That was the average annualized rate during Q3. So it was up a little bit um just

because we had more issuance because there was more E staked on the network and the burn you know did not offset that. If you want to be a store of value, you have to have fairly low issuance, right? So like if you're looking at gold, it's like 1 to 2% per year depending on the price of gold. And the gold mining out there for Bitcoin that is now where's Bitcoin right now is it's 1%. 085 something like that. >> It's like the Ethereum is actually lower than Bitcoin right now. It's not fixed like you said, but the way that they've structured this monetary policy to, you know, the way they've sort of uh set that up with those algorithms with the amount of east stake rising, issuance rising, uh, and then offsetting that with burn, it's it's working quite well,

I would say. I mean, it's it's the inflation's lower than than than Bitcoin. So, >> yeah, I agree. It's uh it's strong like ETH is strong in that aspect. I think it's a little harder to understand though than 21 million fixed supply, but I think we're getting there. All right, let's talk about DeFi for a little bit. This is a story the story of DEX volumes and this is a number that certainly went up on the quarter. >> Yes. Uh strong quarter like I said uh more more active users on on L1 during during Q3 uh compared to Q2. So up 68% in terms of total volume for the quarter. Uh 83 this is combining the L2s and Ethereum here. So, so we've got both. Uh, Ethereum was up was up more

than the and this sort of tells the story of more active users on L1. Ethereum was up 83%. Uh, compared to also strong growth on the L2s, but but not quite as strong. Um, and Ethereum L1 did 33% more volume than the L L2s combined during the quarter. That was only 9% more uh in in Q2. So, strong quarter for for DEX volumes unit. Um, UniChain also had a pretty good quarter, up 32%. We've been tracking sort of the how how unis swap is kind of transitioning from just its its decks into more of an L2. So, >> active loans on Ethereum uh pretty strong quarter as well. This is maybe

what Vitalic in a recent post called slow defi. These kind of collateral backed loans. Uh what are the numbers here? >> Yeah, so strong quarter. Uh so up 67% so active loans um on Ethereum this is combining Ethereum L1 and the L2s was up 67%. This was led by Maple Finance uh up 84%. A had another good quarter up 82%. Uh and also Huer and Morpho had very strong quarters. And in terms of the um the active loans on L2s as a percentage of the total on L1, it's about 12.3% of L1. That's up from from Q2 when it

was uh 10.8%. >> And this is uh by all metrics at all-time highs, right? And particularly led and dominated by a but all-time highs almost like is this like looking like double or triple from the highs of uh you know 2022? >> Looks really good. Yeah, it's been uh it's been in an all-time high now going back to, you know, Q1 uh of this year. So, so it's been a really strong run for sort of DeFi, you know, slow DeFi uh and and A has been A's been leading the charge here.

>> All right, let's uh take a little bit look at the layer 2 ecosystem and zoom in there. So, layer 2 fees as a percentage of the L1 that is uh 25. Sorry, I'll just round it to 26% on the quarter. This is up 5% from previous quarter. Up 63% versus previous year. I'm trying to think about this. So, combined L2 fees as a percent of do we want this to go up or down or is it just an observation? What does this mean? Yeah, this is I would say it's more of an observation so that people can understand sort of how the economics are shifting um from from L1 to L2. And

so yeah, we finished you know the quarter we we've been talking about how L1 had a good quarter, right? L 25% increase in active users. Uh L2 L2's also had a good quarter. So it's not like uh we saw this like a migration or something. It was kind of interesting that they both did well uh at the at the same time and improved and and so if you're a token holder, this is just helping you think through like as the as the economics shift to L2s, um you kind of want to know how that's that's playing out at a high level like this. And then also how can that potentially impact you as a as an ETH holder, as a staker, how is that going to impact your yield? Um and so >> concretely what this means is uh L2s actually generated 30% of the total

Ethereum L1 and L and L2 like the fee set 30% of all the fees were actually L2 users and paid by L2 users. Is that correct? So actually the way to think about this is so L2 users um uh the amount of the combined fees for L2 users was 25.9% of the combined fees of L1 users on on Ethereum is kind of the way way to think of it. So, it's just giving you an idea of like which, you know, at some point the L2s should actually have more fees than L1, I would think. And we've been sort of tracking that. So, so we're right now we're at about 26%,

you know, combined L2s as a percentage of L1's. And we we we expect to see this to continue to rise uh higher and we're just tracking how is that going to impact, you know, blob fee payments, earned ETH, how does it ultimately impact the ETH token holder. This is another fractal of what we were talking about earlier, which is there's some supply and demand dynamics, right? And supply is continuing to increase as well. And this is showing up in the L2 cost per transaction. I think you've zoomed in on base here, but it's continuing to go down because BAS is increasing the amount of L2 block space.

It's not because demand is decreasing. Is that the story? >> I think that's I think that's right. Uh so we've seen you know essentially a lot of supply come on Petra upgrade makes it easier reduces congestion uh for pricing and user fees. So that went up to the target you know blobs per block went up to six. This was in Q2. Uh we have not yet hit hit that. We do have a chart in here to show that. Um so we have not hit it yet. This is keeping fees extremely low uh right now. So, so the average, this is the average cost, you know, just throughout the quarter and it was a little bit under two cents on base.

>> So, two cents to send a stable coin on base is is what we're looking at at this time and that's continuing to decrease which is good. L2 onchain margin on base. Talk about this. >> Yeah. So, um you know, gives you an idea of just sort of the trade-off, right, that Ethereum is making. Ethereum is a product. Uh Ethereum L1's a product. It is, you know, selling that product to to L2s. And so, you know, what is Ethereum getting out of that? Uh, right now it's mostly um the L2s, I would say, that are that are doing quite well. And we may see like some sort of negotiation or I don't know how this is going to play out at some point where Ethereum is able to claw back uh you know, some of some of the some talk, Mike, of Ethereum

instituting sort of a a base fee, you know, like in general for for L2. So, it's not just like fees during contention, but there's just like a base general fee. I think that's an EIP that's in the works. >> Interesting. Interesting. Um, yeah, we'll have to get a somebody from the foundation or something on on one of these calls at some point. Um, but yeah, so so this is just it's been a good trade-off, right, for for base for the L2s. Their their their margin for the quarter was uh was up a just under 1% and it was almost 98%. This is just on just pure onchain margin, right? We know they have employees and other overhead, but this is just pure onchain in terms of user payments that go to base and then what they're paying to L1 for

security. >> Yeah, I was looking at base economics actually earlier this week. It was something like uh right now like you know 450k per day something like that which equates to like I don't know 150 million or something AR like that's pretty good. It's a pretty good business successful LT right now. very profitable. L2 transactions by chain are up only. This is um 20 million transactions over the day. >> Yep. Yep. Per day. >> Million per day. Yeah. >> Wow.

>> So L2s are doing about 12.4x the amount of L1 transactions combined. >> Um on bullish, right? That's bullish. >> This is bullish. Yeah. This is interesting to me that um you know Ethereum L1 had had a good quarter and then we also saw like even more activity on the L2s at the same time. So it wasn't like you know like it's cannibalizing itself. It's sort of like everybody started to do well uh in Q3. So transactions were up 17%. We saw like a huge I I we haven't had a chance to like really look into what's going on over there but um Lana and I don't know if I'm pronouncing that correct. I believe this is the consensus uh L2 they had a really strong quarter um and saw a

big increase in transactions up 170%. We've seen >> uh world chain continue to to grow as well and quite a few transactions running through there. Um base was up 15% during the quarter. They are sort of driving most of these L2 metrics that that we're looking at here. So uh during the quarter they represented 51% of all transactions across L2s. Uh that was 52% uh last quarter. So >> this is cool and they're all competing. I think in uh the Q4 the next time we do this Mike there will be some new additions to the L2s like one that I've had an eye on is lighter which is actually like this L2 per exchange doing some significant transaction volume right now and and scaled to kind of

grow. Let's talk about L2 blobs per block. What this is part of the expansion of blob space that Ethereum deployed in its most recent uh upgrade and it looks like we're almost starting to hit the maximum supply on this. Is is that correct? >> We're getting close. We're getting really close. And you can kind of see, you know, the the purple line there. That's the target target right there. Right. So, as the L2 um amount of blobs hit that target uh per block, that's when sort of state contention kicks in and you get sort of similar to what you would see on the L1 with base fees. Uh you know, they get really spiky after that right?

>> Prices get spiky. Exactly. It's just supply and demand, right? And so, you can see that we were hitting it quite a bit in the middle of the chart there and that was creating more burnt ETH. There's more, you know, it's it's it's it's impacting um the token economics of the network. And so this is important. We did get up to like 5.8. So you can see there like towards the end of the quarter got very close. Uh we've been tracking it even for the the last few weeks. Haven't quite hit it but it's it's sort of getting very very close there. So something something to keep an eye on. >> But we are scheduled to continue to increase the amount of L2 block and we'll increase it again.

>> So that tension is just going to continue for for years here. Yeah. >> Like that rubber band here. Okay. My favorite part of uh all of this always is the store of value case for Ether the asset. It's a big quarter when it comes to monetary store of value types of properties. Uh tell us what you're looking at in the quarter. Maybe this first is ETH ETF AUM. So that is up 61% on the quarter. We're now at uh 6.6 million ETH in terms of supply. That's not the uh USD value. in terms of supply locked in ETFs and that's up 140% from the previous year. It's interesting because it seems like ETH ETFs had a

kind of a slow start when they launched in 2024, but this has just been a massive quarter for them, hasn't it? >> Massive quarter. Uh so the the ETH ETFs hold uh a little over 14 14.5 billion or so of of value and 9 billion of that came in during the during Q3. >> Wow. >> And most and most of that 9 billion came in July. So July was just an absolutely torid pace of >> just the Tom Lee effect. What do you think >> this was? I think so. I think so. Uh Tom Lee had has something to say about that.

And yeah, so it's now the ET the ETFs currently hold 5.5% of the total the total east supply. Um, Black Rockck was up 117% during the quarter. Franklin Templeton was up 57%. Fidelity was up 57%. So really strong quarter, you know, from the from the ETFs. And I think this, you know, helps strengthen that that store of value um, you know, narrative for for Ethereum. Well, speaking of Tom Lee, this is a a section all about ETH held in treasuries. And of course, Tom Lee is is the leading ETH treasury company. I think right now, and a lot of this happened last quarter, they're at about 2.5% of all ETH supply locked up inside of

Bitmine, the ETH treasury company. But this has been an incredible pace on the quarter. Give us the headline numbers. What was the growth in ETH head uh held in these digital asset treasury companies? So 367% uh in in Q3 we grew. And I mean you can look at that chart. It's it's it's an interesting chart where it's just basically a stair. It looks like a staircase. >> Yeah. These are all purchases like you know billion dollar purchases of ETH >> similar size so sort of purchases and yeah you're absolutely right. So bit Bitmine now has two over 2.5% at the end of the quarter uh which was just a few weeks ago they had 2.2%. So it's they're they're growing fast. They added um 782%

to their ETH holdings during the quarter. >> Wow. >> Um BTCS was number two at at 380%. ESB added 345% and then BTBT added 336%. So, um you know, everyone's out there, you know, buying. We'll see how if this is going to continue and what the sort of um strength of this is going to be moving, you know, moving into Q4 uh and also next year. But it's been this has been a really you know important catalyst I would say for Ethereum uh over the last over the last few quarters >> and special shout out to uh BTBT as well that is Bit Digital and thanks to them again for sponsoring this uh this report. So good to see them in the numbers.

>> Um ETH balance on centralized exchanges that is going down and it has continued to drop and this has been quite curious to me. Uh can you talk about this number? Why is it important in the store of value story? >> It's it's important to me because it's showing that people want to to hold ETH and it's leaving it's leaving exchanges uh is kind of the the main thing. Why is it leaving exchanges? I think it's because people want to hold ETH for the capital efficiency that you can get with it. And you're going to get that capital efficiency by going into to DeFi. And so I think you know that's if you saw the the other side of this is that the amount of ETH in smart contracts

continues to to to go up. And so I think that is what's playing out here. The other piece of this is the ETFs, right? So this chart has been you know basically down down and to the right for the last five years or so. Um, it accelerated a little bit I think at towards the end because I think a lot of people are buying the ETFs now and not going on to Coinbase or other centralized exchanges, buying their ETH and then just like custodying it there. They're using the the ETF. So that that potentially is playing into it as well. Um, but this is just telling me that people want to hold ETH and they want to do things with their ETH. The way to do things with your ETH is to go uh onchain and go into DeFi. So >> yeah. So this is uh somewhat interesting

because so this is just ETH balance on centralized exchanges. It's at about 12 million ETH back and it's the lowest level since uh basically the inception of the Ethereum network right before you know ETH even had listings on centralized exchanges which is extraordinary. Back in 2020 it used to be you know closer to 35 million ETH on exchanges. I'm also wondering if this is part of the story of like the diminished role of centralized exchanges and it's a different kind of effect because like what we're seeing is more institutionalization of ETH inside of these ETFs and also these digital asset treasury companies.

But I guess the ETH inside the digital asset treasury companies oftent times ends up on chain anyway because they are looking for yield in the form of staking and they're looking for yield in the form of DeFi. So maybe that's uh you know some more explanation behind these numbers. >> I think so and I think that's part uh of what's playing out too. We mentioned we saw we mentioned earlier that ETH staked was was up uh on on the quarter and a lot of that growth is coming from institutional staking uh providers. We're looking to see that actually you know potentially increase quite a bit.

We've actually been doing some interesting analysis on this. We're expecting the the ETH ETFs to get approval for uh staking uh being able to pass for pass for the staking returns to the ETF holders. And so we expect most of the value that's in um ETFs right now is actually going to go into staking. And so then it's like okay, how is that going to impact the yield? And and there's a bunch of downstream impacts uh on that. So >> so good sign uh this quarter, good signs for ETH as a store of value asset. I guess when I zoom out, I mean the big scoreboard is like kind of the world, right? What are all of the I guess I'll say denationalized commodity money store value assets out there. And of course, if you look the

charts outside of even crypto, number one is gold. What's that now? Uh Mike, $30 trillion, which is that insane >> last year. Crazy. Yeah. >> Number two is actually it's not Bitcoin anymore. I think since silver's been on a run, I think silver has exceeded the market cap of of Bitcoin. I'm just going off memory here. So, I think we're we're over two trillion on silver. So, that'd be number two. Number three would be Bitcoin. And I guess number four would be Ether, the asset. So, that's the big chart to watch if you're looking for the global story here. >> Yep. Yeah, I would I would agree. And I I'm looking for that narrative to to continue to to take hold. And I think one of the challenges like you mentioned earlier is just the the store of value is just it's a it's sort of a easier

sort of explanation with hardcoded 21 million versus the the sort of token economics of of Ethereum. But I think as people get more comfortable people, you know, the the Lindy sort of of the chain itself and the fact that it's really, you know, solved a lot of these monetary policy challenges should should start to like, you know, take hold as time goes on, I think. Well, that's it. Okay. So, I don't think we have any big questions in Q. So, maybe we can wrap this all up with uh any closing remarks you have just on the quarter, Mike. So, overall bullish. I guess we haven't really talked about price, but uh definitely we saw some ETH price appreciation on the quarter. Where does that lead us going

into Q4? >> Yeah. So I I would say, you know, to people, we covered uh about a third of the actual information and insights that are in the report. So I recommend people check out the report, download the PDF, you know, check out the dashboards. Um I think my closing remarks on just sort of where Ethereum's at is it's a it's a good quarter. Uh it's we we saw, you know, improvement across all almost all metrics. Um and I think what I'm looking for moving forward is uh more more real world asset. I I really believe that the story here is going to be real world assets. It's going to be stable coins and let's see how this starts to play out. I think,

you know, there's I think some concern right now about whether or not we're going to have a bare market or not. It could be a much very different bare market if you have all of this adoption playing out even if the macro isn't sort of cooperating. Um and so yeah, I think I think uh good quarter and like I said a lot more information in this report. We did get it. We do go into a fair value. We have a relative strength section where we actually compare ETH against all of its beta pairs in terms of how does ETH perform against uh a number of like core assets within the ecosystem and we do some beta analysis.

We do some correlation analysis. So quite a bit of information in there. It's a public good uh for people and we we made this for for ETH holders. It's amazing, guys. And you can access that, of course, at the d5report.io. I have the link pulled up. You can download an ETH report. We're actually doing the same thing for Salana in an hour or so, Mike. So, you've got that as well, so we could tease that. There's also a company Dune dashboard to support all of the numbers here. Uh Mike has some incredible data scientists and analysts on his team that prepare all of those. I don't think there's anything better when it comes to ETH like uh metrics and output on the internet today. Uh so and another reminder all of

this will be accessible on uh bank list on bankless YouTube. So you can send this uh to any ETH holder that you know it's also on X. The next time we do this will I guess be January 15th for the end of uh 2025 Q4 and that report. We'll have that to you. And if you want just in general some of Mike's opinions on the current cycle, for instance, I see a question from somebody Thomas. He says, "When do you think the top in the what do when do you think the top in the cycle is? And will things continue to just grow or wash out?" I don't think we have time to get into all of that and answer that on today's call, but uh we are doing an episode on Monday where I'm

going to talk to Mike about his thoughts on the current cycle and where we go after that. So stay tuned to Bankless for all of that. We appreciate you joining us today and uh we'll be back next time with another quarterly report in January.