ETH Earnings Report Q3 2025

Here's a comprehensive summary of the YouTube video transcript, maintaining the original language and technical precision:

Key Concepts

• Ethereum Q3 2025 Quarterly Report: A comprehensive analysis of Ethereum's network performance and economics for the third quarter of 2025.
• Real Economic Value: A metric encompassing base fees, priority fees, MEV, and blob fees, representing revenue generated on the network.
• Total Onchain Yield: The combined yield from issuance (consensus rewards) and user payments (priority fees, MEV).
• GDP (Gross Domestic Product) on Ethereum: Aggregated fees from all applications within the Ethereum ecosystem, representing economic activity.
• Real World Assets (RWAs) onchain: Tokenized real-world assets like US Treasuries, commodities, and public equities.
• Staked ETH: The amount of ETH locked in staking, expressed as a percentage of circulating supply.
• Total Value Locked (TVL): The dollar value of assets deposited, staked, or locked in DeFi protocols (excluding stablecoins).
• Stablecoins: Cryptocurrencies pegged to a stable asset, primarily the US dollar.
• Net Dilution Rate: The inflation rate of the Ethereum network, calculated as issuance minus burned ETH.
• DEX Volumes: Trading volume on decentralized exchanges.
• Layer 2 (L2) Ecosystem: Scalability solutions built on top of Ethereum's mainnet (L1).
• Blobs per Block: A component of Ethereum's data sharding, increased by the EIP-4844 (Proto-Danksharding) upgrade.
• ETH ETFs (Exchange-Traded Funds): Financial instruments that hold ETH, offering exposure to the asset.
• Digital Asset Treasury Companies: Companies that hold significant amounts of digital assets, like ETH, on their balance sheets.
• Store of Value: The ability of an asset to maintain its purchasing power over time.

Ethereum Q3 2025 Quarterly Report: Network Performance and Economics

This report provides an in-depth analysis of Ethereum's performance during Q3 2025, presented as a "cryptonative earnings call" for token holders. The data is compiled from public on-chain datasets by The DeFi Report and additional partners.

Opening Remarks and Executive Summary

Ryan Sean Adams and Michael Nato presented the Q3 2025 Ethereum quarterly report. The quarter was characterized as a "mini revival" with improved performance across most metrics compared to Q2. Key highlights include a 25% increase in active users on L1 and significant growth in stablecoin supply. The report aims to provide ETH holders with transparent on-chain data to understand how network economics impact them.

State of the Network: Operating Performance

1. Real Economic Value:

• Key Point: Real Economic Value (REV) increased by 17% in Q3 compared to Q2. However, it was -58% versus the prior year (Q3 2024).
• Components: REV is calculated by aggregating base fees, priority fees, MEV (Maximal Extractable Value), and blob fees.
• Trend: While MEV and priority fees showed consistency, base fees have been trending downwards. User activity on L2s is trending upwards.
• Significance: REV represents revenue that accrues to validators and stakers, directly impacting staking yields.
• Blob Fees: Blob fees saw a significant -99% change on the quarter. This is attributed to the EIP-4844 upgrade (Proto-Danksharding) in May, which increased blobs per block to six. While supply has increased, demand hasn't yet fully utilized this expanded capacity, leading to lower fees. The expectation is for blob fees to pick up in Q4 as state contention increases.

2. Total Onchain Yield:

• Key Point: Total onchain yield decreased by 7.5% versus Q2 and 13% versus the prior year, standing at 2.98% for Q3.
• Composition: 93% of this yield came from issuance (network inflation), with only 7% from priority fees and MEV payments.
• Reason for Decrease: Despite an increase in REV, the total onchain yield decreased due to a 1.3% increase in staked ETH supply during Q3. This dilutes the revenue distributed per validator and staker.
• Real vs. Nominal Yield: The presented yield is nominal, denominated in ETH. Real onchain yield would exclude issuance and only consider user payments.

3. Ethereum GDP:

• Key Point: Ethereum's GDP (Gross Domestic Product) reached $2.3 billion in Q3, a 32% increase from Q2 and a 25% increase from the prior year.
• Definition: GDP on Ethereum aggregates total fees generated by all applications within the ecosystem, representing the economic activity secured by Ethereum.
• Drivers: The growth was primarily driven by a resurgence in DeFi activity on L1. Blue-chip DeFi protocols like Aave (fees up 120%), Lido (fees up 62%), and Uniswap (fees up 45%) experienced strong quarters.
• Correlation with ETH Price: GDP is identified as a metric with a stronger correlation to ETH's price compared to real yield.
• Scope: This metric is for Ethereum L1 only and does not include activity on L2s or other chains like Base.

4. Real World Assets (RWAs) Onchain:

• Key Point: The value of RWAs onchain (excluding stablecoins) reached $9.6 billion, a significant increase.
• Composition: Approximately 57% of this is US Treasuries, followed by commodities (over $2 billion).
• Standout Growth: Public equities saw a massive 6,000%+ increase on the quarter, though from a very small base, reaching around $300 million. This marks the first significant move in tokenized public equities.
• Issuers: BlackRock has issued over $2 billion of these assets, indicating growing Wall Street engagement.
• Future Outlook: RWAs are considered a major growth story for Ethereum over the next few years, especially with regulatory developments.

5. Staked ETH:

• Key Point: Staked ETH as a percentage of circulating supply hit all-time highs at 29.8% in Q3. The total amount of staked ETH increased by approximately 1.2-2% compared to Q2.
• Impact on Yield: While increased economic activity benefits stakers, a rising staked ETH supply dilutes the prorated share of revenue per staker, impacting yield.
• Institutional Growth: Most of the growth in staking is coming from institutional providers like Figment and Blockdaemon, likely driven by treasury companies seeking staking partners.
• Comparison to Other PoS Networks: Ethereum's staked percentage (around 30%) remains lower than networks like Solana or Cardano (70-80%), suggesting more ETH is held outside of staking.

6. Total Value Locked (TVL) in DeFi:

• Key Point: TVL in DeFi reached $88.8 billion in Q3, a 42% increase from Q2 and an 83% increase from the prior year.
• Definition: TVL represents the dollar value of all assets deposited, staked, or locked in DeFi protocols, excluding stablecoins.
• Influence of ETH Price: The significant increase in TVL was partly driven by the 66% rise in ETH price during the quarter, rather than solely by new ETH or asset inflows.
• All-Time Highs: TVL is nearing or at all-time highs, comparable to levels seen in November 2021.
• Correlation with ETH Price: While TVL generally correlates with ETH price, its strong dependence on ETH's price makes it a less independent signal compared to metrics like transaction velocity or GDP.
• Stablecoin Impact: When stablecoins (nearly 2x the TVL) are included, a stronger correlation with ETH price emerges.

7. Stablecoins:

• Key Point: Q3 was a "banger quarter" for stablecoins on Ethereum, with supply reaching $178 billion, up 30% in one quarter and 92% year-over-year.
• Market Share: Ethereum L1 holds 58% of the total crypto stablecoin supply, and with L2s, this figure exceeds 60%.
• Top Growers:
  • Athena: Up 177% to $15 billion, despite recent liquidation issues.
  • PayPal: Up 165%, with billions in supply.
  • Tether: Up 28%, holding 53% of stablecoin supply on Ethereum L1.
  • DAI: Up 27%, holding 3% of the total stablecoin supply on Ethereum.
• Scale: Stablecoin supply on L1 is approximately 2x the TVL of the network.
• Future Narrative: The growth of stablecoins is a key narrative, with potential to reach trillions. The focus is on how much of this supply will be captured by Ethereum L1 and the development of use cases like payroll and merchant adoption.
• Stablecoin Transfer Volume: Transfer volume was also up 41%, indicating increased velocity. Most of this activity is on decentralized exchanges (DEXs) as trading pairs. The expectation is for this to shift towards payments and everyday commerce as use cases expand.

Token Economics and Monetary Policy

1. Circulating Supply of Ether:

• Key Point: The circulating supply of ETH has increased, but the Ethereum Foundation's monetary policy has stabilized the network.
• Issuance Policy: ETH is issued to validators as compensation for network security. Issuance is dependent on the total amount of ETH staked.
• Burn Mechanism: ETH is burned through base fees and blob fees. High L1 activity can lead to significant burns, potentially offsetting issuance and making ETH deflationary.
• Algorithmic Issuance: Unlike Bitcoin's fixed supply, Ethereum has an algorithmic issuance policy with multiple levers.
• Annualized Issuance: The annualized issuance rate is less than 1%.

2. Net Dilution Rate:

• Key Point: The net dilution rate (inflation rate) averaged 0.78% annualized during Q3.
• Explanation: This rate is higher than previous periods due to increased issuance (driven by more staked ETH) without a proportional increase in burns.
• Staker vs. Non-Staker Dilution: Stakers are not diluted as they receive issuance rewards. Dilution primarily affects non-stakers.
• Comparison to Gold and Bitcoin: Ethereum's net dilution rate is lower than gold (1-2%) and currently lower than Bitcoin's (approximately 0.85%).

DeFi Ecosystem

1. DEX Volumes:

• Key Point: DEX volumes saw a strong quarter, with total volume up 68% (combining L1 and L2s).
• L1 vs. L2: Ethereum L1 volume was up 83%, significantly outpacing L2 growth. L1 accounted for 33% more volume than L2s combined in Q3, a notable shift from Q2 (9% more).
• Uniswap: Uniswap's DEX volume was up 32%, with a transition towards L2 deployment.

2. Active Loans:

• Key Point: Active loans on Ethereum (L1 and L2s) increased by 67%, reaching all-time highs.
• Leading Protocols: Maple Finance (up 84%), Aave (up 82%), Huobi, and Morpho showed strong growth.
• L2 Contribution: L2 active loans represent about 12.3% of L1 active loans, up from 10.8% in Q2.
• "Slow DeFi": This growth is attributed to collateral-backed loans, a trend sometimes referred to as "slow DeFi."

Layer 2 Ecosystem

1. L2 Fees as a Percentage of L1:

• Key Point: Combined L2 fees represented 25.9% of L1 fees on the quarter, up 5% from Q2 and 63% year-over-year.
• Observation: This metric indicates the shifting economics towards L2s. Both L1 and L2s experienced growth simultaneously in Q3, suggesting a healthy expansion of the overall ecosystem rather than cannibalization.
• Fee Generation: L2 users generated approximately 30% of the total fees across the Ethereum L1 and L2 ecosystem.

2. L2 Cost Per Transaction:

• Key Point: The cost per transaction on L2s, particularly on Base, has decreased significantly, averaging under two cents for sending a stablecoin.
• Reason: This is driven by increased supply of L2 block space due to upgrades like EIP-4844, not a decrease in demand.
• Blobs Per Block Target: Ethereum has not yet hit the target of six blobs per block, which is expected to increase state contention and potentially fees.

3. L2 Onchain Margin (Base Example):

• Key Point: L2s like Base are highly profitable on-chain, with Base showing an onchain margin of nearly 98% for Q3.
• Profitability: This margin represents user payments to the L2 minus payments to L1 for security. Base is generating significant revenue, estimated at around $450k per day.

4. L2 Transactions by Chain:

• Key Point: L2s are processing significantly more transactions than L1, with approximately 20 million transactions per day across all L2s.
• L1 vs. L2 Transaction Volume: L2s handle about 12.4x the amount of L1 transactions combined.
• Growth: Transactions were up 17% across L2s.
  • Lana (Consensus L2): Saw a 170% increase in transactions.
  • Worldcoin: Continues to grow.
  • Base: Up 15%, representing 51% of all L2 transactions in Q3.

5. L2 Blobs Per Block:

• Key Point: The network is getting very close to hitting the target of six blobs per block, a key component of EIP-4844.
• Impact: Reaching this target will increase the supply of L2 block space, potentially leading to more burnt ETH and impacting token economics. The network has reached up to 5.8 blobs per block towards the end of Q3.

Store of Value Case for Ether

1. ETH ETF AUM (Assets Under Management):

• Key Point: ETH ETFs saw a massive quarter, with AUM up 61% to 6.6 million ETH (approximately 14.5 billion USD).
• Growth: $9 billion of this value was added in Q3, with most inflows occurring in July.
• Market Share: ETH ETFs now hold 5.5% of the total ETH supply.
• Major Players: BlackRock (up 117%), Franklin Templeton (up 57%), and Fidelity (up 57%) showed strong growth.
• Narrative Support: This growth strengthens the store of value narrative for Ethereum.

2. ETH Held in Treasuries:

• Key Point: Digital asset treasury companies experienced significant growth in ETH holdings, with an overall increase of 367% in Q3.
• Leading Companies:
  • Bitmine: Holds over 2.5% of ETH supply, adding 782% to its holdings in Q3.
  • BTCS: Up 380%.
  • ESB: Up 345%.
  • BTBT (Bit Digital): Up 336%.
• Catalyst: This trend has been an important catalyst for Ethereum over recent quarters.

3. ETH Balance on Centralized Exchanges:

• Key Point: ETH balance on centralized exchanges has continued to decrease, reaching its lowest level since the inception of the Ethereum network.
• Significance: This indicates a preference for holding ETH for capital efficiency, primarily by moving it into DeFi or ETFs.
• ETF Impact: The rise of ETH ETFs may also contribute to this decline, as investors opt for ETFs instead of directly holding ETH on exchanges.
• Historical Context: In 2020, exchanges held closer to 35 million ETH, compared to the current ~12 million ETH.

4. Global Store of Value Comparison:

• Key Point: Ethereum is positioned as the fourth-largest "denationalized commodity money store of value asset" globally.
• Ranking:
  1. Gold ($30 trillion)
  2. Silver (over $2 trillion)
  3. Bitcoin
  4. Ether
• Narrative Challenge: The algorithmic monetary policy of Ethereum is considered more complex to explain as a store of value compared to Bitcoin's fixed supply, but its increasing adoption and proven stability are expected to strengthen this narrative over time.

Closing Remarks

Michael Nato summarized Q3 2025 as a "good quarter" with improvements across almost all metrics. He highlighted the ongoing importance of real-world assets and stablecoins as key growth drivers for Ethereum. The report also delves into fair value analysis, relative strength comparisons, and correlation analysis, providing a comprehensive resource for ETH holders. The next quarterly report will cover Q4 2025 and is scheduled for January 15th. A separate discussion on the current cycle and future outlook is planned for an upcoming Bankless episode.