Ethereum usage hits records as ETH fee revenue plunges 82% from a year ago

Ethereum's monthly active users hit a record 13.2 million in Q1 2026, up 85.9% from a year earlier, while transaction fees on the base layer fell 81.9% to $39.9 million over the same period, Token Terminal data show.

"Ethereum is intentionally sacrificing short-term fee capture to expand the network, betting that cheaper block space can unleash more demand and ultimately bring in more network revenue," the Etherealize team wrote in commentary accompanying the Token Terminal report.

Transaction count reached 200.4 million in the quarter, up 81.5% year-over-year, and throughput rose to 25.78 transactions per second, a 41.2% increase. Yet the fully diluted market cap of ETH fell 30.3% quarter-over-quarter to $290 billion, and total value locked across Ethereum DeFi declined 11% to $316.2 billion. The divergence stems from the Fusaka upgrade cycle, which increased data capacity via the second Blob Parameters Only fork in January, driving down the cost of block space.

The pattern reflects the Jevons Paradox — as usage costs decline, demand accelerates — but it raises a fundamental question for ETH holders: if network activity grows while fee capture shrinks, how does value accrue to the native token? The Glamsterdam upgrade in the third quarter is expected to increase the gas limit by more than three times, further compressing fees while potentially driving even more usage.

Tokenized Assets Surge as Institutional On-Chaining Accelerates

Despite the fee compression, Ethereum's role as the settlement layer for tokenized assets continues to deepen. Tokenized asset market cap on Ethereum reached $203.4 billion in Q1, up 42.9% year-over-year, with stablecoins accounting for $178.9 billion of that total. Tokenized funds grew 73.1% to $19.4 billion, while tokenized commodities — almost entirely gold — surged 325.9% to $4.7 billion, Token Terminal data show.

Institutional momentum has accelerated since the quarter ended. BlackRock filed for two more tokenized funds in May, JPMorgan launched its second tokenized money market fund JLTXX on Ethereum, and Fidelity International introduced FILQ, a Moody's AAA-rated USD liquidity fund in ERC-20 form. A consortium of 12 European banks including BNP Paribas, ING, UniCredit and BBVA is preparing to launch a regulated euro stablecoin.

Among the top five chains by total value locked, Ethereum holds 79.2% of active DeFi loans, 61.8% of stablecoins, 73% of tokenized funds and 84% of tokenized commodities, according to Token Terminal. Each new tokenized asset deepens liquidity on the network, attracting the next issuer — a network effect that competing chains have struggled to replicate.

The staking ratio rose to 0.31x from 0.28x a year ago, indicating that ETH holders are committing a larger share of supply to network security even as the token price declined. Token holder count reached 292.8 million, up 24.9% year-over-year, suggesting ownership is broadening despite the valuation compression.

The question for investors is whether fee compression is a temporary growing pain or a structural shift in how Ethereum captures value. The Etherealize team draws a parallel to the early internet: Amazon in 1996 was dismissed as a loss-making online bookstore, but Jeff Bezos prioritized network effects over short-term profits. "Ethereum is making a similar trade-off to solidify its position as a global financial settlement layer," the team wrote.

ETH traded at $1,734 as of Sunday, up 3.3% on the week, according to CoinGecko data.

This article is for informational purposes only and does not constitute investment advice.