Ethereum users and transaction volume hit new highs, but fees and market capitalization are declining simultaneously. What does this indicate?

Ethereum users and trading volume both hit record highs, while fees and market cap decline in tandem. Reports suggest this reflects a “low fees for scale” strategy, as institutions accelerate moving assets on-chain. This article summarizes analysis from Token Terminal.
(Follow-up: Humanity announced the cancellation of the old $H! token, and will distribute a 1:1 airdrop of new tokens based on the snapshot taken before the attack.)
(Additional context: Sharplink CEO: Ethereum’s moat isn’t speed—millions of developers are the real trump card.)

Table of Contents

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• Ecosystem lock-up and lending data analysis
• Transaction volume and fee performance comparison
• Tokenized asset scale expansion
• User activity hits new highs
• Institutional on-chain trend accelerates

Ethereum (Ethereum) is actively entering a “low fees for scale” phase. As the Fusaka upgrade increases data capacity, block space becomes cheaper, and growth in users and transactions starts to accelerate—while short-term fee capture is kept suppressed. The report explains this phenomenon as the Jevons paradox: when the cost of using the service declines, demand for the network may be further unleashed.

More importantly, Ethereum’s core narrative is shifting from being a DeFi public chain to becoming a global financial settlement layer. The report shows that Ethereum still dominates the tokenized assets space: stablecoins, tokenized funds, tokenized commodities, and tokenized stocks all form significant scale on its network. Growth is especially noticeable in funds and gold-type assets. Continued institutional entry—such as BlackRock, JPMorgan, and Fidelity—also pushes “institutional on-chain” forward from concept to product issuance and settlement practice.

Ethereum ($ETH) is a public, permissionless blockchain that provides global settlement and computation capabilities for financial applications in open economies. It runs a shared ledger that anyone can build on, with no single party able to shut it down, and it uses its native asset ETH to pay transaction fees. At the same time, through staking mechanisms, ETH is also used to secure the network.

The activities Ethereum supports have historically been constrained by the costs and throughput limitations of traditional financial infrastructure: settlement takes days, with layer upon layer of intermediaries in between, and each step introduces counterparty risk. Tokenization and stablecoins are on-chain solutions that emerged to address these frictions. As regulatory frameworks for both gradually mature in 2025 and continue into 2026, conditions for institutional-grade on-chain activity are moving from theory to reality.

Ethereum’s role in this transition is the base settlement layer. Stablecoins, tokenized funds, tokenized commodities, and increasingly tokenized stocks are issued and settled on Ethereum. Meanwhile, layer-2 networks handle scalability and roll transactions back to layer 1. As the asset that backs and pays for this settlement, ETH accrues value from the activity, while the staking market reflects how much ETH supply is allocated to this role.

From a market positioning perspective, Ethereum remains the main venue with the largest market cap for tokenized assets. On a cross-chain basis, Ethereum holds the majority share across categories such as stablecoins, tokenized funds, commodities, and stocks. Ethereum is driven jointly by the Ethereum Foundation and a broad, independent community of client teams and researchers. At the same time, institution-focused organizations such as Etherealize also help traditional finance better understand this network.

The first quarter of 2026 can be clearly divided into two main threads. On one hand, usage hits historical highs: the number of monthly active users, the number of transactions, and throughput all set records. On the other hand, USD-denominated value and fee metrics are compressed: fully diluted market cap, total lock-up value, transaction volume, and two fee indicators all decline quarter over quarter. The key events shaping both threads in the quarter are the same: the second Blob Parameters Only (BPO #2) fork in the Fusaka upgrade cycle increased data capacity in January; ERC-8004 launched on the mainnet in February, becoming a standard for AI agent identity and reputation; the Ethereum Foundation determined its 2026 Protocol Cluster priorities—expanding scale, improving user experience, and strengthening layer 1; and in addition, events such as the March Institutional Ethereum Forum also reflect increased institutional participation.

Ecosystem total lock-up value: $316.2 billion (QoQ -11.0%, YoY +22.8%)

Ecosystem active loans: $21.8 billion (QoQ -16.6%, YoY +39.0%)

Ecosystem transaction volume: $134.5 billion (QoQ -24.0%, YoY -31.2%)

Ecosystem fees: $2.0 billion (QoQ -16.9%, YoY -7.8%)

Ecosystem lock-up and lending data analysis

Tokenized asset market cap: $203.4 billion (QoQ -0.7%, YoY +42.9%)

Stablecoins: $178.9 billion (QoQ -2.3%, YoY +37.6%)

Tokenized funds: $19.4 billion (QoQ +4.9%, YoY +73.1%)

Tokenized commodities: $4.7 billion (QoQ +60.0%, YoY +325.9%)

Tokenized stocks: $365.1 million (QoQ +16.5%)

Monthly active users: 13.2 million (QoQ +53.5%, YoY +85.9%)

Transaction count: 200.4 million (QoQ +38.0%, YoY +81.5%)

Transactions per second: 25.78 (QoQ +41.2%, YoY +81.7%)

Fees: $39.9 million (QoQ -47.9%, YoY -81.9%)

Fully diluted market cap: $290.0 billion (QoQ -30.3%, YoY -9.9%)

Staking ratio: 0.31x (QoQ +0.03x, YoY +0.03x)

Token holders: 292.8 million (QoQ +8.1%, YoY +24.9%)

This report covers Ethereum layer 1, i.e., the mainnet. Layer 2 networks are considered independent chains and are not included in Ethereum’s data.

Transaction volume and fee performance comparison

Total lock-up value reflects the USD value of on-chain deposits across various applications within a project, and it is a leading indicator for income-generating activities such as lending, trading, and staking. Here, it measures the capital deposited into the Ethereum ecosystem; depositors can typically withdraw these funds at any time.

Using this definition, in Q1 2026, the ecosystem’s total lock-up value averaged $316.2 billion, down 11.0% QoQ but up 22.8% YoY. The quarterly decline aligns with the overall pullback in asset prices, while the year-over-year growth indicates that the Ethereum ecosystem has still expanded significantly compared to one year earlier.

Among the top five chains, Ethereum leads by a wide margin with $316.2 billion—exceeding the combined total of Tron ($84.5 billion), Solana ($28.8 billion), BNB Chain ($10.3 billion), and Plasma ($5.7 billion)—accounting for 71.0% of the top five chains’ total. Within this pool of capital, the largest concentration is in liquidity staking, representing Lido; and in lending, representing Aave. Further, re-staking projects EigenLayer and ether.fi, as well as synthetic dollar issuers Ethena and Sky, are also among the largest applications. Capital concentration remains Ethereum’s clearest structural edge.

Active loans reflect the portion of deposits that have already been lent out to borrowers and therefore generate interest; this indicator typically correlates with lending income. On Ethereum, it reflects outstanding debt across the entire ecosystem of lending applications.

In Q1 2026, ecosystem active loans averaged $21.8 billion, down 16.6% QoQ but up 39.0% YoY. Lending balances contracted alongside total lock-up value, consistent with lower risk appetite, yet they remain clearly higher than a year earlier.

Lending activity on Ethereum is concentrated in a small number of currency markets, with Aave dominating. At quarter-end, active loans on Aave were about $13.5 billion, making up most of the ecosystem total. Next were Morpho (about $1.9 billion), Spark (about $1.0 billion, a Sky product), and Maple (about $840 million). The contraction this quarter was mainly driven by Aave: as prices fell and borrowing demand cooled, its loan book shrank by about 24% during the quarter. Among the top five chains, Ethereum’s $21.8 billion is far above Solana ($2.5 billion), Plasma ($2.1 billion), BNB Chain ($7.608 billion), and Avalanche ($3.924 billion), accounting for 79.2% of the top five chains’ total. This is the highest share among all metrics in this section.

Transaction volume reflects the total value of trades executed on decentralized spot exchanges. Because traders pay fees, this indicator is usually related to the fees generated by these trading venues. Here, it measures total DEX trading volume within the Ethereum ecosystem.

In Q1 2026, total ecosystem transaction volume was $134.5 billion, down 24.0% QoQ and down 31.2% YoY. Transaction volume fell more sharply than lock-up capital, suggesting risk appetite declined during the quarter’s pullback.

DEX activity on Ethereum is concentrated in a handful of deep liquidity venues. In Q1, Uniswap handled about $85.5 billion in transaction volume—about two-thirds of the ecosystem total. Next were Curve (about $22.1 billion) and CoW Swap (about $12.4 billion). Transaction volume is also the only indicator in this section where Ethereum fails to lead across chains: BNB Chain’s transaction volume was $162.5 billion, higher than Ethereum’s $134.5 billion. Solana followed with $104.9 billion; then Avalanche ($14.5 billion) and Polygon ($10.7 billion). Ethereum accounted for 31.5% of the top five chains’ total transaction volume, ranking second—below BNB Chain’s 38.0%.

Fees reflect the total value users pay for using a given project application—for example, interest paid by borrowers and transaction fees paid by traders—meant to reflect how much economic value is generated. This metric aggregates the fees produced by Ethereum ecosystem applications.

In Q1 2026, total ecosystem fees were $2.0 billion, down 16.9% QoQ and down 7.8% YoY, consistent with weakening trading and lending activity.

Ethereum generated $2.0 billion in fees, clearly higher than Tron ($5.993 billion), Solana ($5.325 billion), BNB Chain ($2.319 billion), and Polygon ($38.80 million). Ethereum accounted for 58.4% of the total fees among the top five chains. Despite the decline, Ethereum remains the largest single source of application fees. Overall in this section, Ethereum leads in lock-up capital, credit, and fees, with only transaction volume lagging.

Circulating asset market cap reflects the total value of an asset after its tokenization on-chain, calculated as circulating supply multiplied by the end-of-day price. For stablecoins, it refers to outstanding supply. For tokenized funds, it refers to on-chain assets under management. For tokenized stocks, it refers to the value of issued shares on-chain. Here, it covers assets issued on Ethereum.

Tokenized asset scale expansion

In Q1 2026, Ethereum’s average tokenized asset market cap was $203.4 billion, essentially flat QoQ (-0.7%) but up 42.9% YoY. Stablecoins make up the largest share at 87.9% of the total; the remainder consists of funds, commodities, and stocks.

In Q1 2026, Ethereum’s average stablecoin size was $178.9 billion, down 2.3% QoQ but up 37.6% YoY. It was the only subcategory to decline within the quarter. Two major issuers dominate: at quarter-end, Tether’s USDT was $94.1 billion and Circle’s USDC was $54.5 billion; together they accounted for most of the network’s stablecoin market cap. Next were Sky’s USDS ($12.4 billion), Ethena’s USDe ($5.9 billion), and PayPal’s PYUSD ($2.9 billion). New regulated entrants such as Ripple’s RLUSD ($1.1 billion) are also live. Among the top five chains, Ethereum led with $178.9 billion, above Tron ($84.5 billion), Solana ($14.5 billion), Arbitrum One ($6.8 billion), and Base ($4.7 billion), accounting for 61.8% of the combined total.

In Q1 2026, Ethereum’s average tokenized fund size was $19.4 billion, up 4.9% QoQ and up 73.1% YoY. This space can be divided into two parts. One category is yield-bearing on-chain USD led by scale, represented by Sky’s sUSDS (about $6.4 billion) and Ethena’s sUSDe (about $3.5 billion). The other category is regulated funds that support the institutional narrative and have already realized scale expansion, including BlackRock’s BUIDL (issued via Securitize, about $1.0 billion), WisdomTree government money market funds (about $815 million), and Superstate’s USTB (about $620 million), followed by Ondo’s OUSG (about $320 million). Among the top five chains, Ethereum’s $19.4 billion ranks first, ahead of zkSync Era ($2.5 billion), BNB Chain ($2.3 billion), Solana ($1.3 billion), and Stellar ($110 million). It accounts for 73.0% of the top five chains’ total, making it the second-highest concentration among all asset categories in this section.

In Q1 2026, Ethereum’s average tokenized commodities size was $4.7 billion, up 60.0% QoQ and up 325.9% YoY— the fastest-growing tokenized asset category. This category is almost entirely made up of gold: Tether Gold (XAUT, about $2.6 billion) and Paxos PAX Gold (PAXG, about $2.4 billion) together make up nearly the entire segment. Among the top five chains, Ethereum’s $4.7 billion far exceeds XRP Ledger ($736.6 million), Arbitrum One ($95.90 million), BNB Chain ($38.40 million), and Solana ($29.80 million), accounting for 84.0% of the top five chains’ total—the strongest lead advantage in this section.

Tokenized stocks remain the smallest category. In Q1 2026, Ethereum’s average tokenized stock size was $365.1 million. Compared with the almost negligible base a year earlier, this represents a large increase, and it also rose 16.5% QoQ. This category is dominated almost entirely by Ondo Finance. Ondo’s on-chain stocks and ETFs cover broad index funds such as the S&P 500 and Nasdaq 100, as well as dozens of individual stocks—forming most of Ethereum’s tokenized stock market cap. Among the top five chains, Ethereum leads with $365.1 million, followed by Solana ($249.0 million), BNB Chain ($150.5 million), Arbitrum One ($29.0 million), and Stellar ($4.2 million). However, Ethereum accounts for only 45.8% of the total among the top five chains in this category—its narrowest lead advantage and the only tokenized category where Ethereum does not hold a clear majority.

Overall, this quarter highlights Ethereum’s leading position in tokenizing funds and commodities, even as stablecoin balances temporarily stall.

Monthly active users reflect the number of unique addresses that conduct revenue-generating transactions with the network within a one-month window. On Ethereum, it counts distinct addresses that transact on layer 1.

In Q1 2026, monthly active users averaged 13.2 million, up 53.5% QoQ and up 85.9% YoY, reaching a historical high. After several quarters of relatively moderate growth, the growth rate of users accelerated noticeably.

Transaction count reflects the number of transactions that are confirmed and added to the blockchain, indicating how actively users are using the network. Transactions per second is the average rate at which these confirmed transactions occur during the period, used to reflect throughput and real-time usage. Both metrics here are calculated for Ethereum layer 1.

In Q1 2026, total transactions were 200.4 million, up 38.0% QoQ and up 81.5% YoY. Throughput increased to 25.78 transactions per second, up 41.2% QoQ. Both indicators hit all-time highs, confirming that user growth is translating into more meaningful on-chain activity.

Here, fees refer to the transaction fees paid by users when conducting transactions on Ethereum layer 1, i.e., the cost of using the underlying layer network. This differs from the ecosystem-level application fees discussed in the second section.

Using this definition, in Q1 2026, total fees were $39.9 million, down 47.9% QoQ and down 81.9% YoY. This is in sharp contrast to transaction volume and is the most critical data point in the quarter: transaction count grew 38.0%, while total fees fell 47.9%. This means that as data capacity increases and block space prices decline, the average cost per transaction dropped substantially.

This section presents a scaling story: more users, more transactions, all completed at lower total cost. As throughput growth outpaces demand growth, increased activity and declining fees can both be true at the same time.

User activity hits new highs

Fully diluted market cap reflects ETH valuation under a fully diluted assumption. It is calculated as the token price multiplied by the total supply under the current token economic model, including circulating, locked, unreleased, and future tokens.

In Q1 2026, the average fully diluted market cap was $290.0 billion, down 30.3% QoQ and down 9.9% YoY. The quarterly drop is the largest among the valuation metrics in this report, and it also pulls down other USD-denominated indicators.

Staking ratio reflects the value of staked ETH used to help secure the proof-of-stake network, relative to the total ETH market cap. A reading of 0.31x means that about 31% of value is allocated to staking.

In Q1 2026, the average staking ratio was 0.31x, higher than both the previous quarter and one year earlier (0.28x). Even as ETH’s market cap declines, the share of ETH committed to securing the network still rises, indicating that staking participation remains stable during periods of price pullback.

Token holder count reflects the number of distinct addresses holding the network’s native token. On Ethereum, it counts the number of addresses holding ETH.

In Q1 2026, the average number of token holders was 292.8 million, up 8.1% QoQ and up 24.9% YoY—continuing the steady upward trend over the past five quarters. Even with a decline in fully diluted market cap, the holder base continues to expand, suggesting that during price pullbacks, ETH ownership becomes even more widespread.

“The key tension this quarter is that Ethereum mainnet usage hit a historical high, yet transaction fees declined. Ethereum appears intent on expanding the network at the cost of sacrificing short-term fee capture—betting that cheaper block space will unlock more demand and ultimately generate more network revenue over the long term.

Token Terminal’s ‘Ethereum Q1 2026 Report’ shows that this bet is paying off. On a year-over-year basis, monthly active users grew 85.9%, transaction counts increased 81.5%, and throughput rose 81.7%. This is Jevons’ paradox in action. We expect the increase in total network demand to be enough to offset the impact of lower fees—similar to how the semiconductor industry today creates revenues that are orders of magnitude higher than in 1975. Back then, Intel co-founder Gordon Moore observed that the number of transistors on a microchip roughly doubled every two years. And the returns from scaling are still ahead: the Glamsterdam upgrade plan will increase the gas limit by more than 3x in the third quarter, and Ethereum’s roadmap points to 10,000 TPS by 2029 and a ‘fast layer’ network with second-level finality.

We agree with BlackRock CEO Larry Fink’s assessment from December last year. He wrote: ‘Today’s tokenization is roughly comparable to the internet in 1996—when Amazon was only selling $16 million worth of books.’ At the time, consensus held that Amazon was just a loss-making online bookstore propped up by the dot-com bubble. However, Jeff Bezos saw that the internet would reshape retail, so he prioritized optimizing network effects and economies of scale rather than short-term profits. Ethereum is making similar trade-offs to secure its position as the global financial settlement layer.

Another lesson from the internet era is that open, permissionless networks often win over closed networks. In 1995, Bill Gates published ‘The Road Ahead,’ predicting that digital commerce would run on proprietary ‘information superhighways’—rather than the open internet. Microsoft was building MSN then. AOL, CompuServe, and Prodigy operated walled gardens with millions of paid users. France’s Minitel still had more users than the entire world-wide web until the end of 1996. They all lost. No serious company would be willing to build on a network controlled by a competitor; perhaps more importantly, no company can keep up indefinitely with the pace of permissionless innovation. We have repeatedly seen this: Linux overtaking proprietary Unix, open networks replacing corporate walled gardens, and Wikipedia replacing Britannica. In each case, proprietary solutions initially had an advantage—more focused products, stronger marketing, and more complete business development teams. But each time, once open systems crossed the thresholds of contribution accumulation, tool maturity, and credible neutrality, that lead was eroded.

Today, we are seeing the same theme in financial infrastructure, and the data in this report proves that Ethereum has crossed that threshold and now holds dominant market share across all key metrics. Institutions building tokenized finance choose Ethereum not out of ideology, but because liquidity, composability, and institutional precedents are already there. As emphasized in this report, among the top five chains, Ethereum accounts for 79.2% of active DeFi loans, 61.8% of stablecoins, 73.0% of tokenized funds, and 84.0% of tokenized commodities. Each new tokenized asset deepens liquidity, which draws in the next asset; a neutral underlying layer is the only sustainable equilibrium, because large participants will never agree to settle on a competitor’s infrastructure. In addition, institutions are realizing that privacy, permissioning, KYC, and transfer restrictions can be implemented on Ethereum through privacy-preserving environments and permissioned token standards, without giving up the ability to access public liquidity. Conversely, it is impossible to graft public liquidity and open application ecosystems onto closed chains.

If there is any change, it is that institutional momentum accelerates further after the quarter ends. Just in May, BlackRock filed two more tokenized funds. JPMorgan launched its second tokenized money market fund on Ethereum, JLTXX. Fidelity International introduced FILQ, a Moody’s AAA-rated dollar liquidity fund, and issued it in ERC-20 form. In the stablecoin space, the Japan Blockchain Foundation’s yen stablecoin EJPY will be launched on Ethereum. A consortium of twelve European banks—including BNP Paribas, ING, UniCredit, and BBVA—is also preparing to roll out a regulated euro stablecoin.

The internet once seemed impossible in 1990, but by 2005 it seemed inevitable. If Fink’s assessment of tokenization’s stage is correct, the next few years could become among the most exciting periods in Ethereum’s history. As argued in the ‘Productive Money’ report, network fees provide ETH with an intrinsic value floor, while a bull scenario involves ETH absorbing more than $30 trillion in monetary premium held by gold and Bitcoin, because ETH has superior monetary properties. ETH does not need high fees to win.’”

Institutional on-chain trend accelerates

Ecosystem total lock-up value: the USD value of assets deposited by various applications within an ecosystem for a chain, reported as a period average.

Ecosystem active loans: the USD value of outstanding loans within lending applications in the ecosystem, reported as a period average.

Ecosystem transaction volume: the USD value of trades executed on decentralized exchanges within the ecosystem, reported as a total for the period.

Ecosystem fees: the total fees paid by users to applications within the ecosystem, reported as a total for the period.

Circulating asset market cap: the circulating USD value of a tokenized asset category, calculated as circulating supply times the end-of-day price, reported as a period average.

Monthly active users: the number of distinct addresses that conduct revenue-generating transactions with Ethereum, reported as a period average of the monthly metric.

Transaction count: the number of transactions confirmed and settled on Ethereum layer 1, reported as a total for the period.

Transactions per second: the average rate of confirmed transactions on Ethereum layer 1 during the period.

Fees: the total transaction fees paid on Ethereum layer 1, reported as a total for the period.

Fully diluted market cap: ETH price multiplied by the total supply under the current token economic model, reported as a period average.

Staking ratio: the value of staked ETH used to secure the network, relative to total ETH market cap, reported as a period average.

Token holder count: the number of distinct addresses holding ETH, reported as a period average.

This report is published quarterly and is produced based on Token Terminal’s end-to-end on-chain data infrastructure. All metrics are directly derived from blockchain data. The charts and datasets referenced in the report can be viewed on Token Terminal’s Ethereum Q1 2026 report dashboard.

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