DeFi Report: Ethereum Sees $261M in Q3 Fees, Lowest Since 2020

In a recent analysis by the DeFi Report, Ethereum generated $261 million in network fees during Q3 2024, marking a 47% decline from the previous quarter and the lowest performance since Q4 2020.

The report, titled “The ETH Report: Q3-24,” published on October 16, highlights that Ethereum’s layer 1 fees have hit their lowest point in four years. The DeFi Report attributes this downturn to the rising popularity of layer 2 networks, the implementation of EIP 4844, and a decrease in new crypto users during the quarter.

Additionally, the report indicates that Ethereum’s Total Value Locked (TVL) fell by 14% in Q3, although it has increased by 133% year-over-year. The price of ETH itself declined by 21% during this period, with more tokens being issued than burned on the network.

The analysis suggests that the dip in Ethereum’s fees can be linked to the EIP 4844 update, the introduction of the modular data availability network Celestia, and the emergence of other lower-cost data availability networks.

The launch of Uniswap Labs’ latest layer 2 solution, Unichain, could further impact Ethereum negatively. The DeFi Report stated, “The optics don’t look great. Fees are down. Inflation is up. Uniswap, which controls 20% of gas fees for Ethereum validators, is now building its own L2.”

Michael Nadeau, founder of the DeFi Report, believes Ethereum validators have the opportunity to increase transaction volumes and burn more tokens by lowering fees, which could enhance demand for ETH and improve network profitability. He commented, “We view this as a win-win-win for app developers, users, and ETH validators or holders. However, as layer 2 solutions scale, there may be a period of reduced revenue for layer 1 validators until new use cases emerge to fill the demand for block space.”

Earlier this week, Nadeau noted in an X post that Ethereum validators and token holders could forfeit approximately $368 million in settlement fees due to Uniswap’s launch of Unichain, with those funds potentially benefiting Uniswap Labs and UNI token holders instead. Consequently, ETH holders might experience losses from a reduced ETH burn rate and the allocation of settlement fees favoring UNI token holders.