Ethereum generated $261m in fees in Q3, its worst performance since Q4 2020

According to a recent analysis published by DeFi Report, Ethereum’s network fees generated $261 million in the third quarter of 2024, down 47% from the previous quarter. Ethereum’s layer 1 fees in Q3 were the lowest the network has seen since Q4 2020.

In the “ETH Report: Q3-24” published on October 16, it was shown that Ethereum(ETH)’s tier 1 in Q3 2024 was at its lowest level since 2020. DeFi Report believes this is due to the resulting growth. layer 2 networks, the introduction of EIP 4844, and the decline in new crypto users in Q3.

The report revealed that Ethereum’s Total Value Locked fell 14% in the quarter, while it rose 133% last year. The token itself fell 21% this quarter, with more tokens minted than burned on the network.

DeFi Report stated that in their analysis, they predict a decrease in Ethereum’s fees.
The EIP4844 update added, along with the introduction of the modular data availability network Celestia, new and cheaper data availability networks are emerging.

The launch of Uniswap Labs’ new layer 2 solution, Unichain, could also bring further damage to Ethereum.

“The optics don’t look good. Fees are down. Inflation is up. Uniswap (which controls 20% of the gas fees issued to Ethereum validators) is now creating its own L2,” DeFi Report said in their latest analysis.

Michael Nadeau, founder of DeFi Report, said Ethereum validators can take advantage of the opportunity to increase transactions and burn more tokens by reducing fees, which can increase token demand and bring more profits to the network.

“We see this as a win, win, win for app developers, users, and ETH validators or holders. However, as an L2 scale, we expect there may be a period where L1 validator revenues may decline until the supply of new block space is eventually filled with new use cases coming to market ” he wrote in the Ethereum Investment Framework.

Earlier this week, Nadeau commented in his X post that Ethereum validators and token holders could lose approximately $368 million in settlement fees paid by Uniswap with the launch of Unichain. Instead, the funds will go to Uniswap Labs and possibly Uniswap token holders.

ETH token holders may also incur losses due to the protocol burning less ETH and settlement fees being distributed to UNI token holders instead.