Ethereum Q1 2026 Review: On-chain activity hits new highs, tokenized assets lead the industry

Written by: Token Terminal

Compiled by: Saoirse, Foresight News

Ethereum is the core underlying settlement network for on-chain assets, relying on ETH to pay transaction fees and staking to maintain network security. Traditional finance faces issues such as slow settlement, multiple intermediaries, and high counterparty risk, while tokenized assets and stablecoins provide on-chain solutions. From 2025 to 2026, relevant regulations will gradually mature, and institutional deployment of on-chain business will officially become feasible.

Various stablecoins, tokenized funds, commodities, and on-chain stocks are issued and settled on Ethereum, with transaction traffic offloaded to layer 2 networks and ultimately returning to layer 1 for confirmation, allowing ETH to continuously accumulate value. Based on market capitalization, Ethereum remains the largest platform for tokenized assets worldwide, operated jointly by the Ethereum Foundation and the developer community. Teams like Etherealize specifically connect with traditional financial institutions to promote institutional capital entry. In Q1 2026, the Ethereum ecosystem shows a polarized trend; the following detailed analysis combines complete data from Token Terminal.

In Q1 2026, the market exhibits a clear duality: on-chain usage hits record highs — monthly active users, total transaction volume, and throughput all set new records; but the asset scale and fee metrics measured in USD shrink simultaneously, fully diluting total market value, total locked assets, transaction volume, and two types of fee data, all declining quarter-over-quarter. Key events this quarter have profoundly shaped this unique market condition:

In January, the second upgrade cycle of Fusaka was implemented, with only the Blob parameter fork (BPO#2), significantly enhancing data storage capacity;

In February, the ERC-8004 standard went live on the mainnet, becoming a universal specification for AI agent identity and credit rating;

The Ethereum Foundation confirmed three core goals for 2026: scaling, user experience optimization, and strengthening layer one security;

In March, the Institutional Ethereum Forum was held, with a notable increase in participation from traditional financial institutions.

Overview of core metrics in Q1 2026

Total locked assets in the ecosystem: $316.2 billion (QoQ -11.0%, YoY +22.8%)

Unsettled active lending in the ecosystem: $21.8 billion (QoQ -16.6%, YoY +39.0%)

Total trading volume on decentralized exchanges (DEXs): $134.5 billion (QoQ -24.0%, YoY -31.2%)

Total fee income from all ecosystem applications: $2 billion (QoQ -16.9%, YoY -7.8%)

Total market cap of on-chain tokenized assets: $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 user addresses: 13.2 million (QoQ +53.5%, YoY +85.9%)

Total layer 1 transaction count: 200.4 million transactions (QoQ +38.0%, YoY +81.5%)

Average transactions per second (TPS): 25.78 (QoQ +41.2%, YoY +81.7%)

Total layer 1 network transaction fee income: $39.9 million (QoQ -47.9%, YoY -81.9%)

Fully diluted market cap of ETH: $290 billion (QoQ -30.3%, YoY -9.9%)

ETH staking ratio: 0.31 (both QoQ and YoY increased by 0.03)

Total ETH holder addresses: 292.8 million (QoQ +8.1%, YoY +24.9%)

Note: This report’s scope includes only Ethereum layer 1 mainnet; layer 2 networks are considered independent blockchains, and their data are not included in Ethereum’s statistics.

Overall ecosystem development

Total locked assets refer to the USD value of assets deposited in various on-chain applications, serving as a leading indicator for lending, trading, staking, and other revenue-generating activities; this statistic reflects the on-chain funds that can be freely withdrawn by Ethereum ecosystem users. In Q1 2026, the average total locked assets in the Ethereum ecosystem reached $316.2 billion, down 11.0% QoQ but up 22.8% YoY. The QoQ decline results from a general correction in crypto asset prices, while the substantial YoY growth indicates real expansion of the ecosystem compared to the same period last year.

Among the five major public chains, Ethereum’s locked assets dominate: $316.2 billion, far exceeding Tron ($84.5 billion), Solana ($28.8 billion), BNB Chain ($10.3 billion), and Plasma ($5.7 billion) combined, accounting for 71% of the total locked assets across these five chains. Funds are mainly concentrated in two major sectors: the liquid staking sector led by Lido, and the lending sector centered around Aave; EigenLayer, ether.fi re-staking protocols, and platforms like Ethena and Sky for synthetic USD stablecoins also hold significant funds. This high concentration of capital is a prominent structural advantage for Ethereum.

Active lending metrics represent the scale of user deposits that generate interest income, directly reflecting lending revenue. This report tracks the total outstanding loans across all Ethereum lending applications. In Q1, the ecosystem’s average active lending scale was $21.8 billion, down 16.6% QoQ but up 39.0% YoY. The shrinking lending balance, synchronized with total locked assets, indicates a cooling of overall market risk appetite, yet the scale remains substantially higher than last year.

Ethereum’s lending market is concentrated in a few large pools, with Aave dominating: at quarter’s end, active lending was about $13.5 billion, occupying most of the ecosystem’s share; followed by Morpho (~$1.9 billion), Spark (~$1 billion), and Maple (~$840 million). The contraction this quarter was mainly driven by Aave, as declining crypto prices reduced borrowing demand, shrinking total lending volume by about 24%. Comparing across five major chains, Ethereum’s $21.8 billion active lending vastly surpasses Solana ($2.5 billion), Plasma ($2.1 billion), BNB Chain ($760.8 million), and Avalanche ($392.4 million), accounting for 79.2% of the total lending volume across these chains, making it the most dominant sector for Ethereum’s assets.

Decentralized exchange (DEX) trading volume refers to the total amount of spot trading executed on on-chain exchanges, with traders paying fees; this metric is highly correlated with platform revenue. This data aggregates all DEX trading across the Ethereum ecosystem. In Q1, total trading volume was $134.5 billion, down 24% QoQ and 31.2% YoY. The decline in trading volume exceeded the reduction in locked assets, confirming that during this asset correction phase, market risk appetite significantly decreased.

Trading flow on Ethereum DEXs is highly concentrated among top platforms: Uniswap accounted for about $85.5 billion in Q1, representing two-thirds of the ecosystem’s total; followed by Curve (~$22.1 billion) and CoW Swap (~$12.4 billion). Trading volume is the only metric where Ethereum does not rank first among the five major chains: BNB Chain’s total volume of $162.5 billion surpasses Ethereum’s $134.5 billion, with Solana close behind at $104.9 billion; Avalanche ($14.5 billion) and Polygon ($10.7 billion) rank lower. Ethereum’s trading volume accounts for 31.5% of the combined total of these five chains, behind BNB Chain’s 38%.

Ecosystem fee revenue refers to all fees generated by users engaging with various applications, including borrower interest and trader transaction fees, directly reflecting the economic value created within the ecosystem. In Q1, total ecosystem fee income was $2 billion, down 16.9% QoQ and 7.8% YoY, declining in tandem with reduced trading and lending activity.

Ethereum’s $2 billion in ecosystem fees remains the industry leader, far surpassing TRON ($599.3 million), Solana ($532.5 million), BNB Chain ($231.9 million), and Polygon ($38.8 million), which together account for 58.4% of total fees across these five chains. Despite the quarterly decline, Ethereum remains the largest source of application fee revenue in the industry. Considering all these metrics, Ethereum leads in locked funds, lending volume, and ecosystem fee revenue, with DEX trading volume being the only area where it trails BNB Chain.

Tokenized asset sector

Total market value of circulating assets refers to the on-chain value of tokenized assets, calculated as circulating supply multiplied by the closing price on the reporting date; stablecoins are measured by circulating supply, tokenized funds by on-chain managed assets, and tokenized stocks by the total on-chain issued shares. This section only includes assets issued on Ethereum.

In Q1, the average total market value of tokenized assets on Ethereum was $203.4 billion, roughly flat QoQ (a decrease of only 0.7%) but up 42.9% YoY. Stablecoins account for 87.9% of the total, with the remaining share divided among tokenized funds, commodities, and stocks.

Stablecoins

In Q1, the average stablecoin market cap on Ethereum was $178.9 billion, slightly down 2.3% QoQ but up 37.6% YoY, making it the only tokenized sub-sector to shrink QoQ. The market is dominated by two issuers: Tether USDT ($94.1 billion) and Circle USDC ($54.5 billion), which together constitute the majority of Ethereum’s stablecoin market cap; other leading products include Sky USDS ($12.4 billion), Ethena USDe ($5.9 billion), PayPal PYUSD ($2.9 billion), and the newly launched Ripple-compliant stablecoin RLUSD ($1.1 billion). Comparing across five major chains, Ethereum’s $178.9 billion stablecoin market cap leads 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 stablecoin market.

Tokenized funds

In Q1, the average market cap of tokenized funds on Ethereum was $19.4 billion, up 4.9% QoQ and a staggering 73.1% YoY. The sector is divided into two main types:

Yield-oriented on-chain USD products (largest segment): Sky sUSDS (~$6.4 billion), Ethena sUSDe (~$3.5 billion);

Traditional financial compliant funds (key for institutional narratives): BlackRock BUIDL (issued via Securitize, ~$1 billion), WisdomTree government money market fund (~$815 million), Superstate USTB (~$620 million), Ondo OUSG (~$320 million). Compared to other chains, Ethereum’s $19.4 billion in tokenized funds significantly surpasses ZKsync Era ($2.5 billion), BNB Chain ($2.3 billion), Solana ($1.3 billion), and Stellar ($110 million), representing 73% of the total, highlighting Ethereum’s advantage in this asset class.

Tokenized commodities

In Q1, the average market cap of tokenized commodities on Ethereum was $4.7 billion, up 60% QoQ and a staggering 325.9% YoY, making it the fastest-growing tokenized category. Nearly all assets are on-chain gold: Tether Gold (XAUT, ~$2.6 billion) and Paxos Gold (PAXG, ~$2.4 billion) dominate this segment. Comparing across five major chains, Ethereum’s $4.7 billion far exceeds Ripple ($736.6 million), Arbitrum One ($95.9 million), BNB Chain ($38.4 million), and Solana ($29.8 million), accounting for 84% of the total, asserting Ethereum’s dominance in this niche.

Tokenized stocks

Tokenized stocks are the smallest segment, with an average market cap of $1.1B in Q1, nearly zero last year, up 16.5% QoQ. The sector is almost entirely dominated by Ondo Finance, which issues on-chain assets representing the S&P 500, Nasdaq 100, and dozens of individual stocks, constituting most of Ethereum’s tokenized stock market value. Comparing across five chains, Ethereum’s $365.1M slightly surpasses Solana ($24.9 million), BNB Chain ($249M), Arbitrum One ($150.5M), and Stellar ($4.2 million), but only accounts for 45.8% of the total tokenized stocks across these chains, making it the only asset class where Ethereum does not hold an absolute majority.

In summary, the tokenized asset sector: stablecoins saw a slight decline in supply in Q1, but Ethereum’s dominant position in tokenized funds and commodities continues to strengthen.

On-chain activity

Monthly active users (MAU) are defined as unique addresses generating revenue-producing on-chain transactions each month. This metric only counts interaction addresses on Ethereum layer 1 mainnet. In Q1, the average MAU reached 13.2 million, a sharp increase of 53.5% QoQ and 85.9% YoY, setting a new record and ending several quarters of slow growth, with user growth accelerating significantly.

Total transaction volume refers to the number of transactions written into the blockchain and confirmed, reflecting user engagement intensity; transactions per second (TPS) is the average confirmation rate during the period, measuring real-time network capacity. Both metrics only include layer 1 mainnet activity. In Q1, total transactions reached 200.4 million, up 38% QoQ and 81.5% YoY; average TPS increased to 25.78, up 41.2% QoQ. Both figures set new records, demonstrating that user growth has effectively translated into real on-chain activity.

Fee data here refers specifically to the base network cost paid by users when initiating transactions on Ethereum layer 1, distinct from the total ecosystem application fee revenue discussed earlier. In Q1, total layer 1 transaction fees amounted to $39.9 million, plummeting 47.9% QoQ and 81.9% YoY. The stark contrast between rising transaction volume and sharply falling fees is primarily due to the Blob upgrade, which significantly increased block storage capacity, providing ample block space and reducing individual transaction costs.

The core conclusion for this section is that the benefits of network scaling are materializing: user numbers and transaction counts hit new highs, while overall network costs are decreasing. When throughput expansion outpaces market transaction demand growth, the network exhibits the pattern of “rising activity, falling fees.”

Ethereum native token ETH fundamentals

Fully diluted market cap calculation: ETH price × total supply under the current economic model (including circulating, locked, unlocked, and unissued tokens). In Q1, the average fully diluted market cap was $290 billion, a sharp decline of 30.3% QoQ and 9.9% YoY, representing the largest QoQ drop among all valuation metrics in this report and a key factor behind the overall USD-denominated asset decline in the ecosystem.

Staking ratio: the proportion of ETH value staked to secure the proof-of-stake network relative to total ETH market cap; 0.31 indicates about 31% of ETH market value is staked. The average staking ratio in Q1 was 0.31, higher than the previous quarter and the same period last year at 0.28. Even as ETH’s overall market cap sharply declined, the proportion of tokens participating in staking increased, indicating long-term holder commitment remains stable despite price downturns.

Token holder metrics: the total number of unique wallets holding ETH. In Q1, the average number of ETH addresses was 292.8 million, up 8.1% QoQ and 24.9% YoY, continuing a steady increase over five consecutive quarters. Despite the persistent decline in fully diluted market cap, the number of addresses continues to grow, suggesting ETH holders are becoming more dispersed and retail participation remains resilient.

Etherealize team commentary

The most critical paradox this quarter: on-chain usage on Ethereum layer 1 hit record highs, yet transaction fees declined simultaneously. Ethereum actively promotes network scaling, sacrificing short-term fee revenue with the long-term logic that cheaper block space will unlock massive latent demand, ultimately driving sustained growth in network revenue.

Data from Token Terminal’s “Q1 2026 Ethereum Report” confirms this long-term thesis: monthly active users increased 85.9%, total transaction volume rose 81.5%, and network throughput improved 81.7% YoY. This exemplifies the Jevons paradox. The team predicts that the incremental long-term transaction demand will fully offset the short-term revenue loss caused by fee reductions. Drawing an analogy to the semiconductor industry: when Gordon Moore proposed Moore’s Law in 1975, industry revenues were limited; today, industry revenue has grown by several orders of magnitude. The scaling benefits have yet to be fully realized: the Glamsterdam upgrade planned for Q3 will triple gas limits; Ethereum’s long-term roadmap aims for 10,000 TPS by 2029, enabling final confirmation of transactions within seconds.

The team agrees with BlackRock CEO Larry Fink’s December statement: the current stage of the tokenization industry is akin to the internet in 1996 — at that time, Amazon’s online book sales were only $16 million. The market believed Amazon was merely surviving on internet hype and losing money; but Bezos foresaw the internet’s potential to reshape retail, choosing to prioritize network effects and scale over short-term profits. Ethereum is making a similar choice now, aiming to solidify its role as the global financial settlement layer.

Another key lesson from internet history: open, permissionless networks will ultimately outperform closed, proprietary ones. In 1995, Bill Gates predicted in “The Road Ahead” that digital commerce would rely on corporate private networks (“Information Superhighway”), not the open internet. At that time, Microsoft’s MSN, AOL, CompuServe, and Prodigy operated as closed walled gardens, with millions of paid users; France’s Minitel system surpassed the global internet in user numbers by 1996. Yet, these closed systems eventually failed. No large enterprise was willing to build on a network controlled by competitors; more critically, no company could sustain innovation at the pace of open ecosystems. History repeatedly confirms this: Linux overtook proprietary Unix, open web browsers replaced corporate intranets, and Wikipedia replaced the Encyclopaedia Britannica. Early in each wave of change, private products gained advantages through precise features, marketing, and business resources; but once open ecosystems accumulated enough developer tools, community, and neutrality, the initial advantages rapidly eroded.

Today, this industry pattern is repeating in financial infrastructure. All data in this report supports that Ethereum has crossed the ecosystem threshold: it holds dominant market share across all core sectors. Institutional adoption of tokenized finance is choosing Ethereum not out of ideological preference, but because of its liquidity, composability, and mature real-world use cases. Data shows: Ethereum accounts for 79.2% of active DeFi lending, 61.8% of stablecoins, 73% of tokenized funds, and 84% of tokenized commodities across the five leading chains. Each new tokenized asset further enhances ecosystem liquidity and attracts more institutional participation. The neutral, open-layered foundation is the only stable, balanced solution — large financial institutions will not uniformly choose competing private chains for asset settlement. Moreover, institutions are increasingly aware that privacy, access control, KYC compliance, and asset transfer restrictions can be implemented via privacy-preserving computation and permissioned token standards on Ethereum, fully integrated with the broader liquidity network. Conversely, closed private chains cannot connect to the open ecosystem’s vast liquidity and diverse applications.

After the quarter, institutional deployment accelerated further, with several major developments in May: asset management firms applying for new tokenized funds; JPMorgan issuing a second on-chain Ethereum-based money market fund (JLTXX); Fidelity launching a USD liquidity fund rated AAA by Moody’s, issued as ERC-20 tokens. Stablecoin developments include Japan’s Blockchain Foundation preparing to deploy the JPY stablecoin EJPY on Ethereum; and a consortium of 12 major European banks (including BNP Paribas, ING, UniCredit, Banco Santander, etc.) preparing compliant euro stablecoins.

The internet seemed distant in 1990, but by 2005 it had become a societal necessity. If Fink’s assessment of the tokenization industry’s stage is accurate, the coming years could be the most promising period in Ethereum’s development history. Previously, the “Efficient Currency” report emphasized that network fees underpin ETH’s intrinsic value; the long-term optimistic view is that, with improved monetary properties, ETH could absorb the combined store-of-value premium of gold and Bitcoin, totaling over $30 trillion. Ethereum can establish industry dominance without relying on high fees.