State of Fuel Q2 2025

Key Insights

• Fuel launched The Rig, its first native liquid staking protocol, enabling stakers to earn auto-compounding sequencer rewards through stFUEL while retaining liquidity. The protocol reached $781,800 in TVL (9.5% market share) by the end of Q2.
• Major sequencer upgrades on June 9 introduced gas optimizations, Protobuf-based validator delegation, and enhanced account management, improving execution efficiency and expanding developer flexibility.
• FUEL’s circulating market cap fell 28.4% QoQ to $35.7 million in Q2 2025, with token price down 39.2%. Average daily onchain costs dropped 89.7% to $17.9, driven by lower blob pricing following Ethereum’s Pectra upgrade and sequencer efficiency gains.
• DeFi TVL on Fuel Ignition declined 6.8% QoQ to $8.2 million, with over 98% concentrated in Mira Protocol (now Microchain), SwayLend, and The Rig. Mira remained the top DEX with $4.4 million in TVL (54.2% share).
• Fuel announced Fuel Forge I, a fully sponsored in-person builder residency in Costa Rica beginning August 2025. The residency is designed to accelerate high-performance application development through intensive mentorship, workshops, and investor engagement.

Primer

Fuel (FUEL) is an Ethereum Layer-2 powered by the FuelVM, built to enhance PSI (parallelization, state-minimized execution, interoperability). Fuel’s technology stack also includes the Sway programming language optimized for blockchain development. The network provides a suite of developer tools, such as Forc (Fuel Orchestrator) and Fuelup (toolchain manager), along with SDKs and APIs to facilitate development.

FuelVM utilizes a UTXO model with strict state access lists, which allows transactions to be executed in parallel. This capability enables the network to leverage multiple CPU threads and cores, increasing compute power, state access, and transaction throughput compared to traditional single-threaded blockchains.

Sway is a custom-built, domain-specific programming language optimized for blockchain development. It combines Rust’s safety mechanisms with Solidity’s smart contracts, including built-in contract storage and blockchain functionalities, which makes integrating blockchain-specific syntax easier. Sway prioritizes compile-time analysis and safety by offering static auditing for smart contracts. It also features a modular backend that can be adapted to different blockchain architectures.

The Fuel network refers to the broader Fuel ecosystem, encompassing its technology, community, and infrastructure. The network leverages Ethereum for data availability and features a one-second block time, with a focus on mitigating state growth and state bloat issues. Fuel v1 was the first Layer-2 network to reach the status of being a Stage 2 Appchain Optimistic Rollup.

Fuel Ignition, an Optimistic rollup on the Fuel Network, marks the transition from development to a fully operational network. Fuel Ignition was built with state-growth and state-bloat mitigation in mind, addressing what many consider blockchain’s fundamental bottleneck and benefits from a hybrid proving system utilizing zero-knowledge proofs (zkps). Fuel Ignition has low fees and high throughput, achieving over 600 transactions per second (TPS) when using Ethereum data availability and up to 21,000 TPS per CPU core, making it one of the most scalable Ethereum Layer-2 solutions. Fuel Ignition launched on Oct. 15, 2024, and the Token Generation Event (TGE) for FUEL occurred on Dec. 19, 2024.

Website / X (Twitter) / Forum / FuelVM

Key Metrics

Financial Overview

Market Cap

Q2 2025 was the second full quarter since FUEL’s TGE on December 19, 2024. During the quarter, FUEL’s circulating market cap decreased 28.4% to $35.7 million, and the token price declined 39.2% quarter-over-quarter (QoQ) to $0.007.

Onchain Costs

Onchain costs on Fuel Ignition reflect the level of network activity, typically increasing with higher usage and falling when activity slows. These costs are broken into four categories: blobs and calldata, which cover data storage and availability, and compute and overhead, which represent execution and fixed operational expenses. Rollup operators manage these costs by prioritizing blobs over calldata and reducing compute demands through parallel execution.

In Q2 2025, average daily onchain costs on Fuel Ignition fell to $17.9, down 89.7% QoQ from $174.1 in Q1. This decline was driven by a steep drop in blob costs, which fell 91.6% QoQ from $158.3 per day to $13.3 per day. The drop aligns with Ethereum’s Pectra upgrade, which increased blob capacity from 6 to 12 per block, reducing pricing pressure for rollups relying on blobs for transaction batching. Additionally, Fuel announced its plan to transition to EigenDA in Q3 2025, which will reduce costs further and unlock Fuel’s full throughput potential. The move would remove current DA bottlenecks, allowing the FuelVM to use all CPU cores for parallel execution, lower latency, and throughput above 150,000 TPS.

Overhead also declined meaningfully to $3.9 per day from $13 per day (-70.0% QoQ), as sequencer upgrades introduced on June 9, 2025, enhanced throughput reliability and system efficiency. Compute and calldata expenditures similarly dropped by 73.9%, as execution optimizations across Fuel’s parallel UTXO model helped reduce computational burden per transaction.

Network Analysis

Liquid Staking

On June 23, 2025, The Rig, the first liquid staking protocol built on Fuel, went live. The system lets users stake FUEL and receive stFUEL, a transferable, auto-compounding token that represents their stake. Holding stFUEL allows users to maintain liquidity while earning sequencer rewards, which are reflected directly in the stFUEL redemption rate. This design improves capital efficiency by enabling stakers to participate in DeFi protocols and other applications without the need to unstake their tokens.

Key technical and design characteristics include:

• Validator Architecture: Staked FUEL is delegated to a set of decentralized, permissioned validators. The validator set consists of eight geographically distributed operators. Delegation is managed programmatically based on relative stake weight and performance.
• Reward Structure: stFUEL appreciates in value over time through auto-compounded sequencer rewards. Users do not need to manually claim or restake rewards, as the protocol handles reward conversion natively.
• No Lockups: Users can mint and burn stFUEL at any time, subject only to standard network gas costs. stFUEL can be redeemed for FUEL via direct burns or through liquidity pools that provide secondary market liquidity.
• Protocol Fees: A 10% fee on gross staking rewards funds the network’s ongoing development and operations. This fee is deducted prior to distribution and is automatically factored into the stFUEL redemption rate.

Security features include support for validator slashing (though no slashing has occurred to date), a multi-signature upgrade path, and an emergency pause mechanism. Oak Security audited the protocol ahead of launch.

stFUEL is already integrated with Mira (now Microchain), where it can be traded against FUEL and USDC. Looking forward, stFUEL is positioned to serve as a core yield-bearing asset within the Fuel ecosystem, with future use cases including lending collateral and yield strategy composition.

The Rig’s design reflects an intent to create sustainable, composable staking infrastructure from the outset. It introduces a native reward layer to Fuel’s onchain economy and marks a key step in enabling capital-efficient DeFi participation.

Sequencer Upgrades

On June 9, 2025, Fuel deployed a series of upgrades to its decentralized sequencer aimed at improving performance, efficiency, and developer flexibility. The update introduced several key changes:

• Gas Optimization: Core sequencer processes were streamlined to reduce gas consumption, lowering transaction costs and improving execution speed for users.
• Protobuf Encoding: Data serialization for validator delegation was overhauled using Protobuf encoding, making staking operations and related validation workflows more efficient.
• Enhanced Account Management: New authorization capabilities now allow one account to manage others, enabling more complex dApp architectures and advanced user experiences.

These enhancements strengthen the sequencer’s role as a permissionless, trust-minimized component of Fuel’s architecture, while sustaining the high performance required for demanding applications. The upgrades also expand the design space for developers, making the network more attractive for enterprise-grade and composable onchain systems.

Ecosystem Analysis

Usage

Fuel Ignition processed an average of 99,100 transactions per day in Q2 2025, marking a 12.6% QoQ decline from 113,400 in Q1. The decrease follows a broader normalization trend after elevated activity in Q4 2024.

DeFi

At the end of Q2 2025, Fuel Ignition’s DeFi ecosystem recorded $8.2 million in TVL, a 6.8% decline QoQ. Activity remained highly concentrated, with Mira Protocol, SwayLend, and The Rig collectively accounting for more than 98% of total DeFi TVL.

Mira Protocol retained its lead as the network’s top DEX, holding $4.4 million in TVL (54.2% market share) despite a 10.1% QoQ drop. The platform supports token swaps and liquidity pools, including for newer assets such as stFUEL. SwayLend, Fuel’s primary lending platform, followed with $2.7 million in TVL (33.1%), down 16.5% from Q1.

The Rig, Fuel’s liquid staking protocol, reached $781,800 in TVL (9.5% market share), highlighting early adoption of staking-based yield strategies. Smaller protocols posted mixed results: Fluid Protocol fell 56.1% to $165,700, while Ruscet and Diesel Dex closed the quarter with $40,600 and $38,300, respectively.

FUEL Tokenomics

FUEL has a total token supply of 10.1 billion, with an annual inflation rate of 3%, introduced through protocol-level rewards (e.g., sequencer incentives). FUEL plays three primary roles in the network:

1. Securing the network through staking
2. Paying for onchain resources (compute, storage, data availability)
3. Enabling application-specific sequencing

Users can stake unlocked FUEL via Ignition or delegate through The Rig. Locked tokens are ineligible for staking.

Fuel’s token distribution is designed to prioritize long-term ecosystem development. Approximately 51% of the total supply is allocated to community initiatives, including airdrops, ecosystem support, and R&D funding.

FUEL’s unlock schedule follows a tiered structure based on participant category:

• Community and Ecosystem & R&D: Unlocked at launch (TGE)
• Contributors (24-month), Purchasers, and Ecosystem & R&D (24-month): Unlock linearly over 24 months post-TGE
• Contributors (48-month): Unlock linearly over 48 months post-TGE

Fuel continued distribution efforts in Q2 2025 through its Genesis Drop, which allocated 150 million FUEL (1.5% of total supply) to over 250,000 eligible addresses. Participants could claim their airdropped tokens and begin earning points via the Fuel ecosystem Points Program, incentivizing early network engagement.

Ecosystem Growth

Fuel’s ecosystem expanded across partnerships, infrastructure integrations, developer tooling, and community programs in Q2 2025, reflecting growing alignment around its modular execution stack. Key developments included:

Partnerships and Integrations

• Binance Alpha: Fuel was listed on Binance Alpha, accompanied by a trading competition with $730K in rewards and a 99 million FUEL token prize pool. An airdrop campaign also distributed 5,550 FUEL to eligible Alpha Points holders.
• Hyperlane: Fuel partnered with Hyperlane to enable bridging between Fuel and BNB Chain, using Hyperlane as the canonical bridge for cross-chain FUEL transfers.
• Dune Analytics: Fuel data became available on Dune, with new dashboard infrastructure enabling analytics and visibility for onchain activity.
• QuickNode: QuickNode published a full-stack developer guide for building AI-powered trading agents on Fuel, highlighting the network’s real-time execution capabilities.

Sway Developer Ecosystem

Q2 2025 saw continued progress in the Sway developer ecosystem, with a series of language upgrades and tooling improvements that deepened support for builders on Fuel.

Several new features were introduced:

• SRC-6 and SRC-7 contract standards were added to the Sway standard library, expanding support for reusable, modular contract logic and interface compatibility across applications.
• A new Time Library was launched, enabling developers to implement time-based logic directly within contracts. This feature is critical for use cases like vesting schedules, auctions, and expiration windows.
• Additional utilities such as the Beacon Proxy standard and the Forc Migrate tool were released. These tools simplify contract upgrades and streamline codebase migration across breaking versions of Sway.

Developer Programs

On June 13, 2025, Fuel announced Fuel Forge I, its inaugural in-person builder residency program set to be held in Costa Rica. Designed as an intensive three-week experience, Fuel Forge I offers full sponsorship, including flights, lodging, and meals, for 20 selected participants building on the Fuel stack.

Unlike traditional hackathons or accelerators, Fuel Forge I is designed as an immersive, end-to-end product development residency. Participants work alongside core Fuel contributors, engaging in technical workshops on topics such as Sway development, CLOB architecture, and application deployment, while also receiving mentorship on the business fundamentals needed to take an idea from inception to market. This includes guidance on branding, user acquisition, fundraising, and go-to-market strategy. The program culminates in investor-focused events, including a demo day with venture introductions, giving teams the opportunity to showcase both their products and business readiness to the broader ecosystem.

Fuel Forge I is targeted at early-stage founders and technical teams with high-potential ideas and a willingness to iterate quickly. The residency emphasizes rapid feedback cycles, product experimentation, and deep engagement with the Fuel ecosystem.

Set to begin in August 2025, Fuel Forge I reflects the network’s commitment to supporting long-term ecosystem growth by backing early builders with the resources, mentorship, and infrastructure needed to launch high-performance applications.

Closing Summary

Q2 2025 marked a pivotal quarter for Fuel Network, characterized by infrastructure upgrades, ecosystem expansion, and early adoption of new financial primitives. The launch of The Rig, Fuel’s native liquid staking protocol, introduced the first yield-bearing asset to the network and established a foundation for capital-efficient DeFi activity. This was complemented by sequencer improvements, which reduced onchain costs and improved the network’s scalability profile.

Developer infrastructure continued to mature, with the rollout of the Sway Package Registry, contract standard updates, and new educational resources enhancing the builder experience. These efforts were matched by ecosystem growth initiatives, including Fuel Forge I, new cross-chain integrations (e.g., Binance Alpha, Hyperlane), and expanded data visibility through platforms like Dune.

Despite a modest decline in daily transaction volume and DeFi TVL, the quarter laid critical groundwork for sustainable long-term growth. With performance upgrades now live and composability improving, Fuel is positioned to support the next wave of high-throughput applications and ecosystem development in H2 2025.