State of Tezos Q3 2025

Key Insights

• Transactions on Tezos rose 21.5% QoQ and peaked at 4.7 million transactions in July 2025.
• Tezos’ Layer-1 quarterly transaction fees reached 17,460 XTZ, up 16.9% QoQ, while Etherlink’s Layer-2 transaction fees declined 36.7% QoQ to 50,220 XTZ.
• After a 57.2% dip in Etherlink’s TVL in July, TVL rebounded 200.6% from that point and reached $61.2 million by quarter end, up 46.9% QoQ.
• Tezos’ DeFi TVL reached $45.1 million, up 13.1% QoQ. Youves remained the largest protocol by TVL, leading the ecosystem with $31.4 million in TVL, up 18% QoQ.
• Etherlink’s Kernel 4.1 upgrade doubled the throughput target to 4 million gas per second and improved gas estimation. Additionally, the Seoul upgrade in September 2025 added a native multisig, aggregated attestations, and a simpler unstaking flow.

Primer

Tezos (XTZ) is a Proof-of-Stake (PoS) blockchain recognized for its strong emphasis on security, upgradeability, and community-driven governance. Smart contracts on its Layer-1 (L1) network are implemented using the Michelson language, designed to facilitate formal verification while also offering Ethereum virtual machine (EVM) compatibility through Etherlink, a community-governed, non-custodial Layer-2 (L2). The network features onchain governance and self-amending functionality, enabling stakeholders to adopt protocol upgrades without requiring a network hard fork.

Tezos’ recent upgrades have focused on scalability and performance through Smart Rollups and a Data Availability Layer (DAL). The Mumbai upgrade in March 2023 introduced Smart Rollups, an L2 scaling solution that enables throughput beyond 1 million TPS and customization to adapt to specific use cases, such as implementing new coding environments. The Paris upgrade in June 2024 reduced L1 block times from 15 to 10 seconds, bringing 20-second finality. It also introduced the DAL, a data-availability solution that boosts Smart Rollup scalability. Finally, the Paris upgrade implemented a new staking mechanism and Adaptive Issuance, which adjusts token issuance based on the staked ratio of XTZ.

Current R&D work from teams across the ecosystem focuses on realizing “Tezos X,” a proposed roadmap that enhances the blockchain’s performance, composability, and interoperability, delivering a “cloud-like” developer experience. Leveraging Smart Rollup technology and the built-in Data Availability Layer, developers can build complex, scalable applications on a unified application layer with multiple runtimes, using mainstream programming languages, and with improved connectivity across Tezos and other blockchain ecosystems.

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Key Metrics

Financial Analysis

Tez (XTZ) is the native token of the Tezos blockchain. It is used (i) for staking, delegation, and governance and (ii) as the primary medium for paying transaction fees on both the Tezos Layer-1 (L1) and the EVM-compatible Layer-2 (L2) network, Etherlink. In Q3 2025, XTZ's price increased 24.1% QoQ from $0.54 to $0.67, while its circulating market cap (USD) grew 25.4% QoQ to $708.8 million. The slight discrepancy is due to XTZ’s circulating supply increasing 1.1% QoQ to 1.06 billion XTZ, in line with the protocol's inflation schedule. XTZ's circulating market cap ranking rose from 101st in Q2 2025 to 98th in Q3 2025.

As of Sept. 30, 2025, XTZ’s circulating supply was 1.06 billion. The Paris upgrade, launched in April 2024, introduced the Adaptive Issuance mechanism, designed to incentivize a secure network while minimizing inflation. The target for staking is 50% of the total XTZ supply, and the mechanism dynamically adjusts staking rewards to achieve this with the least possible XTZ issuance. The aim is to minimize XTZ dilution, improve liquidity, reduce inefficiencies, and optimize XTZ for real-world use cases. The total XTZ staked on the network decreased by 0.6% from 692.2 million in Q2’25 to 688.1 million at the end of Q3’25.

In Q3 2025, total fees paid on Tezos L1 rose 16.9% QoQ to 17,460 XTZ, while Etherlink L2 fees declined 36.7% QoQ to 50,220 XTZ. In July 2025, validators, also known as “bakers,” conducted two Etherlink governance votes that were executed on Tezos L1, resulting in ballot transactions and wallet interactions throughout the month. This aligned with the quarterly high in L1 transaction fees in July 2025.

Etherlink’s 4.1 kernel upgrade increased the rollup’s throughput threshold that triggers higher base fees from two million to four million gas per second. This allows it to clear similar loads at a lower demand-indexed base fee, which resulted in total L2 fees falling as post-launch usage cooled. Notably, several infrastructure incidents in August, including mainnet RPC and relay issues, interrupted Etherlink usage and reinforced the drop in L2 fees throughout the quarter. Additionally, fast withdrawals went live in June 2025, reducing L2 to L1 transfers to approximately one minute and eliminating multi-step bridge flows that previously generated L2 fees. Compared to Tezos L1, Etherlink L2 fees were higher in total because Etherlink processed far more transactions and paid L1 data costs in addition to its own base fee, because each batch must be written to the Tezos base layer for security.

Network Overview

Usage

Transactions on Tezos L1 rose 21.5% QoQ in Q3 2025, reaching an average of 4.3 million transactions, up from 3.6 million in Q2. Additionally, contract calls rose 15.5% QoQ, up to 1.2 million from 1.1 million in Q2. The Kernel 4.1 upgrade may have driven growth in network activity, as transaction throughput nearly doubled without an increase in fees, allowing for higher usage at the same cost. The spike also coincided with TezDev in July 2025 during EthCC week. This year’s conference featured an “Art on Tezos: Past, Present, Future” session with its founders and artists, including Zancan and Ganbrood, a 360° digital art exhibition that included objkt.one releases, and a curated Logo Remix showcase.

Etherlink processed 12.2 million transactions in Q3 2025, a 40.1% QoQ decrease from 20.4 million in Q2. The decline reflected a post-launch cooldown after July’s Kernel 4.1 change, which doubled Etherlink’s gas target from 2M to 4M gas per second and allowed the sequencer to clear similar loads at a lower base fee, reducing marginal and retry transactions. Fast withdrawals, introduced at the end of June 2025, also eliminated multi-step bridge workflows that had inflated activity, while intermittent mainnet incidents in August reduced usage windows. Despite this, Etherlink transactions remained well above Q4’24 and Q1’25 levels, indicating a stronger baseline than previous quarters. At the same time, Tezos L1 transactions reached a quarterly high of 4.7 million in July 2025, underscoring stronger activity on the base layer.

In Q3 2025, daily active addresses (DAAs) on Tezos L1 increased 8.6% QoQ, averaging 2,370 unique addresses per day. On Etherlink, DAAs increased 33.8% QoQ, from averaging 3,720 in Q2’25 to averaging over 4,980 in Q3’25. The surge in DAAs in September 2025 could have been due to KuCoin enabling native XTZ deposits and withdrawals on Etherlink on Sept. 4, 2025, which broadened access and may have pulled a cohort of new wallets onchain for first-time deposits.

Governance and Network Upgrades

Tezos utilizes an LPoS mechanism, enabling staked XTZ to be used for both network security and governance. The network's self-amending blockchain reduces the need for hard forks by employing onchain governance for protocol upgrades. Users delegate their XTZ to validators who participate in stake-weighted voting. The governance process is divided into five periods, spanning approximately two months and ten days.

To complement protocol governance, Tezos Commons established the Tezos Ecosystem DAO, which manages and allocates XTZ for community projects. The DAO’s initial funding came from NFT sales on Objkt and donations from ecosystem participants.

Etherlink follows an onchain governance model similar to Tezos L1, ensuring fairness and transparency. Governance for Etherlink features the same self-amending properties (meaning no hard fork needed) and is controlled by L1 bakers. Unlike L1, Etherlink governance pilots both upgrades and the sequencer operator. Additionally, it has an alternative “fast governance” process for swift incident responses, with shorter duration but higher participation requirements. The governance process occurs solely on Tezos L1 through dedicated smart contracts and consists of five stages: Proposal Period, Exploration Vote Period, Cooldown Period, Promotion Vote Period, and Adoption Period.

Etherlink Kernel 4.1 Upgrade

Etherlink activated the Kernel 4.1 upgrade on July 15, 2025, following a governance vote. The release raised the throughput speed limit from two million to four million gas per second, which increased the amount of transactional capacity the rollup could handle before its demand-responsive base fee rose. It also refined gas-limit calculations to prevent valid transactions from being blocked by over-estimation and updated the kernel’s governance contracts used for baker voting. As a result, comparable loads cleared at a lower per-transaction cost, with fewer retries and minimal submits appearing in the data.

Seoul Protocol Upgrade

Seoul, Tezos’ 19th protocol upgrade, activated on mainnet on Sept. 19, 2025, at block #10,279,489 after passing onchain governance. The release introduced three key features to the Tezos Layer-1:

• Protocol-Native Multisig Accounts: Gives teams more flexible and secure options for managing multi-user or high-value wallets without relying on custom contracts.
• Aggregated Attestations: Bundles multiple validator votes into one, so less data needs to be shared, and blocks can be confirmed faster.
• Open Unstake Finalization: Allows any party to finalize an unstake transaction after the freeze period, simplifying exits and reducing the risk of withdrawals getting stuck.

These changes tightened account controls to reduce custody risk, streamlined consensus to reduce network overhead, and simplified the staking user experience for everyday actions.

Etherlink 5.0 Ebisu Upgrade

Ebisu was announced as the fifth Etherlink kernel proposal on Sept. 16, 2025, to align Etherlink’s EVM with Ethereum’s Prague execution changes, which are the execution-layer portion of Ethereum’s broader Pectra upgrade. Pectra is the umbrella name for two halves of a single upgrade, with Prague serving as the execution layer and Electra as the consensus layer. Etherlink implements the EVM execution environment, not Ethereum’s consensus, so Ebisu targeted Prague compatibility, not the entire Pectra upgrade.

Ebisu will add three Prague features to Etherlink:

• EIP-7702: Allows a regular, externally owned account to attach contract code for a single transaction and delegate what it can do. This enables smart-account features, such as batching steps, session keys, or sponsored fees, without transferring funds to a new contract wallet. After the transaction is complete, the account returns to normal, allowing existing addresses and tooling to continue functioning.
• EIP-2537: Adds a built-in, low-level function that the EVM can call to perform BLS12-381 calculations quickly. This makes verifying BLS signatures and certain ZK-proof operations significantly faster and more cost-effective compared to writing the math in Solidity. This will allow apps that utilize BLS signatures, light-client proofs, or zero-knowledge (ZK) tooling to run more efficiently with this upgrade.
• EIP-7623: Raises the gas charged per byte of calldata. The impact is concentrated on transactions that include a large amount of raw data to discourage spam and align the fee math with other Ethereum tooling. This means contracts that send large payloads need to compress data or batch more carefully going forward.

The Etherlink upgrade also announced a few kernel improvements in addition to the Prague changes. The kernel will migrate the EVM engine to REVM, aiming for a higher capacity range with a target of roughly 7 million gas/s under the target-based fee model.

App Development

Despite a 35.1% and 85.8% QoQ decline in contract deployments across both Tezos L1 and Etherlink L2, respectively, over 28,000 smart contracts were deployed across both networks in Q3'25. This was driven almost entirely by a surge in activity on Etherlink in August 2025. The August spike coincided with the release of Apple Farm Season 2 on July 24, 2025, and the introduction of Kernel 4.1 tooling improvements, which prompted teams to ship or redeploy contracts on Etherlink to qualify for incentives and launch campaigns. Quarterly contract deployments on Etherlink declined to 28,770, down 85.8% QoQ from 203,220 in Q2’25. Tezos L1 deployments had a smaller drop to 3,693, a 35.1% QoQ decrease.

As of September 2025, Tezos continues to maintain a growing base of active open‑source contributors, with 229 monthly active developers working across more than 3,700 Git repositories, a 37.1% QoQ increase from Q2’25.

Economic Security

Tezos uses a Liquid Proof-of-Stake (LPoS) mechanism, which requires validators (known as “bakers” in the Tezos ecosystem) and delegators to stake XTZ as collateral to secure the network. Rewards and fees collected from transactions are paid to validators and delegators to maintain the network. In Q3 2025, the number of active public validators declined 8.3%% QoQ, from 282 in June 2025 to 258 in September 2025. Public validators make a fraction of the total validator set. Total stake decreased 0.6% over the same period, decreasing from 692.2 million XTZ to 688.1 million XTZ. Despite the ongoing downtrend in public validator participation, overall staking levels have remained stable, indicating continued network security and economic alignment among participants.

Adaptive Issuance dynamically adjusts the issuance of XTZ based on the proportion of staked tokens to the total supply. At the end of each blockchain cycle, the issuance rate is modified to target a protocol-defined staking level, currently set at 50%. This mechanism incentivizes staking to provide stable security for the network.

The Tezos network has demonstrated consistent year-over-year stability in the number of validators and delegators, as well as in the amount of staked XTZ. This stability is crucial for secure and scalable L2 growth. Validators in the ecosystem are also decentralized geographically and by host service providers, further ensuring the network's resilience and security.

Ecosystem Overview

In Q3 2025, Etherlink continued to play a pivotal role in supporting the expansion of the Tezos ecosystem, facilitating growth across DeFi, gaming, and NFTs. As an EVM-compatible Layer-2 built on Tezos' Smart Rollup technology, Etherlink delivers subsecond finality and low fees, while remaining anchored to Tezos’ secure and decentralized Layer-1 for settlement and governance. There was a surge in new activity in Q3 2025, including incentive programs, infrastructure enhancements, and strategic partnerships. Together, these developments reinforced Etherlink’s role as a scalable execution layer that complements Tezos’ vision for a modular and layered blockchain architecture.

DeFi

TVL (USD) on Tezos L1 increased 13.1% QoQ in Q3 2025 from $39.8 million at the end of June 2025 to $45.1 million by September 2025. TVL (XTZ) grew 32.4% QoQ, from 57.4 million XTZ to 76.1 million XTZ. This continued the rebound from Q2 and reflected increased net inflows, a broader pickup in network usage, and steadier activity on Etherlink. While the USD–XTZ TVL gap widened slightly, the strong gain in XTZ terms indicated that deposits and protocol engagement expanded in native units rather than being driven solely by an increase in price.

This growth was driven largely by Youves, which remained the largest protocol by TVL in the Tezos ecosystem. A robust DeFi ecosystem can create a more vibrant and self-sustaining economy on Tezos, providing users with opportunities to earn yields, trade assets, and access financial services.

• Youves: A suite of tools for onchain treasuries and synthetic assets on Tezos L1.
  • Youves had the largest contribution to the overall DeFi TVL on Tezos. Its TVL climbed from $26.6 million to $31.4 million, an 18% jump that solidified its share of Tezos TVL as the top by market share at 69.7%.
• Sirius: A liquidity venue that facilitates swaps across XTZ and wrapped BTC (tzBTC).
  • Sirius ended Q3 with $7.4 million in TVL. This is a 10.6% increase from the previous quarter. However, its market share declined 2.3% to 16.3% of the network's market share. The data reflects a continued rotation of capital into newly launched protocols.
• Bitfinex: Provides custodial staking and liquidity channels that connect institutional users to Tezos.
  • Bitfinex closed Q3 with $2 million in TVL, a 3.7% QoQ increase from Q2. However, its market share declined from 4.8% to 4.4%.
• Kolibri: An overcollateralized stablecoin backed by onchain collateral on Tezos.
  • Kolibri ended Q3 with $1.7 million in TVL, a 2.8% QoQ decline, while its share of overall TVL fell from 4.3% to 3.7%. The pullback in market share is tied to the comparative growth of Youves, which caused smaller protocols such as Kolibri’s share of overall DeFi TVL to decline despite retaining the same USD value.
• QuipuSwap V1/V2: A concentrated-liquidity AMM that supports fee tiers and tighter pricing around the middle bands. While assets are primarily concentrated on V2, QuipuSwap V1 provides a legacy constant-product AMM that continues to serve long-tail assets.
  • Quipuswap V1 and V2 both ended Q3 with a TVL of $0.6 million, a 7% gain and 2% decline QoQ, respectively. Liquidity grew in select pairs and benefited from fee-tier tuning, and aggregator order flow continued to route to V2 from V1.

Etherlink’s TVL (USD) reached $84.4 million at the end of Q3 2025, a 56.4% QoQ increase from $53.9 million at the end of Q2. Growth in TVL was highly volatile throughout the quarter, with TVL rising to $60.2 million on July 15, 2025, and then falling sharply to $33.2 million on July 20, 2025. Despite this, Etherlink’s TVL experienced a strong rebound in the remainder of the quarter and rose 200.6% from the July dip to close Q3.

The dip and subsequent rebound in July were likely due to a combination of factors, mainly centered around the rewards schedule for seasons one and two of Apple Farm. While Apple Farm season one ended on July 16, 2025, Apple Farm season two began on July 24, 2025, introducing another $3 million in incentives for users, which drove more users back into the DeFi ecosystem after a brief drop during the lapse in rewards. Additionally, fast withdrawals reduced Etherlink withdrawals from fifteen days to under one minute, making the July outflows more abrupt, as it was the first full month of this feature being made available. Etherlink’s DeFi TVL grew 37.9% QoQ to $84.4 million. This growth was driven largely by Curve, which quickly became the largest protocol by TVL in the Etherlink ecosystem.

The Etherlink DeFi ecosystem has quickly become the primary venue for DeFi liquidity across both Tezos L1 and Etherlink L2.

• Curve: A concentrated-liquidity AMM on Etherlink that supports fee tiers and tight ranges for stable and volatile pairs. Liquidity is concentrated in a small set of core pools, which aggregate the majority of routing.
  • Curve had the most significant contribution to the overall DeFi TVL on Etherlink. Its TVL climbed from $4.7 million in August to $31 million, a 563.6% jump that quickly solidified it as the largest TVL on Etherlink by market share at 36.7%.
  • Curve did not become active on Etherlink until August 2025
• Superlend: A lending and borrowing market with variable rates and risk controls tuned for Etherlink.
  • Superlend ended Q3 with $16.3 million in TVL, a 37.2% decrease from the previous quarter. Additionally, its market share declined from 39.4% to 19.3% of the network's market share. The data reflects a continued rotation of capital into newly launched protocols, primarily Curve.
  • Superloop, a subset of Superlend, is an infrastructure for moving assets and liquidity across Etherlink and connected venues with lower operational overhead. While Superloop did not go live until September 2025, it ended Q3 with a TVL of $4.5 million and captured 5.3% of all DeFi TVL in its first month.
• Spiko: Issues tokenized money market funds on Etherlink, offering UCITS-style shares backed by U.S. and EU T-Bills that settle onchain.
  • Spiko closed Q3 with $11.4 million in TVL, a 121.8% QoQ increase from Q2 2025. Its market share increased from 7.8% to 13.5%, as incentive programs and new integrations encouraged users to pull deposits from competing venues and instead route order flow into Spiko’s primary pools.
• Uranium.io: A tokenized-commodity platform on Etherlink that gives investors direct, onchain ownership and transfer of physical uranium.io held with regulated custodians.
  • Uranium.io ended Q3 with a TVL of $7.2 million, a 2% gain QoQ. Despite maintaining a stable TVL, this led to a decline in its market share from 10.8% to 8.6% as capital shifted to other new protocols.
  • Oku integrated Morpho on Etherlink to enable xU3O8-backed borrowing, letting holders post tokenized uranium as collateral to borrow USDC. This connected Uranium.io’s xU3O8 directly to a lending market, allowing holders to access liquidity without selling their exposure, which increased xU3O8’s utility across Etherlink DeFi.
• Gearbox: A generalized leverage and credit protocol on Etherlink that uses isolated credit accounts to let users deploy borrowed capital into whitelisted DeFi strategies.
  • Gearbox finished Q3 with $5.9 million in TVL, a 17.9% QoQ decline, while its share of overall TVL fell from 10.8% to 7%.

Protocol Interactions

Objkt remained the leading marketplace on Tezos by unique address activity, averaging over 1,544 weekly active addresses in Q3 2025, a 3.7% QoQ increase from 1,490. Objkt continued to dominate the NFT category, maintaining the largest share of active users across the network. Objktlabs also launched bootloader, a fully open-source, new type of long-form generative art.

Art on Tezos was celebrated with events worldwide, including at TezDev 2025 in Cannes on July 3, 2025, which featured a digital art exhibition and artist programming that put Tezos creators on the main stage during EthCC week. Later in July 2025, RGB MTL, a Montréal-based artist collective and non-profit organization, raised 15,000 tez in under 20 minutes via an interactive minting experience powered by Objkt. The Tezos Foundation matched the proceeds to help power the third annual collective event. In New York, bitforms gallery presented Zancan’s solo show “Tree_Line,” produced in collaboration with the Tezos Foundation and on view through early August, keeping generative art on Tezos in a contemporary art setting during the quarter. Additionally, the "Resonance" interactive installation by Motus Art was presented in Valencia at the Volumens Festival, with the support of the Tezos Foundation, powered by Tesserart and EditArt.

In the DeFi category, QuipuSwap and 3route experienced modest growth. QuipuSwap rose from 240 to 306 average weekly users, while 3route rose from 230 to 314. The “Others” category, which includes dozens of smaller or emerging protocols, grew from 1,380 to 1,579 weekly active addresses, representing sustained participation across the long tail of applications.

The circulating supply of stablecoins on Tezos remained essentially unchanged, growing only 0.3% QoQ, from $54.2 million to $54.3 million. USDT remained the dominant stablecoin on the network with $42.3 million in issuance. This was followed by uUSD at $11.1 million, up 2% QoQ as its market share increased to 20.4%. The largest Tezos-native stablecoins, kUSD and USDTez, had a circulation of $670,910 and $271,880, respectively. The small increase in TVL was primarily driven by an increase in the balance of uUSD and USDTez, while USDT remained stable throughout the quarter.

Closing Summary

Tezos closed Q3 2025 with healthier core usage, steadier economics, and visible execution on upgrades. Tezos Layer-1 activity and fees increased while Etherlink Layer-2 fees declined. This was consistent with July’s governance votes on the L1 as Etherlink’s higher-capacity fee target eased L2 fee accrual. Onchain usage broadened as Tezos L1 transactions rose 21.5% QoQ, and Etherlink sustained strong user adoption through a new exchange on-ramp. Tezos’ DeFi TVL increased 13.1% QoQ, led by Youves, while Etherlink’s TVL finished the quarter higher despite a 57.2% drop in TVL in July.

The quarter also delivered material protocol upgrades, including Etherlink’s Kernel 4.1, which increased throughput while keeping the cost to transact constant. The Seoul upgrade was also activated, introducing native multisig, aggregated attestations, and a simpler unstaking flow, reinforcing the network’s modular roadmap. Looking ahead, the Ebisu proposal, which targets Prague-level EVM features, sets a clear path for Etherlink’s next leg. At the same time, Tezos’ stable governance and builder activity continue to position the ecosystem for incremental growth into Q4 2025.