Tezos (XTZ)

Key Insights

* As a protocol focused on security and upgradeability, Tezos (XTZ) has maintained a consistent level of network activity throughout 2024 despite a broader reduction in activity across blockchain networks. In Q1 2025, overall network activity on Tezos L1 decreased 27.3% quarter-over-quarter (Q4 2024). Average monthly transactions and contract calls fell to 2.4 million.

* This decline is largely driven by a shift in usage toward Layer 2 solutions like Etherlink, which provide faster and cheaper transactions. In Q1 2025, network activity on Etherlink averaged over 1.4 million monthly transactions, an increase of 189.2% and 72.2% of Tezos L1's transaction counts.

* This rapid adoption of Etherlink, launched in October 2024, showcases its growing role in the Tezos ecosystem. The platform is fully integrated with the Tezos protocol and provides cross-compatibility with the Ethereum virtual machine (EVM) through Etherlink.

* This integration, a key focus for the community in 2024, is powered by a shared data availability layer (DAL) that is part of the Tezos protocol. The Paris protocol upgrade introduced the DAL, designed to boost Smart Rollup scalability and provide a common foundation for L2s on Tezos.

* The Mumbai protocol upgrade introduced Smart Rollups, a scaling solution that can achieve throughput levels of over 1 million transactions per second (TPS) and is easily adaptable to different use cases. Smart Rollups are off-chain environments that process transactions quickly and bundle them for posting on-chain.

* Together, Smart Rollups and the DAL allow for scalable throughput, efficient data processing, and a customizable architecture, setting the stage for next-generation dapps with high performance and adaptability.

* In Q1, developer teams Nomadic Labs, Trilitech, and Functori proposed the Quebec upgrade, aiming to reduce the block time to 8 seconds, enhance staking, and adjust Adaptive Issuance to curb inflation. By the end of Q4, this proposal had advanced to the final “Promotion” voting stage.

* Current research and development (R&D) efforts are focused on realizing “Tezos X,” a proposed roadmap for boosting the blockchain's performance, composability, and interoperability to deliver a “cloud-like” developer experience.

* Leveraging Smart Rollup technology and the data-availability layer, it enables developers to build complex, scalable applications using mainstream programming languages, with improved connectivity across the ecosystem.

Key Metrics

Financial Overview

Revenue

In Q1 2025, L1 transaction fees slipped to 8,500 XTZ, marking a 23.3% quarter-over-quarter (Q4 2024) decrease in XTZ terms (31.1% in USD terms due to a decrease in XTZ price).

Etherlink, Tezos' first EVM-compatible, non-custodial smart rollup, saw a significant 54.1% quarter-over-quarter growth, reaching 10,302 XTZ, surpassing L1 for the first time.

As a cost-efficient L2 solution, Etherlink Mainnet's rapid growth outpacing L1 aligns with expectations for its scalability and cost advantages.

Supply and Market Capitalization

XTZ, the native token of Tezos, is used as a medium of exchange and for staking, delegating, and facilitating governance. As of the end of Q1, the circulating supply was 1.0 billion XTZ.

The Paris upgrade that launched in 2024 introduced the Adaptive Issuance mechanism, which is designed to incentivize a secure network while keeping inflation at a minimum. The target for staking is 50% of total XTZ supply, and the mechanism dynamically adjusts staking rewards to achieve this with the least possible XTZ issuance. The aim is to minimize the dilution of XTZ, improve liquidity, reduce inefficiencies, and make XTZ better suited for real-world use cases.

In Q1, the annualized real yield for validators was 1.6%, with a quarter-over-quarter increase of 1.3%.

Tezos' market capitalization closed Q1 2025 at over $680 million, down 48.4% quarter-over-quarter, driven primarily by a 49.2% decline in the price of XTZ. The drop in XTZ mirrored broader weakness in the crypto market during Q1. For reference, Ethereum's market cap was down 45.6% quarter-over-quarter. Despite the price decline, demand for XTZ remained evident, as evidenced by the fees paid during the quarter.

Network Overview

Usage

In Q1