State Of Tezos Q2 2025

What Happened

Etherlink processed 20.5 million transactions in Q2'25. A 474% increase from the previous quarter, driven by the rollup’s Mainnet launch, illustrates the network's position as an important execution environment within the Tezos ecosystem.

The Rio upgrade modernized Tezos’ protocol architecture. The upgrade reduced network cycle time from three days to one, improved validator responsiveness, and allocated 10% of participation rewards to validators supporting the DAL.

RISC-V support was introduced. This will allow developers to build more complex rollups using features like runtime code generation and fine-grained gas metering. It complements, but does not replace, existing WebAssembly-based rollups.

Tezos (XTZ) is a Proof-of-Stake (PoS) blockchain network known for its strong focus on security, upgradeability, and democratic community governance. Its smart contracts on Layer-1 (L1) are implemented using the Michelson language, designed to facilitate formal verification while also offering Ethereum virtual machine (EVM) compatibility through Etherlink, a community-supported Layer-2 (L2). The network features onchain governance and self-amending functionality, enabling stakeholders to adopt protocol upgrades without requiring a network hard fork. Recent upgrades on Tezos have focused on scalability and performance through Smart Rollups and a Data Availability Layer (DAL). The Mumbai upgrade introduced Smart Rollups, a 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 reduced L1 block time from 15 to 10 seconds, bringing 20-second finality. It also introduced the DAL, a data-availability solution that boosts Smart Rollup scalability and is part of the Tezos protocol. The DAL is now active on mainnet, and it is supported by a majority of validators, completing its integration with L1 consensus. 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 for boosting the blockchain’s performance, composability, and interoperability, with the goal of delivering 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.

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 Q2, the circulating supply was 1.1 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 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 the dilution of XTZ, improve liquidity, reduce inefficiencies, and make XTZ better suited for real-world use cases. In Q2, the annualized real yield for validators was 1.6%, with a QoQ increase of 1.3%.

Etherlink processed 20.5 million transactions in Q2'25, a 474% QoQ increase from 3.6 million in Q1. The surge followed the launch of its Mainnet Beta in March and reflects the rollup’s rapidly expanding usage. For the quarter, Etherlink accounted for 64% of all Tezos ecosystem transactions, overtaking L1 volume and reflecting its emerging role as the primary execution layer within Tezos’ modular architecture.

Network Upgrades

The Rio upgrade marked Tezos’ 18th protocol upgrade and was activated following community governance approval. Developed by Nomadic Labs, Trilitech, and Functori, Rio introduced changes aimed at improving scalability, staking mechanics, and validator participation.

Market Context

Total network fees rose 324% QoQ, reaching a new all-time high. Etherlink contributed 74% of this volume, marking a major shift in activity from L1 to L2. The surge in fees reflects growing engagement from both users and developers.

Supply and Market Capitalization

Tezos' circulating market capitalization declined 17.8% QoQ to approximately $560 million by the end of Q2'25. The contraction follows a 48.4% drop in Q1 and reflects continued softness in the broader market, despite a sharp rebound in network usage and fees paid.

Why It Matters

Validator participation declined modestly. Publicbaker count fell 7.5% to 271, while active stake rose 10%. Maintaining staking levels aligned with the protocol’s 50% target, suggesting continued security.

Network activity on Tezos L1 rose 63.1% QoQ in Q2'25, reaching an average of 4.0 million transactions and contract calls per month, up from 2.4 million in Q1. Activity growth was driven by a broad rebound in transaction throughput, including increases in both standard transfers and smart contract calls. The spike coincides with rising demand for blockspace on Tezos L1 and Etherlink L2, suggesting a coordinated upswing in user engagement across the ecosystem.

Details

Key Insights

Primer

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Key Metrics

Financial Overview

Revenue

In Q2'25, total fees paid on Tezos L1 and Etherlink surged to 29,844 XTZ and 79,584 XTZ, respectively. This marked a 200% QoQ increase for Tezos L1 (up from 9,832 XTZ in Q1'25) and a 672% increase for Etherlink (up from 10,302 XTZ). The sharp uptick in Etherlink fees reflects accelerating usage of the rollup, following its mainnet beta release in March. By June, Etherlink fees made up over 74% of total network fees, reflecting a transfer of activity from L1 to L2.

Network Overview

Usage

In Q2 2025, daily active addresses (DAA) on Tezos L1 fell 7% QoQ, averaging 1,040 unique addresses per day. However, on Etherlink, DAA increased 662, averaging over 1400 DAA in June, demonstrating strong user adoption of the Etherlink L2 and broader Tezos X ecosystem.