Validators process transactions and receive fees from users (supply-side fees).

Ethereum is a smart contract platform for decentralized applications (a blockchain). Ethereum was founded by Vitalik Buterin, Anthony Di Iorio, Mihai Alisie, etc. and launched in 2015.

ETH holders own and govern the protocol. They currently take a cut of the total transaction fees (base fee) paid by users (revenue). Ethereum’s investors include KR1, Block Ventures, 8 Decimal Capital, etc.

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# Ethereum Earnings Methodology

## 1. Overview

Ethereum earnings represents the protocol's net profitability, calculated as total revenue minus total expenses on a daily basis. Revenue comes from transaction fees that are burned (base fees and blob fees), while expenses represent the cost of validator rewards and block production incentives paid out to network participants. This metric provides insight into Ethereum's economic sustainability and the net value created by the protocol's fee-burning mechanism versus its reward issuance.

## 2. Data sources

- **Ethereum blocks**: Block-level data including timestamps, block numbers, gas usage, base fee per gas, and uncle block references
- **Ethereum transactions**: Individual transaction records with gas usage, effective gas prices, blob gas usage, and blob gas prices
- **Ethereum uncle blocks**: Uncle block data with block numbers and timestamps for calculating uncle rewards
- **Ethereum beacon chain validator data**: Validator count, effective balance amounts, and slot information for calculating beacon chain rewards
- **End-of-day token price feeds**: ETH to USD conversion rates for standardizing all monetary amounts

## 3. Step-by-step calculation

### Component A: Revenue from base fees
- **Purpose**: Calculate daily revenue from EIP-1559 base fees that are burned
- **Logic**: For each transaction, multiply the `gas_used` amount by the `base_fee_per_gas` from the corresponding block. Base fee per gas values are converted from wei to ETH by dividing by 10^18. These individual transaction base fee amounts are then aggregated by day to get total daily base fee revenue. All base fees are burned and represent direct revenue to the protocol.
- **Key fields**: `gas_used` from transactions, `base_fee_per_gas` from blocks, `block_timestamp` for daily aggregation

### Component B: Revenue from blob fees  
- **Purpose**: Calculate daily revenue from blob transaction fees that are burned
- **Logic**: For transactions that include blob data, multiply the `blob_gas_used` by the `blob_gas_price` to get the blob fee amount. Blob gas prices are converted from wei to ETH by dividing by 10^18. These blob fee amounts are aggregated daily to get total daily blob fee revenue. Like base fees, blob fees are burned and represent protocol revenue.
- **Key fields**: `blob_gas_used`, `blob_gas_price`, `block_timestamp` for daily aggregation

### Component C: Expenses from block rewards
- **Purpose**: Calculate the cost of block production rewards paid to miners/validators
- **Logic**: Block rewards are hardcoded based on historical Ethereum upgrade milestones. Blocks before the Byzantium upgrade (block 4,370,000) received 5 ETH rewards. Blocks from Byzantium to Constantinople (block 7,280,000) received 3 ETH. Blocks from Constantinople to The Merge (block 15,537,392) received 2 ETH. After The Merge, block rewards are 0 ETH. These amounts are aggregated daily to calculate total block reward expenses.
- **Key fields**: `block_number` for determining reward era, `block_timestamp` for daily aggregation

### Component D: Expenses from uncle rewards
- **Purpose**: Calculate rewards paid to uncle block miners
- **Logic**: Uncle rewards are calculated based on how close the uncle block was to being included in the main chain. The formula is `(uncle_block_number + 8 - block_number) * base_reward / 8`, where `base_reward` follows the same historical schedule as regular block rewards (5 ETH, then 3 ETH, then 2 ETH, then 0). This incentivizes miners to include recent uncle blocks and reduces centralization pressure.
- **Key fields**: `uncle_block_number`, `block_number`, historical reward amounts

### Component E: Expenses from nephew rewards
- **Purpose**: Calculate additional rewards paid to miners who include uncle blocks
- **Logic**: When a block includes uncle blocks, the block miner receives additional "nephew" rewards equal to 1/32 of the base block reward for each uncle included. A block can include up to 2 uncles, so the nephew reward is either `base_reward * 1/32` for one uncle or `base_reward * 2/32` for two uncles.
- **Key fields**: `uncles` array length from blocks, `amount` from block rewards

### Component F: Expenses from beacon chain rewards
- **Purpose**: Calculate daily validator rewards from the proof-of-stake beacon chain
- **Logic**: Beacon chain rewards use an issuance formula based on validator economics. The daily issuance is calculated as `epochs_per_day_estimate * (effective_balance_increment * base_reward_factor * number_of_validators) / sqrt(effective_balance_amount)`, where epochs_per_day_estimate is 225, effective_balance_increment is 32 ETH, and base_reward_factor is 64. This formula ensures that total issuance decreases as more validators join the network.
- **Key fields**: `number_of_validators`, `total_effective_balance`, `slot_timestamp` for daily values

### Final aggregation
- **Combining components**: Revenue components (base fees and blob fees) are summed to get total daily revenue. Expense components (block rewards, uncle rewards, nephew rewards, and beacon rewards) are summed to get total daily expenses.
- **Currency conversion**: All ETH amounts are converted to USD using end-of-day token price feeds applied to the respective daily amounts
- **Time aggregation**: All data is aggregated to daily boundaries using timestamp truncation to day level
- **Final calculation**: Daily earnings equals total daily revenue minus total daily expenses, representing the net economic value generated by the Ethereum protocol each day

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

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