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 Expenses Methodology

## 1. Overview

Ethereum expenses represent the total daily token incentives paid by the Ethereum network to secure and operate the blockchain. This metric captures all forms of ETH rewards distributed to validators and miners, including block rewards, uncle rewards, nephew rewards, and beacon chain staking rewards. The calculation aggregates these different reward mechanisms across Ethereum's protocol evolution, from proof-of-work mining rewards to proof-of-stake validator rewards after The Merge.

## 2. Data sources

- **Ethereum block data**: Raw blockchain block records containing block numbers, timestamps, gas usage, base fees, and uncle block references
- **Ethereum uncle block data**: Records of uncle blocks (valid blocks not included in the main chain) with timestamps and block number relationships
- **Beacon chain validator data**: Post-merge validator statistics including validator counts, effective balances, and slot timestamps
- **End-of-day token price feeds**: USD price data for ETH token conversion
- **Token metadata**: ETH token contract address and decimal specifications

## 3. Step-by-step calculation

### Component A: Block rewards calculation
- **Purpose**: Calculate base mining/validation rewards for each Ethereum block
- **Logic**: Uses hardcoded reward amounts based on Ethereum protocol upgrade history. Blocks are categorized by number ranges corresponding to major upgrades: pre-Byzantium blocks (before block 4,370,000) receive 5 ETH, Byzantium to Constantinople blocks (4,370,000 to 7,280,000) receive 3 ETH, Constantinople to The Merge blocks (7,280,000 to 15,537,392) receive 2 ETH, and post-Merge blocks receive 0 ETH as rewards shifted to the beacon chain
- **Key fields**: `block_timestamp` for daily aggregation, `block_number` for determining reward era, `amount` as the calculated reward amount

### Component B: Uncle rewards calculation  
- **Purpose**: Calculate rewards paid to miners of uncle blocks (valid blocks not included in main chain)
- **Logic**: Uses the formula (uncle_block_number + 8 - block_number) * base_reward / 8, where base_reward varies by protocol era (5 ETH pre-Byzantium, 3 ETH Byzantium-Constantinople, 2 ETH Constantinople-Merge, 0 ETH post-Merge). Only applies when uncle blocks exist and block number is within valid ranges
- **Key fields**: `uncle_block_number` and `block_number` for calculating the reward multiplier, `amount` as the calculated uncle reward

### Component C: Nephew rewards calculation
- **Purpose**: Calculate additional rewards for blocks that include uncle blocks
- **Logic**: Blocks that include uncle blocks receive additional rewards at 1/32 of the base block reward per uncle block included (maximum 2 uncles per block). Calculated as base block reward * (1/32) * number_of_uncles, where number_of_uncles is determined from the uncles array length
- **Key fields**: `uncles` array to count included uncle blocks, `amount` from block rewards as the base for nephew reward calculation

### Component D: Beacon chain rewards calculation
- **Purpose**: Calculate post-merge staking rewards distributed through the beacon chain
- **Logic**: Uses beacon chain validator data to estimate daily staking rewards using the formula: 225 epochs per day * (32 ETH effective balance increment * 64 base reward factor * number of active validators) / square root of total effective balance. Takes the last validator snapshot per day to avoid double counting across slots
- **Key fields**: `number_of_validators` for active validator count, `total_effective_balance` for network stake amount, `slot_timestamp` for daily aggregation

### Final aggregation
- **Combining components**: All four reward components are combined using UNION ALL operations, creating a unified dataset of daily reward distributions across different mechanisms and time periods
- **Currency conversion**: All ETH amounts are converted to USD using end-of-day token price feeds, with proper decimal adjustment for the ETH token (18 decimals)
- **Time aggregation**: All timestamps are truncated to daily boundaries using `timestamp_trunc(timestamp, day)` to ensure consistent daily aggregation across all reward types
- **Final calculation**: Daily expenses equal the sum of all reward types (block + uncle + nephew + beacon rewards) converted to USD for each day, with zero-filling applied for days with no rewards to maintain continuous time series data

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

Total project operating and incentive expenses.

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Expenses

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