3 reasons why Arbitrum TVL leads in Ethereum layer 2

Arbitrum, one of Ethereum’s Layer 2 networks, has attracted significant attention from cryptocurrency users and developers since its launch. According to Footprint Analytics, Arbitrum has contributed 41.88% of all TVLs to Layer 2, a total of $ 2.25 billion as of Dec. 8. Arbitrum is now the leading player in all Layer 2 networks.

Data source: Imprint analysis - TVL Layer division 2
Data source: Imprint analysis – TVL Divide according to layer 2

Arbitrum launched its main network on September 1, 2021, which seems late compared to other Layer 2 networks. Despite this, Arbitrum’s TVL quickly overtook other projects, exceeding expectations.

Data source: Footprint analysis - Layer 2 TVL growth trend
Data source: Imprint analysis – TVL layer 2 growth trend 2

What makes Arbitrum stand out from the crowd?

Reason 1: Low technology migration costs

Arbitrum’s Optimistic rollups solution is in the short term more popular among developers than the technically more complex ZK rollups solution. However, in the long run, the UK rollups network may have the potential to catch up thanks to faster speeds and stronger security.

Reason 2: Low cost of gas charge

Arbitrum handles 40,000 transaction requests per second, which is much more than Ethereum’s 15-30 requests, greatly reducing network congestion, increasing speed and reducing transaction costs. According to external data, Arbitrum’s transaction cost is 1.8 Gwei compared to Ethereum’s 64 Gwei, which is almost 36 times more than Arbitrum.

Reason 3: A more open ecosystem

Many people may wonder why the Optimistic network, which also uses the Optimistic rollups solution, is not as good as Arbitrum. Arbitrum’s launch strategy included more than 400 DeFi projects before it opened to the public, and dozens of projects were already online at the same time at launch. This allowed users to complete various operations in their ecosystem. Optimistic, on the other hand, uses a whitelisting mechanism so that only projects on the whitelist can be implemented on its main network.

Due to Arbitrum’s open implementation mechanism, Arbitrum did not celebrate the main DeFi protocol, but various “degen” investments – those that offer unscrupulously high returns.

Arbitrum’s initial growth in TVL is largely due to ArbiNYAN, which attracts investors to invest their original tokens with a return of 1000% more. These projects, although not always legitimate, have enabled the emergence of a new ecosystem.

Introduction to the Arbitrum ecosystem

Arbitrum has only 44 live projects, which is not particularly big. Among them, the DeFi category is dominated by the DEX, lending and asset categories.

Of this, DEX accounts for 56% of TVL, assets 18% and loans 17.8%.

Data source: Imprint analysis - TVL share in the arbitrator category
Data source: Imprint analysis – TVL share in the category at the arbitrator

Looking at the TVL scale of DeFi projects, degen projects are no longer in the top 5, and mainstream projects are climbing to the top. Curve is in first place with a $ 420 million TVL.

Data source: Footprint Analytics - Top 5 DeFi protocols in Arbitrum
Data source: Footprint Analytics – Top 5 DeFi protocols in Arbitrum

Conclusion

Arbitrum, a key player in Ethereum’s expansion, is already attracting a lot of capital attention, with $ 124 million in Series A and B funding and an estimated $ 1.2 billion. Arbitrum is not currently launching a cryptocurrency, and the co-founder of its development team, Offchain Labs, said it has no plans to launch a cryptocurrency in the near future.

Arbitrum is still at an early stage and we expect it to continue to enrich its ecosystem and attract more developers and investors.

This report was brought to you by Footprint Analytics.

What is Footprint

Footprint Analytics is a comprehensive analysis platform for blockchain data visualization and insight detection. It cleans and integrates data in the chain so users of any level of experience can quickly begin researching tokens, projects, and protocols. With over a thousand dashboard templates and a drag-and-drop interface, anyone can create their own custom charts in minutes. Discover blockchain data and invest smarter with Footprint.

Published in: Ethereum, technology
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