3 Reasons Why Arbitrum TVL Leads In Ethereum Layer 2

Arbitrum, one of Ethereum’s Layer 2 networks, has garnered significant attention from crypto users and developers since its launch. According to Footprint Analytics, Arbitrum contributed 45.38% of all Layer 2 TVL, totaling $2.5 billion as of December 27. Arbitrum is currently the leader of all Layer 2 networks.

Data source: Footprint

Arbitrum mainnet launch on September 1, 2021, seems late compared to other Layer 2 networks. Even so, Arbitrum’s TVL quickly surpassed other projects, exceeding expectations.

Data source: Footprint

What makes Arbitrum stand out from the crowd?

Reason 1: Low cost of technology conversion

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

Reason 2: Low gas cost

Arbitrum processes 40,000 transactions per second, which is much larger than Ethereum’s 15-30 transactions, greatly reducing network congestion, increasing speed, and reducing transaction costs. According to the data, Arbitrum’s transaction cost is 1.8 Gwei compared to Ethereum’s 64 Gwei, which is almost 36 times that of Arbitrum.

Reason 3: More open ecosystem

Many people may ask why the Optimistic network, which also uses the Optimistic rollups solution, is not as good as Arbitrum. Arbitrum’s launch strategy adopted over 400 DeFi projects prior to opening to the public, and dozens of projects were online at the same time at launch. This allows users to complete a variety of activities within its ecosystem. On the other hand, Optimistic uses a whitelisting mechanism so that only whitelisted projects can be deployed on its mainnet.

Due to Arbitrum’s open implementation, it’s not the main DeFi protocol that made Arbitrum famous, but the various “degen” investments that yield incredibly high returns.

Arbitrum’s initial TVL growth was largely due to ArbiNYAN, which attracted investors to stake their native tokens with over 1000% returns. These projects, while not always legal, have allowed new ecosystems to emerge.

Introduction to the Arbitrum ecosystem

Arbitrum only has 44 active projects, this number is not too large. Among them, the DeFi category is dominated by DEX, lending and asset portfolios.

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

Data source: Footprint

Looking at the TVL rankings of DeFi projects, degen projects are no longer in the top 5, with mainstream projects rising to the top. Curve comes in first place with a TVL of $420 million.

Data source: Footprint

conclude

Arbitrum, a key player in scaling Ethereum, is currently attracting a lot of capital attention, with $124 million in Series A and B funding and a $1.2 billion valuation. Arbitrum is not currently launching a cryptocurrency and the co-founder of its development team, Offchain Labs, has stated that there are no plans to launch a cryptocurrency in the near future.

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