Original title: Arbitrum is Mooning
Original compilation: MarsBit
Original compilation: MarsBit
Now is the L2 season.
Currently, Layer 2 is one of the strongest growth areas in the crypto space, with its TVL denominated in ETH, user volume and transaction volume soaring during 2022.
Overall, L2 has now been processing more transactions than Ethereum L1, and is starting to really prove their capabilities as Ethereum's primary scaling solution.
One of the main drivers of L2 growth is Arbitrum, an optimistic rollup. In an increasingly competitive rollup environment, Arbitrum is becoming a major L2 in DeFi, with a large number of innovative applications and a strong community.
Source: DeFi Llama
DeFi TVL
Source: DeFi Llama
With a TVL of $1.1 billion, Arbitrum ranks fifth among all L1 or L2 networks, with a 2.5% TVL share across all networks and a 62% TVL share in L2.
Over the past year, Arbitrum's market share has grown significantly, and this growth may be due to the growth of applications such as the perpetual contract trading platform GMX (more on this later).
It is worth noting that the growth of Arbitrum did not use the whole network incentive plan, because the rollup has no native token. However, a certain percentage of the liquidity on the network may only be used for retroactive airdrops (more on that later too).
image description
Arbitrum Monthly Active Address: Source Dune Analytics
Arbitrum's average monthly active addresses (MAA) in the fourth quarter were 614,279, a quarter-on-quarter (Q/Q) and year-on-year (Y/Y) increase of 81.3% and 728.7% respectively. L2 is on track to exceed that number in January 2023, as the current month's active address volume is projected at 631,633.
image description
trade
Arbitrum Monthly Transactions - Source: Dune Analytics
The number of transactions on Arbitrum has grown along with the number of users, increasing by 199.6% (Q/Q) and 1904.2% (Y/Y) respectively in the fourth quarter.
As with active addresses, after the Nitro deployment in August 2022, there was a significant increase in transaction volume, which was partially attributable to airdrop mining. Since October 2022, Arbitrum processed 52.7% of the number of transactions verified on Ethereum L1 during the same period.
Notable Arbitrum Projects
Now that we've touched on Arbitrum's KPIs, let's take a look at some of the major dapps that have contributed to Arbitrum's success.
Arbitrum is quickly becoming a DeFi hotbed, leveraging the enhanced scalability of rollups to unlock new types of applications, while taking full advantage of the composability offered by general-purpose L2 to create a broad and intertwined ecosystem. Additionally, many of these protocols are grassroots, with enthusiastic communities and limited VC reach.
Next, let's talk about some of these influential agreements:
GMX
Topping the list is GMX — the decentralized perpetual contracts exchange that has become the nexus of Arbitrum DeFi.
GMX enables traders to open long or short positions with up to 50x leverage by borrowing from a basket of assets known as GLP. GLP acts as a counterparty to GMX because it accumulates value when traders lose money and loses value when traders make money. GLP also earns 70% of all transaction fees paid in ETH, while stakeholders in the protocol’s governance token, GMX, earn another 30%.
GMX TVL reached $440.7 million, accounting for 37.6% of the TVL of all Arbitrum DeFi protocols. The protocol has become a cash cow, generating $33.9 million in revenue over the past year, making the GMX token one of the best performing assets in a volatile 2022, returning 84.0% against USD and 428.5% against ETH % .
Due to the success of GMX, it is increasingly being used as the underlying primitive and source of liquidity by Arbitrum-based DeFi protocols. Many protocols, such as Rage Trade, Jones DAO, GMD, and Umami Finance, are building minimal delta vaults on top of GLP, while decentralized options protocol Dopex is integrating its Atlantic Options to provide traders with liquidation protection. Other protocols, such as social trading platform STFX and another options protocol Lyra, are also built on top of DEX. GLP has also emerged as a form of collateral, with lending protocols like Vesta and Tender.Fi integrating LP tokens into their offerings.
More Perpetual Contract Products
GMX is not the only permanent game in the ecosystem. It was followed by notable challenger and newcomer Gains Network. Gains originally came from Polygon, which uses a similar model to GMX in that it uses DAI vaults as a counterparty and a source of liquidity for DEX trades.
However, unlike GMX, Gains offers trading in cryptocurrencies, stocks, and forex, while offering up to 1000x leverage for the latter. Usage of the protocol has skyrocketed since its launch on Dec. 30, facilitating $1.2 billion in transaction volume during that time.
Another well-known DEX is Cap Finance. Cap has generated $21.7 billion in transaction volume over the past year and has recently launched V3.1 and is preparing to launch V4. Other protocols on the verge of entering the perpetual contract space include Vertex, which launched an order book trading platform, and Vela, which uses a unique model to enable 1,000x leveraged trading.
other products
Perpetual contracts are not the only popular type of derivatives within the Arbitrum ecosystem. There are many options protocols built on top of L2. Let's talk about some of them.
The most well-known options ecosystem on Arbitrum today is Dopex. Dopex offers a suite of options products including Option Vaults via SSOV, Interest Rate Option Vaults, and numerous products using the aforementioned Atlantic options as straddles, as well as GMX liquidation protection as described above. Dopex has become a primitive in its own right, with Jones DAO building option vaults that run automated strategies on top of the protocol. Meta-governance aggregator Plutus is also building on Dopex by accumulating 54.6% of the supply of veDPX, a vote-locked variant of Dopex’s governance token, DPX.
Premia is another important options protocol that has gained a lot of attention. Premia is unique in that it is one of the only options agreements to offer American options, which are options that can be exercised before expiration. The protocol recently released its V3 white paper, which includes the idea that it will overhaul AMMs by incorporating fractional collateralization and centralized liquidity while allowing the creation of permissionless pools.
Of course, Premia and Dopex are not the only options, there are several other protocols such as Nuemon, which offers perpetual options, and IVX, which is building an options AMM. Buffer Finance is another fast-growing protocol that offers users the ability to trade binary options, allowing traders to bet on the price direction of different assets over a short period of time.
The above projects are native to Arbitrum. However, these protocols will soon be challenged by migration projects such as Optimism's Lyra, which, as mentioned above, plans to deploy its AMM on top of GMX.
NFT-Fi
DeFi applications are not the only use case where PMF is found in Arbitrum. Arbitrum has a rapidly growing GameFi ecosystem powered by Treasure DAO.
These games can be accessed through Trove. Trove is the hub of the Treasure ecosystem, a marketplace for in-game assets and Treasure NFT collectibles. The most popular of these series are Smol Brains (the basis of the Smolverse) and another NFT series, The Lost Donkeys, which has its own game of the same name.
These games can be accessed through Trove. Trove is the hub of the Treasure ecosystem, a marketplace for in-game assets and Treasure NFT collectibles. The most popular of these series are Smol Brains (the basis of the Smolverse) and another NFT series, The Lost Donkeys, which has its own game of the same name.
Future Outlook and Growth Catalysts
While some of the liquidity and usage may be driven by airdrops, Arbitrum is growing its user base and number of transactions while increasing its share of TVL in DeFi.
Furthermore, given the success of Treasure and the growth potential of Arbitrum Nova, a L2 built for games via AnyTrust, Arbitrum is well-positioned in the gaming space to compete with other networks such as Optimism and OPCraft, which build games on custom L2 OP stack.
Arbitrum should benefit from network effects through its extensive DeFi ecosystem, which may help it maintain or even expand its lead in TVL in L2. And the lead can only be strengthened through the incentive program after the launch of the Arbitrum token.
The Arbitrum token is the elephant in the room, almost certain Offchain Labs will eventually release a token to help with other tokenized L2 (eg Optimism, StarkWare) and eventually zkEVM (eg those from Polygon, zkSync) maintain an even playing field.
Although it has grown significantly without anyone, the token launch is critical to Arbitrum's long-term success, as a properly directed incentive program has the potential to bring billions in liquidity to the network while Expand its user base and engage developers and community mindshare. Token distribution will also play an important role in determining L2's governance and the long-term concentration of power within the ecosystem.
Additionally, tokens can be used to decentralize key network functions such as the collator — the entity that sorts, batches, and submits transactions to L1.
Arbitrum currently has a centralized sorter and whitelist proof verification, as well as an upgradable contract. While these “guardrails” are sufficient to protect users, these centralization vectors are the greatest risk Arbitrum faces today, as they increase censorship and the risk of losing user funds.
According to an Arbitrum spokesperson, both a decentralized orderer and permissionless proof verification are in the works. However, a major security or censorship incident during this period could seriously damage Rollup's long-term growth prospects.
Original link
IOS
Android