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As Ethereum’s layer 2 landscape develops, Arbitrum surges.

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Arbitrum is now in the lead as Ethereum’s layer 2 landscape begins to emerge.
In terms of the total value locked (TVL) inside its decentralized finance (DeFi) ecosystem, Arbitrum is now the fourth-largest blockchain, according to DefiLlama.
Its $1.49 billion TVL is almost twice as much as that of its major rival, Optimism, which scales Ethereum using a similar technique but has a TVL that is more in line with $800 million.
GMX, a decentralized spot, and perpetual exchange that went live in September 2021 and has since experienced rapid development is largely responsible for Arbitrum’s recent expansion. GMX presently represents $457 million, or 30%, of Arbitrum’s total TVL. (GMX is also implemented on the Avalanche blockchain, although its footprint is only around one-fourth as large.)

Smart contracts are used by decentralized financial platforms like GMX to enable users to transact without the use of middlemen, and users’ fees are collected as a mechanism to compensate liquidity providers and community members. Due to GMX’s recent success, it generated more transaction fees over the course of a 24-hour period this past weekend than the Ethereum blockchain did.


Ethereum’s Layer 2 landscape

Rollups, which are secondary blockchains that package and “settle” transactions on Ethereum, were seen as an urgently required answer to the chain’s mounting accessibility issue when Ethereum transaction prices soared last year in response to rising user demand. Contrary to sidechains like Polygon PoS, which also package transactions and settle them on Ethereum, rollups, often referred to as “Layer 2” platforms, make advantage of the security architecture already available on Ethereum.

Optimism and Arbitrum, the first significant roll-up chains to hit the market, are both referred to as “optimistic” rollups due to the method they employ to borrow Ethereum’s security.

According to research from Blockworks, transaction costs on Optimism and Arbitrum now average roughly $0.20 and $0.14, respectively. In contrast, yCharts estimates that Ethereum transaction costs are above $0.75 on average.
The layer 2 ecosystem of Ethereum got off to a sluggish start, and the total value locked across layer 2 rollups is still far less than the value locked on Ethereum. However, according to L2beat, layer 2 projects have recently routinely had larger total transaction volumes than Ethereum’s main chain.

Arbitrum had a different growth approach than Optimism, which gave its native OP as a perk for customers to use various Optimism-based apps in an effort to draw in additional users.

Since Arbitrum lacks a token, it was dependent on the organic expansion of the decentralized finance ecosystem to draw visitors to their website. However, it’s conceivable that bots created to farm Arbitrum’s unannounced currency have artificially boosted the platform’s usage statistics. (When cryptocurrency protocols introduce new tokens, they usually “airdrop” some of them as a bonus to current users.)
The two biggest rollups currently are Arbitrum and Optimism, but in the next months, they will be up against a new generation of zkEVMs, a more sophisticated breed of rollups that leverages zero-knowledge cryptography to increase fees and security.