Arbitrum’s Impressive Growth and Achievements:
Arbitrum’s recent success is part of a broader surge in the blockchain’s performance. In the past week, Arbitrum achieved three all-time highs in total value locked (TVL), DEX volume, and the spot price of its native token, ARB. TVL, indicating the investments locked in a blockchain or DeFi protocol, surged, making Arbitrum the leader in net inflow of investor funds among all layer 2 blockchains, securing $365 million in the last seven days. Ethereum still leads in this metric with $705 million, as reported by DefiLlama.
Challenges Faced by Arbitrum:
Despite these accomplishments, Arbitrum has faced challenges, including several outages. The most recent occurred in December and was attributed to issues with the blockchain’s Sequencer, a component used to verify, organize, and transfer transaction bundles to the Ethereum mainnet for finality. It’s noteworthy that similar problems were faced by ZkSync, another Ethereum layer 2, around Christmas.
Layer 2 Growth Across Ethereum Ecosystem:
Beyond Arbitrum’s gains, Ethereum’s layer 2s have witnessed substantial growth. With a combined TVL of $20.7 billion, these layer 2 networks surpass the TVL of all other layer 1 networks, excluding Ethereum, which stands at $19.7 billion. However, it’s essential to note a discrepancy in TVL valuation sources, as L2Beat includes the market value of native tokens in layer 2 figures, whereas DefiLlama considers only the value of investments in layer 1 blockchains’ decentralized finance markets.
Positive Impacts on Ethereum Mainnet:
While some layer 2s show signs of challenging Ethereum’s dominance, these developments are not necessarily detrimental to the mainnet. On the contrary, they contribute positively to Ethereum’s economic outcomes. Increased validator earnings result from layer 2 networks paying fees when rolling up bundled transactions to the Ethereum mainnet for finality. This process contributes to the deflationary mechanisms for Ether token supply, aligning with Ethereum’s overall strategy for reducing net Ether token inflation.
Arbitrum’s achievement in surpassing Ethereum’s mainnet in trading volume showcases the growing prominence of layer 2 blockchains. Despite challenges, the successes of layer 2 networks contribute positively to Ethereum’s economic landscape, reinforcing its position as a leader in the blockchain industry.