In yesterday’s edition, we briefed you on some implications of EIP-4844 and the rest of the Ethereum Dencun upgrade. Today, we’ll be discussing Arbitrum, arguably the biggest recipient of any positive implications associated with ETH Dencun.
With ETH Denver kicking off, $ETH price rising, restaking tech improving and ETH Dencun’s March 13th date approaching, it’s a good time to consider the current state and future of Arbitrum, which currently stands as the most dominant L2 in the space. We recently released a new Industry Intel report ‘The State of Arbitrum’, available as a PDF here, as well as on our website. This report was created in collaboration with the folks at Castle Capital, who have a wealth of experience and expertise around the Arbitrum ecosystem.
Stay alert, stay informed ⬇️
Arbitrum: What the Metrics Mean
Arbitrum leads the pack when it comes to FDV, currently sitting at around $18B. Arbitrum stands as the leader in the Layer-2 (L2) space in terms of Total Value Locked (TVL), boasting approximately $2.9 billion across its ecosystem of 455 unique dApps.
Arbitrum’s TVL surged from approximately $1.9 billion to $2.9 billion, marking a 50.15% increase. When denominated in $ETH, this growth represents a 16% increase in TVL, underscoring the network’s resilience even as it benefits from the price increase of $ETH. Additionally, the Hyperliquid Perpetuals DEX experienced a significant increase in TVL from $14m to $128m as traders deposited funds to secure a share of the anticipated Hyperliquid airdrop upon its launch. Vertex Protocol also contributed to this influx of new TVL into the ecosystem, following a Liquidity Bootstrapping Auction (LBA) in November 2023. Pendle‘s TVL impressively grew from $190m to $505m, with a remarkable peak trading volume of $61m on January 24th 2024 .The leading DEX by TVL on Arbitrum is GMX, with $538 million in TVL.
Scalibility is important; Arbiturm also leads when it comes to TPS, with an average TPS of 14.52.
Fee marketshare is also dominated by Arbiturm. In the Layer-2 protocols’ fee generation landscape, Arbitrum dominates with a 31.9% market share, equating to $24.65 million in total fees, highlighted by a notable $11.47 million earned in December 2023.
Arbitrum is still seeing innovation and new products being built out. Recently, LRTfi has been brought to the L2 as opposed to Ethereum mainnet, along with numerous other news events in recent history.
Rari Foundation launched Rari Chain on Arbitrum, a Layer 3 solution aiming to support the NFT ecosystem and preserve royalties.
Arbitrum’s Orbit platform added support for custom gas tokens, diversifying utility within its ecosystem.
Kinto migrated to the Arbitrum ecosystem, focusing on bridging traditional and decentralized finance with a KYC-compliant Layer 2.
The Arbitrum DAO approvds a substantial backfund to support diverse projects, emphasizing commitment to ecosystem growth.
Arbitrum’s community greenlighted a staking proposal for ARB token holders, promoting engagement and incentivizing token utility.
Key Takeaways
Arbitrum remains the most dominant and widely adopted L2 on Ethereum, with approximately half of the market share and over 500 protocols.
Arbitrum commands a 50% L2 market share with a TVL of $3 billion, ranking as the fourth-largest blockchain network.
DeFi and derivatives remain the most dominant market sectors on the chain, attracting projects working on a broad range of instruments, such as perps, options, yield trading, and structured products.
Post-airdrop, $ARB price showed stability around $1, fluctuating 10-20%, with an all-time high of $2.40, achieved in January 2024.
Arbitrum has a token unlock scheduled for March 16, 2024, when 1.11 billion $ARB tokens (87.5% of the current circulating supply) will enter circulation.
There are both shared and unique catalysts on the horizon that could further enhance the value proposition backing the $ARB token. On the one hand, EIP-4844 will significantly reduce data availability costs for rollups. On the other hand, Arbitrum Orbits and the Stylus upgrade will specifically contribute towards the growth of the Arbitrum ecosystem.
The DAO continues to generate significant revenue from sequencer profits (~$16.6M in 2023) and, even though most of this liquidity remains unutilized, there are ongoing initiatives aimed towards ecosystem growth, such as STIP and LTIP.
Arbitrum’s prominence in the L2 landscape is evident, with a substantial market share of over 55%, and ranking fourth in TVL across all blockchains. With more than 500 protocols deployed on the chain, Arbitrum also leads in critical metrics such as transaction volume and Ethereum gas consumption.
If you’ve found this Arbitrum info helpful so far, you’ll be pleased to know that this is just a taste…
With the help of Castle Capital, we’ve compiled a 35+ page report breaking down all the current data around Arbitrum’s performance as well as the upcoming catalysts for the chain.
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