Layer-2 solutions are seeing a strong growth in the crypto market based on TVL, user base, and ETH transactions. Layer-2 are now processing more transactions than Ethereum Layer-1. One of the most outstanding layer-2 projects is Arbitrum One, which is gaining a lot of attention with many innovative apps and a strong community.
TVL
At the time of writing, Arbitrum’s TVL is around $2.69 billion, ranking 1st among L2 solutions available today. Arbitrum’s market share has grown significantly over the past year, rising from 1% among all chains a year ago. Furthermore, the growth of Arbitrum has come without the use of network-wide incentive programs. This layer-2 solution has not issued the native token yet, so the community is expecting an airdrop in the near future.
Active addresses
Arbitrum averaged 614,279 monthly active addresses (MAA) in Q4, representing 81.3% and 728.7% growth quarter-on-quarter (Q/Q) and year-over-year (Y/Y), respectively. This layer-2 solution is still on the rise as that number in January 2023 reached 590,621. This increase in the number of users coupled with the growth of liquidity within Arbitrum and following Nitro, a highly anticipated network upgrade in August 2022, help to increase the throughput and speed of transactions.
Transactions
Arbitrum’s transaction volume has grown along with the number of users, respectively reaching 199.6% and 1904.2% Q/Q and Y/Y in Q4. Like active addresses, there was a significant jump in transactions after Nitro went live in August 2022. As of October 2022, Arbitrum processed 52.7% of the number of transactions validated on Ethereum L1 over that same period.
Future outlook
Some suggested that Arbitrum’s liquidity and usage likely could be attributed to airdrop farming, but anyway, Arbitrum is growing its user base and trading volume while increasing its TVL in DeFi. Furthermore, given the success of Treasure and the growth potential of Arbitrum Nova (an L2 built for gaming via AnyTrust), Arbitrum is well positioned to compete in the gaming space with other networks like Optimism.
The only shortcoming at the moment, though, is that Arbitrum has yet to launch its own token. Because, this can drive billions of liquidity into the network while growing the user base and attracting developers and community. The distribution of tokens will also play an important role in determining the long-term governance and concentration of power within this L2 ecosystem.
All in all, while the risk of network centralization remains, Arbitrum seems to continue its growth trajectory in 2023. If the momentum is maintained, next time we may see an explosion of solutions on this platform.