Arbitrum, an Ethereum Layer 2 protocol, has been seeing renewed interest in the market since the year began. The decentralized finance space on the network has been especially fortunate during this time, jumping almost 50% in less than two months.
2023 Brings Good Tidings For TVL On Arbitrum
The Ethereum Layer 2 scaling solution started out the year 2023 like any other protocol and that is with low momentum. The entire decentralized finance (DeFi) market was negatively affected by the bear market, causing TVL across networks to drop drastically.
However, Arbitrum has been able to leverage the recent recovery in the market to push up its own TVL. The protocol which was sitting at a TVL of $1.02 billion ballooned to over $1.5 billion by mid-February. This represents an over 47% growth in TVL on the protocol in less than two months.
Arbitrum TVL jumps to $1.51 billion in 2023 | Source: DeFiLlama
This sudden rise in TVL puts it ahead of other protocols such as Polygon, which is another Ethereum Layer 2 scaling solution. Not only that but Arbitrum is now sitting comfortably ahead of the likes of Avalanche, Fantom, and even Solana, as well as Cardano.
To put this in perspective, the total TVL of Avalanche, Fantom, Solana, and Cardano is $926.65 million, $508.58 million, $249.68 million, and $110.15 million, respectively.
With its current TVL, it is the fourth-largest in the DeFi space behind networks such as Ethereum, BNB Chain, and Tron.
Market recovery pushes Ethereum price above $1,500 | Source: ETHUSD on TradingView.com
What Is Driving This Growth For The Ethereum Layer 2 Blockchain?
As with anything in the crypto space, the driving factor behind the growth of the Arbitrum TVL has been a rise in adoption. Since January, there have been some notable launches on the blockchain which has helped to drive more attention to it.
One of these is the Camelot decentralized exchange (DEX) which launched back in December. The native token of the DEX called GRAIL rallied tremendously, hitting an all-time high above $3,000. This spurred the release of other tokens that led to high demand on the network.
Other important protocols that are operating on the blockchain include GMX, a derivative platform, which currently boasts the highest TVL of $463 million, accounting for over 30% of the TVL. Uniswap V3 was also launched on Arbitrum and has reached a TVL of $117.8 million at the time of writing. Other important protocols include SushiSwap, ZyberSwap, AAVE V3, Cruve, and Synapse, which are all fully operational on Arbitrum.
Interestingly, Arbitrum itself does not have its own native token. The network is powered by Wrapped Ether (WETH) and offers significantly cheaper fees compared to the Ethereum Layer 1 blockchain.
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Author: Best Owie