Arbitrum Continues to Explode in 2023, Layer 2 May Become the Starting Point of the Next Bull Run
With the Federal Reserve slowing down interest rate hikes, a small bull run appeared in the crypto market at the end of January, with Bitcoin breaking through $23,700, reaching a new high in six months. Arbitrum has been frequently delivering good news, injecting new vitality into the entire crypto market. On one hand, Arbitrum underwent a technical upgrade in 2022 to cope with more frequent trading activities. On the other hand, the popularity of the Odyssey event in its first week has garnered significant attention for Arbitrum's ecosystem projects.
This article will focus on the development of Arbitrum, analyzing its technical upgrades and future roadmap. It will also explore the success factors and prospects of the booming DeFi and gaming projects in the ecosystem, such as GMX and other innovative mechanisms, as well as the protocols that performed well during the bear market. In addition, the anticipation of Arbitrum's token issuance is expected to continue to bring positive news.
Overview
At the beginning of 2023, Layer 2 performed the most outstandingly, aligning with the predictions of most institutions and opinion leaders. In terms of coin prices, Optimism, Polygon, and Arbitrum ecological coins all had impressive performances, with $OP reaching a high of $3.17 in February and $MATIC also touching $1.32. After new public chains like Terra and Solana suffered heavy blows, Ethereum will still dominate the market, with future competition more focused on new public chains and Layer 2. In February, Arbitrum stood out with remarkable results.
Currently, Arbitrum is the project with the largest TVL in Ethereum's Layer 2 scaling solutions, reaching $2.98 billion, accounting for 3.01% of the total TVL in the network, and occupying 49.51% of the share in L2. Arbitrum Rollup is an off-chain protocol that uploads transactions to the Ethereum mainnet using compression algorithms. This method can partially alleviate the congestion issue of Ethereum, achieving advantages such as fast transactions, low gas fees, security guarantees, and a good user experience.
Technical Upgrade
In 2022, Arbitrum has been very active. In addition to holding the Odyssey event, it has also continuously innovated in terms of technical upgrades, including the launch of the Arbitrum Nova and Arbitrum One dual chains, as well as the introduction of the new programming environment, Stylus.
Arbitrum Nova - AnyTrust Chain
On July 12, 2022, Arbitrum announced the construction of a new chain "Arbitrum Nova". This chain is based on AnyTrust technology and is designed for cost-sensitive scenarios such as gaming and social applications. The AnyTrust technology is based on a minimal trust assumption ensured by a data availability committee, which is responsible for managing off-chain transaction data and providing support. This eliminates the 7-day withdrawal waiting period for users, enhancing the user experience. Key technologies include:
Sign data availability certificates and publish for batch transactions
Restore to Arbitrum aggregation protocol when the committee cannot reach a consensus
Execute data on the L2 chain, confirm the new state on Ethereum after the challenge period.
Nitro
At the end of August 2022, Arbitrum One upgraded to the Nitro version, significantly improving network speed and reducing transaction costs. The Nitro upgrade mainly included the following improvements:
Modified the previous AVM architecture and ArbOS
Replace the old AVM architecture with WebAssembly(WASM) architecture.
Replace the custom EVM simulator with Geth
Rewrite and streamline ArbOS in Go, optimizing transaction batching and compression systems.
The Nitro core is a new prover that enables interactive fraud proofs for Arbitrum on WASM code. This allows for the construction of compilations using standard languages and tools. At the same time, it directly compiles Geth into Arbitrum, enhancing EVM compatibility.
Stylus
The Arbitrum development team Offchain Labs announced the launch of the next-generation programming environment Stylus for Arbitrum One and Nova. Stylus allows users to deploy applications using languages such as Rust, C, and C++ through WebAssembly smart contract capabilities, running in conjunction with EVM programs on Arbitrum. Stylus achieves an order of magnitude speed improvement, reducing costs, and is fully interoperable with the Ethereum virtual machine (EVM). Offchain Labs refers to it as EVM+, but Stylus will not replace EVM.
Ecological Cooperation
Over the past year, Arbitrum's market share has grown significantly, driven by: 1) a continued positive outlook on Layer2; 2) expectations for Arb token issuance; 3) growth in ecological applications, especially native applications. Since the launch of the Arbitrum One mainnet in September last year, leading DeFi protocols on Ethereum Layer1, such as Uniswap, Sushiswap, and Curve, have been deployed on Arbitrum One, along with well-known cross-chain protocols like Synapse and StarGate. This indicates developers' recognition of Arbitrum's scaling solution.
In June 2022, the Odyssey event selected 14 of the most active projects on Arbitrum, covering cross-chain bridges, DeFi, NFTs, and gaming. The event was originally planned to last for 8 weeks, but it was actually paused after the first week. The main reason for the pause was the network congestion in the second week, which led to excessively high gas fees, even surpassing those of the Ethereum mainnet. This also indicated that Arbitrum was struggling to accommodate so many users at that time.
Despite being held for only a week, the Odyssey event still attracted a lot of attention. Arbitrum combined the weekly format of NFT events to stimulate user participation enthusiasm, helping to understand the Arbitrum ecosystem, while bringing traffic to ecosystem projects and increasing the user base. At the same time, it retained the expectation of future token issuance, avoiding a hasty airdrop.
Data shows that from the start of the activity on June 21 to the end of the first week's tasks, Arbitrum added 207,000 new addresses. On June 27, the single-day addition reached 55,000, setting a record for the highest number of new addresses in a single day. It is evident that the Odyssey activity has been very effective.
After the Odyssey, Arbitrum continued to make technical advancements, constantly launching innovative mechanism projects, making it highly anticipated during the small bull run at the end of January. Currently, the average monthly active addresses for Arbitrum from October 2022 to January 2023 is 608,000, an increase of 51.2% compared to September. The trading volume and user numbers have also risen accordingly.
Popular Project Analysis
In the past two months, Arbitrum's native ecological projects have attracted significant attention. The following outlines some projects that have performed remarkably well. These projects still have a gap in market capitalization compared to similar projects on other public chains and are currently undervalued. With the issuance of Arbitrum tokens and future developments, there is potential for substantial growth.
DeFi category
Arbitrum has well-known multi-chain deployment projects such as Uniswap and AAVE. However, native projects on Arbitrum demonstrate astonishing explosive power, such as the perpetual contract exchange GMX and the yield aggregator Jones DAO. Currently, Arbitrum has formed a sustainable profit model: derivative protocols are similar to casinos, continuously generating income; yield aggregators attract funds and expand returns through strategies; more participants bring more abundant liquidity, and income continues to increase.
GMX
GMX is a decentralized perpetual contract exchange that allows users to trade ETH, BTC, LINK, and UNI perpetual contracts with up to 30x leverage on a decentralized platform. The operations are more complex than those on centralized exchanges and require the use of oracles for pricing. GMX utilizes Keeper( to carry out opening and closing operations in a manner similar to crowdsourcing.
User closing positions are divided into two parts: sending transactions and executing operations, the latter being completed by GMX Keeper. In addition to paying the gas fee for sending transactions, users also need to pay the gas fee for the Keeper to execute operations to ensure the transaction is executed properly.
GMX TVL reached $543 million, accounting for 31.46% of Arbitrum DeFi protocol TVL. In the past year, it generated $33.9 million in revenue, making GMX token one of the best-performing assets of 2022, with returns of 84.0% and 428.5% against the USD and ETH respectively.
)# Camelot
The Arbitrum native DEX Camelot completed its token sale in December 2022. It is an overall Uniswap V2 + Curve type DEX, which has added features such as Launchpad, custom trading fees, integration of LP and NFTs, and incentive measures set by the project party.
An AMM DEX similar to Uniswap V2, with liquidity distributed from 0 to infinity.
Stablecoin swap trading pairs similar to Curve
Supports dynamic directional trading fees, allowing project parties to set the fee ratio based on market conditions.
Provide income and incentives through NFTs, users provide liquidity to obtain spNFT.
No permission agreement is required, and project parties can set up incentive measures through Nitro Pools.
With Launchpad functionality, project parties can raise funds and guide liquidity.
The similar project with the highest TVL on OP, Velodrome, has a liquidity of 77.14 million USD, surpassing Uniswap V3's 44.87 million USD, but its FDV is only 9.46 million USD, with an FDV/TVL ratio of 0.21. Compared to Camelot, Velodrome has a higher TVL but a lower valuation.
RDNT
The Arbitrum lending protocol RDNT has two major innovations: using LayerZero for multi-chain lending; the circular loan ### is currently unavailable (. It is currently leading in Arbitrum, with a TVL exceeding the Aave V3 Arb version, but long-term competition remains fierce.
As a full-chain lending protocol, users can deposit major assets on any major chain and borrow supported assets across chains. Depositors deposit assets, borrowers lend, generating a fee of 50% for depositors and 50% for locking RNDT as a reward. Currently, it is version V1, and V2 will undergo the following upgrades:
Allow BTC, ETH, and USDC to be fully cross-chain lent, with more assets to be selected later by Radiant DAO voting.
Tilt the protocol fees towards LPs to increase liquidity and reduce slippage.
Introduce the "Dynamic Liquidity" mechanism to reward long-term investors.
Exiting the liquidity pool will trigger a penalty mechanism.
) game category
Arbitrum has a rapidly growing GameFi ecosystem, especially with the three popular projects: Treasure DAO, The Beacon, and Trident DAO. Currently, the Arbitrum GameFi ecosystem is relatively leading, but it does not possess an absolute advantage like the derivatives track; the future still needs to be observed for further developments.
Treasure DAO
Treasure is committed to building a "decentralized Nintendo" by connecting a series of on-chain games through in-game asset interoperability and the native token MAGIC as a shared currency. The most popular ones include the strategy game Bridgeworld, the role-playing game The Beacon, and Smolverse, as well as the resource management strategy game Realm.
These games can be accessed through Trove. Trove is the Treasure ecosystem hub, as well as the in-game asset and Treasure NFT collectibles marketplace. The most popular series include Smol Brains###, Smolverse base(, and another NFT series The Lost Donkeys), which has the same name as the game(.
)# Trident DAO
The Arbitrum project "Trident" has proposed a "Risk To Earn" sustainable GameFi economic model, attracting the attention of players and the community. After the public sale of the Token, it has become the hottest project in the Arbitrum ecosystem.
PSI is the official utility token of Trident, used in various games for future versions, allowing the purchase of items, exchange of NFTs, and player-to-player betting, among other uses. Trident will charge a fee from each successful bet and permanently destroy it. After the integration of Risk To Earn, the supply of PSI will be deflationary.
![Deconstructing the Main Narrative of February: The Technology, Ecology, Popular Projects, and Future of Arbitrum]###https://img-cdn.gateio.im/webp-social/moments-6653725502bbbd214d0374fbfba61a8c.webp(
Future Development
Arbitrum's success suggests that the Layer 2 track could become the starting point for the next bull run. However, whether it's the Optimistic Rollup or zk Rollup route, there are still technical issues to be resolved. In the future, Arbitrum will develop in three areas: )1( continuous technical upgrades; )2( ongoing support for ecological projects; )3( attracting users through the anticipation of token issuance.
Technically, Optimistic Rollup is still criticized for having slightly centralized sequencers. Arbitrum currently has centralized sequencers, whitelisted proof verification, and upgradable contracts. Although no security issues have arisen so far that could jeopardize user assets, it still increases the risk of scrutiny and capital loss. Decentralized sequencers and permissionless proof verification are the inevitable path. Offchain Labs has provided the corresponding technical roadmap:
Continuously reduce costs and improve tps
Decentralized
Manage and authorize software upgrades in a decentralized manner
Validator Decentralization
sequencer decentralization
![Deconstructing the Main Narrative of February: The Technology, Ecology, Popular Projects, and Future of Arbitrum])https://img-cdn.gateio.im/webp-social/moments-6be63a3bd8fbc34e80632b661d86bffd.webp(
In terms of ecology, DeFi, cross-chain, and gaming are the main applications of Arbitrum. With the growth of developers and users, more new applications will be deployed here, with social and NFT projects being the most anticipated. Given the success of Treasure and the growth potential of Arbitrum Nova, the Nova chain will truly be enabled, allowing Arbitrum to occupy a favorable position in the gaming field.
The economic model is the most anticipated part. The token launch is for Arbitrum.
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Arbitrum 2023 continues to surge, Layer 2 becomes the starting point for the next bull run.
Arbitrum Continues to Explode in 2023, Layer 2 May Become the Starting Point of the Next Bull Run
With the Federal Reserve slowing down interest rate hikes, a small bull run appeared in the crypto market at the end of January, with Bitcoin breaking through $23,700, reaching a new high in six months. Arbitrum has been frequently delivering good news, injecting new vitality into the entire crypto market. On one hand, Arbitrum underwent a technical upgrade in 2022 to cope with more frequent trading activities. On the other hand, the popularity of the Odyssey event in its first week has garnered significant attention for Arbitrum's ecosystem projects.
This article will focus on the development of Arbitrum, analyzing its technical upgrades and future roadmap. It will also explore the success factors and prospects of the booming DeFi and gaming projects in the ecosystem, such as GMX and other innovative mechanisms, as well as the protocols that performed well during the bear market. In addition, the anticipation of Arbitrum's token issuance is expected to continue to bring positive news.
Overview
At the beginning of 2023, Layer 2 performed the most outstandingly, aligning with the predictions of most institutions and opinion leaders. In terms of coin prices, Optimism, Polygon, and Arbitrum ecological coins all had impressive performances, with $OP reaching a high of $3.17 in February and $MATIC also touching $1.32. After new public chains like Terra and Solana suffered heavy blows, Ethereum will still dominate the market, with future competition more focused on new public chains and Layer 2. In February, Arbitrum stood out with remarkable results.
Currently, Arbitrum is the project with the largest TVL in Ethereum's Layer 2 scaling solutions, reaching $2.98 billion, accounting for 3.01% of the total TVL in the network, and occupying 49.51% of the share in L2. Arbitrum Rollup is an off-chain protocol that uploads transactions to the Ethereum mainnet using compression algorithms. This method can partially alleviate the congestion issue of Ethereum, achieving advantages such as fast transactions, low gas fees, security guarantees, and a good user experience.
Technical Upgrade
In 2022, Arbitrum has been very active. In addition to holding the Odyssey event, it has also continuously innovated in terms of technical upgrades, including the launch of the Arbitrum Nova and Arbitrum One dual chains, as well as the introduction of the new programming environment, Stylus.
Arbitrum Nova - AnyTrust Chain
On July 12, 2022, Arbitrum announced the construction of a new chain "Arbitrum Nova". This chain is based on AnyTrust technology and is designed for cost-sensitive scenarios such as gaming and social applications. The AnyTrust technology is based on a minimal trust assumption ensured by a data availability committee, which is responsible for managing off-chain transaction data and providing support. This eliminates the 7-day withdrawal waiting period for users, enhancing the user experience. Key technologies include:
Nitro
At the end of August 2022, Arbitrum One upgraded to the Nitro version, significantly improving network speed and reducing transaction costs. The Nitro upgrade mainly included the following improvements:
The Nitro core is a new prover that enables interactive fraud proofs for Arbitrum on WASM code. This allows for the construction of compilations using standard languages and tools. At the same time, it directly compiles Geth into Arbitrum, enhancing EVM compatibility.
Stylus
The Arbitrum development team Offchain Labs announced the launch of the next-generation programming environment Stylus for Arbitrum One and Nova. Stylus allows users to deploy applications using languages such as Rust, C, and C++ through WebAssembly smart contract capabilities, running in conjunction with EVM programs on Arbitrum. Stylus achieves an order of magnitude speed improvement, reducing costs, and is fully interoperable with the Ethereum virtual machine (EVM). Offchain Labs refers to it as EVM+, but Stylus will not replace EVM.
Ecological Cooperation
Over the past year, Arbitrum's market share has grown significantly, driven by: 1) a continued positive outlook on Layer2; 2) expectations for Arb token issuance; 3) growth in ecological applications, especially native applications. Since the launch of the Arbitrum One mainnet in September last year, leading DeFi protocols on Ethereum Layer1, such as Uniswap, Sushiswap, and Curve, have been deployed on Arbitrum One, along with well-known cross-chain protocols like Synapse and StarGate. This indicates developers' recognition of Arbitrum's scaling solution.
In June 2022, the Odyssey event selected 14 of the most active projects on Arbitrum, covering cross-chain bridges, DeFi, NFTs, and gaming. The event was originally planned to last for 8 weeks, but it was actually paused after the first week. The main reason for the pause was the network congestion in the second week, which led to excessively high gas fees, even surpassing those of the Ethereum mainnet. This also indicated that Arbitrum was struggling to accommodate so many users at that time.
Despite being held for only a week, the Odyssey event still attracted a lot of attention. Arbitrum combined the weekly format of NFT events to stimulate user participation enthusiasm, helping to understand the Arbitrum ecosystem, while bringing traffic to ecosystem projects and increasing the user base. At the same time, it retained the expectation of future token issuance, avoiding a hasty airdrop.
Data shows that from the start of the activity on June 21 to the end of the first week's tasks, Arbitrum added 207,000 new addresses. On June 27, the single-day addition reached 55,000, setting a record for the highest number of new addresses in a single day. It is evident that the Odyssey activity has been very effective.
After the Odyssey, Arbitrum continued to make technical advancements, constantly launching innovative mechanism projects, making it highly anticipated during the small bull run at the end of January. Currently, the average monthly active addresses for Arbitrum from October 2022 to January 2023 is 608,000, an increase of 51.2% compared to September. The trading volume and user numbers have also risen accordingly.
Popular Project Analysis
In the past two months, Arbitrum's native ecological projects have attracted significant attention. The following outlines some projects that have performed remarkably well. These projects still have a gap in market capitalization compared to similar projects on other public chains and are currently undervalued. With the issuance of Arbitrum tokens and future developments, there is potential for substantial growth.
DeFi category
Arbitrum has well-known multi-chain deployment projects such as Uniswap and AAVE. However, native projects on Arbitrum demonstrate astonishing explosive power, such as the perpetual contract exchange GMX and the yield aggregator Jones DAO. Currently, Arbitrum has formed a sustainable profit model: derivative protocols are similar to casinos, continuously generating income; yield aggregators attract funds and expand returns through strategies; more participants bring more abundant liquidity, and income continues to increase.
GMX
GMX is a decentralized perpetual contract exchange that allows users to trade ETH, BTC, LINK, and UNI perpetual contracts with up to 30x leverage on a decentralized platform. The operations are more complex than those on centralized exchanges and require the use of oracles for pricing. GMX utilizes Keeper( to carry out opening and closing operations in a manner similar to crowdsourcing.
User closing positions are divided into two parts: sending transactions and executing operations, the latter being completed by GMX Keeper. In addition to paying the gas fee for sending transactions, users also need to pay the gas fee for the Keeper to execute operations to ensure the transaction is executed properly.
GMX TVL reached $543 million, accounting for 31.46% of Arbitrum DeFi protocol TVL. In the past year, it generated $33.9 million in revenue, making GMX token one of the best-performing assets of 2022, with returns of 84.0% and 428.5% against the USD and ETH respectively.
)# Camelot
The Arbitrum native DEX Camelot completed its token sale in December 2022. It is an overall Uniswap V2 + Curve type DEX, which has added features such as Launchpad, custom trading fees, integration of LP and NFTs, and incentive measures set by the project party.
The similar project with the highest TVL on OP, Velodrome, has a liquidity of 77.14 million USD, surpassing Uniswap V3's 44.87 million USD, but its FDV is only 9.46 million USD, with an FDV/TVL ratio of 0.21. Compared to Camelot, Velodrome has a higher TVL but a lower valuation.
RDNT
The Arbitrum lending protocol RDNT has two major innovations: using LayerZero for multi-chain lending; the circular loan ### is currently unavailable (. It is currently leading in Arbitrum, with a TVL exceeding the Aave V3 Arb version, but long-term competition remains fierce.
As a full-chain lending protocol, users can deposit major assets on any major chain and borrow supported assets across chains. Depositors deposit assets, borrowers lend, generating a fee of 50% for depositors and 50% for locking RNDT as a reward. Currently, it is version V1, and V2 will undergo the following upgrades:
) game category
Arbitrum has a rapidly growing GameFi ecosystem, especially with the three popular projects: Treasure DAO, The Beacon, and Trident DAO. Currently, the Arbitrum GameFi ecosystem is relatively leading, but it does not possess an absolute advantage like the derivatives track; the future still needs to be observed for further developments.
Treasure DAO
Treasure is committed to building a "decentralized Nintendo" by connecting a series of on-chain games through in-game asset interoperability and the native token MAGIC as a shared currency. The most popular ones include the strategy game Bridgeworld, the role-playing game The Beacon, and Smolverse, as well as the resource management strategy game Realm.
These games can be accessed through Trove. Trove is the Treasure ecosystem hub, as well as the in-game asset and Treasure NFT collectibles marketplace. The most popular series include Smol Brains###, Smolverse base(, and another NFT series The Lost Donkeys), which has the same name as the game(.
)# Trident DAO
The Arbitrum project "Trident" has proposed a "Risk To Earn" sustainable GameFi economic model, attracting the attention of players and the community. After the public sale of the Token, it has become the hottest project in the Arbitrum ecosystem.
PSI is the official utility token of Trident, used in various games for future versions, allowing the purchase of items, exchange of NFTs, and player-to-player betting, among other uses. Trident will charge a fee from each successful bet and permanently destroy it. After the integration of Risk To Earn, the supply of PSI will be deflationary.
![Deconstructing the Main Narrative of February: The Technology, Ecology, Popular Projects, and Future of Arbitrum]###https://img-cdn.gateio.im/webp-social/moments-6653725502bbbd214d0374fbfba61a8c.webp(
Future Development
Arbitrum's success suggests that the Layer 2 track could become the starting point for the next bull run. However, whether it's the Optimistic Rollup or zk Rollup route, there are still technical issues to be resolved. In the future, Arbitrum will develop in three areas: )1( continuous technical upgrades; )2( ongoing support for ecological projects; )3( attracting users through the anticipation of token issuance.
Technically, Optimistic Rollup is still criticized for having slightly centralized sequencers. Arbitrum currently has centralized sequencers, whitelisted proof verification, and upgradable contracts. Although no security issues have arisen so far that could jeopardize user assets, it still increases the risk of scrutiny and capital loss. Decentralized sequencers and permissionless proof verification are the inevitable path. Offchain Labs has provided the corresponding technical roadmap:
![Deconstructing the Main Narrative of February: The Technology, Ecology, Popular Projects, and Future of Arbitrum])https://img-cdn.gateio.im/webp-social/moments-6be63a3bd8fbc34e80632b661d86bffd.webp(
In terms of ecology, DeFi, cross-chain, and gaming are the main applications of Arbitrum. With the growth of developers and users, more new applications will be deployed here, with social and NFT projects being the most anticipated. Given the success of Treasure and the growth potential of Arbitrum Nova, the Nova chain will truly be enabled, allowing Arbitrum to occupy a favorable position in the gaming field.
The economic model is the most anticipated part. The token launch is for Arbitrum.