CoinEx Institute | A Comprehensive Analysis of Arbitrum — The Layer 2 Ascetic

Figure 1: TVL Ranking by L2beat layer2. Source: https://l2beat.com/#projects (as of March 21)

Introduction to Arbitrum

Arbitrum is an Ethereum scaling solution created by Offchain labs, which raised $120 million in a Series B round back in 2019, with involvement from leading institutional investors such as Pantera Capital, Polychain Capital, Coinbase, etc.

The Competitiveness of Arbitrum

When it comes to the competitiveness of Arbitrum, analyses that focus on the technical differences among Layer 2 projects may seem unintelligible to the average user. As such, we decided to adopt the perspective of users and noticed that there are two things users really need: 1) satisfying user experiences, and 2) strong asset security. The paragraphs below will focus on these two factors.

Figure 2: Market Shares of Ethereum Bridges. Source: Dune Analytics @eliasimos (as of March 22)
Table 1: Comparison of Projects with Optimistic Rollup

The Arbitrum Ecosystem

As mentioned above, since Arbitrum is highly EVM-compatible, the big infrastructure projects on Ethereum were deployed on Arbitrum soon after it was launched. Through Arbitrum, users can try out Ethereum projects with low fees and at a high speed. For instance, DEXes like Uniswap, Sushiswap, and Balancer, stablecoin projects such as Curve Finance and Abracadabra Money, as well as cross-chain bridges including Ren, Multichain, and Synapse are all available on Arbitrum. That is an essential reason why Arbitrum has managed to grab market shares within such a short period. The project provides smoother and cheaper trading experiences for loyal Ethereum users.

Figure 3: Trading Volume and Transaction Fees of GMX. Source: https://stats.gmx.io/ (as of March 24, 2022)

Growth Prospects

In a market where Layer 1/Layer 2 projects pursue competitive differentiation, where is Arbitrum headed? When will the project record exponential growth?

Figure 4: Arbitrum says “there is no Arbitrum token” on Twitter. Source: twitter@arbitrum

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