Arbitrum, the Ethereum Layer 2 protocol, has seen new interest in the market since the year it started. The network’s decentralized finance space has been extremely lucky during this period, rising almost 50% in less than two months.
2023 Brings Good News For TVL In Arbitrum
Ethereum Layer 2 scaling solutions start in 2023 like other protocols and with little momentum. All decentralized finance (DeFi) markets were negatively affected by the bear market, causing TVL on the network to drop drastically.
However, Arbitrum has been able to use the recent recovery in the market to push its own TVL. The protocol that was sitting at $1.02 billion in TVL ballooned to over $1.5 billion in mid-February. This represents over 47% growth in TVL in less than two months of protocol.
Arbitrum TVL jumps to $1.51 billion in 2023 | Source: DeFiLlama
This sudden increase in TVL puts it ahead of other protocols such as Polygon, which is another Ethereum Layer 2 scaling solution. Not only that, but Arbitrum now sits comfortably ahead of Avalanche, Fantom, and even Solana, as well as Cardano.
To put it in perspective, the total TVLs of Avalanche, Fantom, Solana, and Cardano are $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’s Driving This Growth For Ethereum Layer 2 Blockchain?
As with anything in the crypto space, the driving factor behind Arbitrum TVL’s growth has been rising adoption. Since January, there have been several notable launches in blockchain that have helped attract more attention.
One of them is the Camelot decentralized exchange (DEX) which was launched in December. The original token from DEX called GRAIL rallied strongly, reaching an all-time high above $3,000. This spurred the release of other tokens that led to high demand in the network.
Other important protocols operating on the blockchain include GMX, a derivative platform, which currently has the highest TVL of $463 million, accounting for more than 30% of 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, all of which work on Arbitrum.
Interestingly, Arbitrum itself does not have its own native token. The network is powered by Wrapped Ether (WETH) and offers lower fees compared to the Ethereum Layer 1 blockchain.