1/ Optimism vs Arbitrum: the battle for Ethereum layer 2 supremacy.
How do they compare?
Here's their current state & key catalysts for growth: ๐
How do they compare?
Here's their current state & key catalysts for growth: ๐
2/ Arbitrum and Optimism are the top rollups that batch and process transactions off Ethereum, then publish a compressed version back to Ethereum.
They're faster & cheaper than Ethereum - it's like a boss receiving thousands of tasks, processing them, and giving back a report.
They're faster & cheaper than Ethereum - it's like a boss receiving thousands of tasks, processing them, and giving back a report.
3/ Btw, you can read this post on my blog post with more detailed explanations.
I'm also launching an 'Innovation Zone' where I review promising DeFi projects, that I find interesting and have the potential to be the next big thing.
ignasdefi.substack.com
I'm also launching an 'Innovation Zone' where I review promising DeFi projects, that I find interesting and have the potential to be the next big thing.
ignasdefi.substack.com
4/ Arbitrum & Optimism are still behind Ethereum in daily transactions.
Recently Arbitrum briefly surpassed Ethereum only to fall back lower again.
Optimism's transactions have fallen sharply since Galaxy Quests ended, but received a boost thanks to the partnership with Base.
Recently Arbitrum briefly surpassed Ethereum only to fall back lower again.
Optimism's transactions have fallen sharply since Galaxy Quests ended, but received a boost thanks to the partnership with Base.
5/ Optimism is lagging behind in transactions despite a 7 month head-start.
It launched two years ago, when Synthetix went live.
But due to Optimism's permissioned launch, Arbitrum gained an early lead in transactions and users.
It launched two years ago, when Synthetix went live.
But due to Optimism's permissioned launch, Arbitrum gained an early lead in transactions and users.
6/ Optimism & Arbitrum raised similar funding from top VCs at comparable valuations:
โข Optimism: $178M at $1.65B
โข Arbitrum: $143M at $1.2B
Notably, Pantera & Coinbase invested in both.
$OP trades at a $12B fully diluted valuation - 7.2x Series B price.
โข Optimism: $178M at $1.65B
โข Arbitrum: $143M at $1.2B
Notably, Pantera & Coinbase invested in both.
$OP trades at a $12B fully diluted valuation - 7.2x Series B price.
7/ Arbitrum is leading in cheaper gas fees, despite handling more transactions and having 3x more active wallets.
Gas fees have fallen by 50% since last year.
Thanks to EIP-4844, which is coming sometime mid-2023, fees will drop further by 10-100x!
Only down from here ๐
Gas fees have fallen by 50% since last year.
Thanks to EIP-4844, which is coming sometime mid-2023, fees will drop further by 10-100x!
Only down from here ๐
8/ That wasn't the case in May last year, when gas fee on Arbitrum exceeded the fee on Ethereum mainnet.
In August 2022, Arbitrum launched Nitro upgrade which increased throughput by 7-10 and reduced gas fees considerably.
When both L2s launched, gas fees were similar to ETH.
In August 2022, Arbitrum launched Nitro upgrade which increased throughput by 7-10 and reduced gas fees considerably.
When both L2s launched, gas fees were similar to ETH.
9/ Now is time for Optimism's major update.
The Bedrock will offer modularity, simplicity, and Ethereum equivalence for L2 solutions.
It will enable performance improvements, including transaction costs, throughput boost, and sync speeds.
Upgrade should launch in April.
The Bedrock will offer modularity, simplicity, and Ethereum equivalence for L2 solutions.
It will enable performance improvements, including transaction costs, throughput boost, and sync speeds.
Upgrade should launch in April.
10/ What's more, Coinbase's new L2โBaseโwill use Optimism's technology.
Plus, Coinbase joins Optimism as a core dev to build the open-source OP Stack that powers Optimism.
It's bullish for Optimism, although it's unclear how different it will be from Base.
Plus, Coinbase joins Optimism as a core dev to build the open-source OP Stack that powers Optimism.
It's bullish for Optimism, although it's unclear how different it will be from Base.
11/ Coinbase & OP vision is a Superchain: To create a network of interoperable layer 2 rollups that gradually form a "mesh" scaling Ethereum.
Rollups will act as "hubs" for different ecosystems, creating a more vibrant developer ecosystem than a single chain.
Rollups will act as "hubs" for different ecosystems, creating a more vibrant developer ecosystem than a single chain.
12/ The vision of 'Hubs' is shared by Arbitrum.
Indeed, Arbitrum has 2 networks:
โข Arbitrum One for DeFi/NFT
โข Arbitrum Nova for gaming/social apps
Nova enables low fees at the expense of security, thanks to managing data off-chain via an external Data Availability Committee.
Indeed, Arbitrum has 2 networks:
โข Arbitrum One for DeFi/NFT
โข Arbitrum Nova for gaming/social apps
Nova enables low fees at the expense of security, thanks to managing data off-chain via an external Data Availability Committee.
13/ Reddit chose Arbitrum Nova for it's community points.
"We found Arbitrum optimistic rollups to be the most promising scaling technology for Community Points."
Other contenders were Solana, StarkWare and Polygon.
That's a big win for Arbitrum and Ethereum L2s in general.
"We found Arbitrum optimistic rollups to be the most promising scaling technology for Community Points."
Other contenders were Solana, StarkWare and Polygon.
That's a big win for Arbitrum and Ethereum L2s in general.
14/ Arbitrum and Optimism DeFi ecosystems are growing faster than any other major chain.
Arbitrum grew by 62%, overtaking Polygon and Avalanche.
Optimism's grew by 35%, leading Solana with 3.7x more in TVL, while $OP is 13.5x cheaper than $SOL.
Arbitrum grew by 62%, overtaking Polygon and Avalanche.
Optimism's grew by 35%, leading Solana with 3.7x more in TVL, while $OP is 13.5x cheaper than $SOL.
15/ Arbitrumโs TVL (and transactions) are dominated trading related dApps, with GMX leading the pack.
It makes sense, as trading requires fast transactions & cheap fees.
It makes sense, as trading requires fast transactions & cheap fees.
16/ ZyberSwap overtook Uniswap with generous farming rewards: 32% APY for ETH-USDC & 17% for 3pool stablecoins.
Yet, it all depends on ZYBER price and, if you learned anything from the DeFi summer times, 1097% APY for a governance token doesnโt last long.
Yet, it all depends on ZYBER price and, if you learned anything from the DeFi summer times, 1097% APY for a governance token doesnโt last long.
17/ Sushi and Vela exchange are the leading dApps in terms of contract activity, accounting for 14.1% and 13% of the total activity, respectively.
Vela is a derivatives exchange, offering leveraged trading not just for BTC/ETH but also for EUR, GBP and Japanese Yen.
Vela is a derivatives exchange, offering leveraged trading not just for BTC/ETH but also for EUR, GBP and Japanese Yen.
18/ The top 5 dApps on Optimism are different, ranging from DEXes to yield aggregators.
It's clear that Coinbase's vision of L2s as 'Hubs' is already a reality, based on the differences between Arbitrum and Optimism's dApp ecosystems.
It's clear that Coinbase's vision of L2s as 'Hubs' is already a reality, based on the differences between Arbitrum and Optimism's dApp ecosystems.
19/ Velodrome saw 132% TVL increase & $VELO up 290% in just a month.
Success is partly due to tokenomics.
By staking $VELO users get veVELO: a governance token in the form of NFT, which uses ve(3,3) rebase mechanism.
Holders of veVELO receive 'bribes' for voting on emissions.
Success is partly due to tokenomics.
By staking $VELO users get veVELO: a governance token in the form of NFT, which uses ve(3,3) rebase mechanism.
Holders of veVELO receive 'bribes' for voting on emissions.
20/ Synthetix just launched V3 โ a complete rebuild of the protocol from the ground up.
Their mission is to help protocols grow liquidity with "Liquidity as a Service" and launch any derivative asset you want.
Their mission is to help protocols grow liquidity with "Liquidity as a Service" and launch any derivative asset you want.
21/ By contract activity, Thirdweb is the leader with 41% share.
Itโs a powerful dev tool and managed infrastructure services that simplify the entire web3 development cycle.
In short, making development on Optimism as easy as possible.
Itโs a powerful dev tool and managed infrastructure services that simplify the entire web3 development cycle.
In short, making development on Optimism as easy as possible.
22/ There are more bullish developments:
โข EIP-4844 will further reduce fees
โข Coinbase's partnership with $OP will ensure more innovation
โข Arbitrum's native token launch can boost on-chain activity, depending on how it's launched
โข Growth of modular 'Ethereum narrative'
โข EIP-4844 will further reduce fees
โข Coinbase's partnership with $OP will ensure more innovation
โข Arbitrum's native token launch can boost on-chain activity, depending on how it's launched
โข Growth of modular 'Ethereum narrative'
23/ Ultimately, the competition between them is great for users and all DeFi ecosystem as we get better user experience.
With so much development on Ethereum, Iโm less optimistic for other L1s that donโt offer any unique diversification to their dApps or users.
With so much development on Ethereum, Iโm less optimistic for other L1s that donโt offer any unique diversification to their dApps or users.
24/ What's your take on it?
Follow me @DefiIgnas for more.
Like/Retweet the first tweet below if you can:
Follow me @DefiIgnas for more.
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