Bitcoin News

How Arbitrum and Optimism Made Millions in 2022

Ethereum price action 2022

Arbitrum and Optimism raked millions in profit despite the extended bear market that hammered decentralized finance (DeFi) activities and Ethereum (ETH) valuation in 2022.

Arbitrum And Optimism Win Big

Per on-chain data shared on Twitter, Arbitrum, and Optimism, general-purpose Ethereum layer-2 platforms, made 2,906 ETH and 2,086ETH, respectively. In USD terms, it translates to around $4.6 million and $3.3 million for each protocol.

Based on user activity and the number of dApps launched on Ethereum, solid statistics show that developers prefer the first smart contracting over competitors. Since launching, the network has become a hub of activity, spearheading exciting innovations in decentralized finance (DeFi), NFTs, metaverse, and gaming. 

Trackers in mid-January 2023 state that the total value locked (TVL) in Ethereum stands at $26.88 billion, representing more than half of the assets locked across DeFi. The drop in TVL mirrors the fall in ETH prices in 2022.

Ethereum price action 2022
Ethereum price, daily chart | Source: ETHUSDT on TradingView.com

In essence, Ethereum dominates with DeFi activity over the Binance Smart Chain (BSC), trailing at less than a quarter of the TVL of the leading platform, at $4.65 billion.

Despite this dominance, Ethereum’s scaling problem directly impacts Gas fees. As demand picks up, Gas fees fluctuate, leading to as much as $50 on this blockchain to post a simple transaction. Deploying smart contracts cost much more, sometimes upwards of $80, when the network is congested. As an illustration, the average transaction fees on Ethereum stood at $0.63 on January 17. However, on May 1, 2022, this figure stood at over $23.

Ethereum layer-2 protocols are part of the scaling attempts made by developers to relieve the mainnet. By routing transactions off-chain, layer-2 solutions can help scale Ethereum but, most importantly, reduce Gas fees by several magnitudes. 

In Ethereum’s layer-2 realm, Arbitrum and Optimism dominate. According to L2Beat statistics, Arbitrum and Optimism had TVLs of $2.52 billion and $1.45 billion, with a market share of 52% and roughly 30%, respectively. 

Popular Ethereum L2s by TVL
Ethereum Layer-2 Protocols | Source: L2Beat.com

Riding on Network Effects

Although associated fees in Arbitrum, Optimism, and all other layer-2 networks are negligibly low,…

Click Here to Read the Full Original Article at NewsBTC…