Three protocols are vying for dominance of the Ethereum Layer 2 market and its $52 billion value of so-called decentralized finance (DeFi): Arbitrum (ARB), Optimism (OP), and Base.
Bullish buyers even see a chance for layer 2s to displace a few of Ethereum’s $220 billion market cap and even the values of alternate blockchains like Solana or Avalanche.
One thing of a misnomer, a “layer 2” cheapens and speeds up the transactions of a layer 1 blockchain, but layer 2s are primarily separate blockchains that publish information onto a base blockchain.
Arbitrum and Optimism have been the 2 earliest main rivals, and their valuations stay intently matched. Regardless of wildly divergent approaches, each ARB and OP are buying and selling inside 5% of a $3.2 billion totally diluted valuation.
In distinction to Arbitrum and Optimism, Base is a corporately incubated layer 2 that doesn’t have a local token. As an alternative of an preliminary coin providing (ICO) or airdrop, Base financially rewarded its company founder Coinbase with financial savings on transaction charges.
Base additionally used its social media following to advertise quite a lot of offshoot tasks that issued tokens themselves, like Zora (ZORA) and BaseIsForEveryone.
Optimism
Optimism’s progress technique has relied on quite a lot of company partnerships, even licensing and white-labeling its expertise for companions like Base.
Though lots of Optimism’s agreements have income kickbacks to learn tokenholders, they comprise numerous contractual provisions that would make planning for the long-term worth of OP tough.
A lead researcher at Delphi Digital described Optimism’s major chain as “trending to ghost town.” To counteract the decline, Optimism says it’s engaged on Superchain interoperability for apps.
It boasts of main partnerships, together with UniSwap, Curve Finance, and Aave.
Regardless of Base utilizing Optimism’s expertise, it’s now a direct competitor that rewards Coinbase way over OP tokenholders.
Arbitrum
In distinction to Optimism, Arbitrum has retained most of its liquidity on its major blockchain. In contrast to Optimism’s flashy enterprise partnerships and off-chain transactions, nearly all income on Arbitrum is straight attributable to ARB tokenholders.
As a result of Arbitrum retains its liquidity on-chain somewhat than in off-chain partnerships, it’s simpler for DeFi trackers to estimate its complete worth locked (TVL). Most estimates place the amount of crypto property on Arbitrum’s blockchain at $2.3 billion.
Arbitrum’s bridged TVL, which incorporates double-counting of varied crypto property throughout blockchains, exceeds $11 billion.
To proceed rising, Arbitrum has additionally inspired an orbit of further chains that function their very own transaction sequencers. These orbit chains maintain some property as liquidity bridged from Arbitrum’s major chain.
Learn extra: Coinbase claims the token Base simply launched isn’t really a token in any respect
Base
The Coinbase-supported Base has about $3 billion in TVL and $14 billion in bridged TVL. Base claims transaction charges of lower than one cent, placing it effectively beneath Ethereum or Solana.
Even with the low charges it claims, the chain charges collected in a 24-hour interval reached hundreds of thousands of {dollars} for a number of days in late March and early April 2024.
With founding ties to Optimism’s OP Stack, the apps that construct on Base considerably overlap with Arbitrum’s competing liquidity Aave and Uniswap.
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