The Layer 2 (L2) ecosystem of Ethereum is witnessing a renewed surge in activity as Total Value Locked (TVL) shifts among major scaling solutions. Base is nearing its all-time high, while Optimism remains stagnant, and Arbitrum is experiencing a shift from recent declines to signs of recovery.
Base Shows Robust Recovery, Optimism Remains Low
Recently, Base has emerged as the leading performer among Ethereum’s scaling solutions. Its TVL is climbing rapidly, with a promising trajectory toward reclaiming its all-time high. This rebound signifies a resurgence of confidence in the Coinbase-backed layer-2 solution, which benefits from strong developer engagement, attractive yield opportunities, and a friendly DeFi environment.
Conversely, Optimism continues to struggle. Despite a generally optimistic market landscape, its TVL has stagnated around levels last seen in April. This situation raises questions about user retention and the effectiveness of the incentives designed to keep participants engaged within the Optimism ecosystem. While it has maintained a facade of being a top competitor in the L2 space, recent trends suggest that a more compelling catalyst is necessary to reignite interest among users.
Meanwhile, Arbitrum finds itself situated in a transitional phase. Its TVL is slowly recovering, albeit at a more gradual pace compared to Base’s rapid ascent. This might indicate a strategic approach, nudging users to focus on long-term developments beyond the immediate appeal of any particular protocol before re-engaging.
Arbitrum Revenue Declines, Yet New Offerings May Spark Growth
In the past week, Arbitrum-based protocols generated $1.06 million in revenue, reflecting an 18% decrease compared to the previous week. While this drop is concerning, it highlights the volatility often seen in the DeFi space.
An exciting development is the expansion of Gains Network, which recently added 13 new tradable assets, including stocks and indices. This platform has already established itself as a leading revenue generator among Arbitrum protocols and could see further growth if these new assets attract user interest. Gains Network generated $139,000 in revenue in the past week, ranking second among Arbitrum protocols.
GMX remains the top-earning protocol on Arbitrum, benefiting from a dedicated user base engaged in perpetual futures trading, generating $372,000 as reported in October.
Following closely, Ostium Labs reported $129,000 in revenue. These three platforms are collectively driving the majority of Arbitrum’s revenue, maintaining ecosystem activity despite a temporary downturn.
Penpie and Aave are further down the list with reported revenues of $55,000 and $52,000, respectively. While these figures are smaller, they still indicate ongoing interest and engagement in DeFi fundamentals such as lending, staking, and governance.
Can Arbitrum Maintain Its Growth as Base Advances?
The upcoming weeks are crucial for Arbitrum as it strives to remain competitive amid increasing rivalry. The latest revenue report suggests a temporary slowdown for the platform. However, the recent introduction of new trading assets by key players like Gains Network could lead to a notable turnaround in volume, enhancing user activity and capital inflows back into Arbitrum.
In contrast, Base’s swiftly increasing TVL suggests it is positioning itself as a serious contender. Its user onboarding process is streamlined, and its partnership with Coinbase provides a unique channel to attract both retail and institutional investors.
On the flip side, Optimism needs to reassess its strategy. Consistently low TVL and lackluster protocol activity may imply that it is falling behind in the innovation curve. To revive its position, it may require aggressive developer incentives or high-profile partnerships to capture public attention once again.
Conclusion
The race for Layer 2 solutions on Ethereum is a dynamic and shifting landscape, constantly changing the hierarchy among the protocols. Currently, Base is making strides while Arbitrum recalibrates after a drop in revenue; meanwhile, Optimism appears to be at a standstill.