Layer 2 Blockchain Update Q3/2022: Arbitrum and Optimism are in the spotlight
There are many Layer 2 blockchains that are being built and operated. There are general blockchains and application-specific blockchains. Layers 2 blockchains can also be categorised by the technology they use.
Layer 2 Blockchain Update Q3/ 2022
This article will focus on layer 2 analysis of the following groups:
- Optimistic Rollups: Optimism, Arbitrum, Metis, Boba.
- zkRollups: dYdX, Loopring, zkSync, ZKSpace, StarkNet.
- Validium: Immutable, RhinoFi, Sorare, Validium.
Layer 2 Total Value Locked (TVL)
From the beginning of 2022, the Total Value Locked (TVL) of the entire market tends to decrease. However, in Q3/2022, this index tends to rise again to the same level as the beginning of the year.
In Q3 2022, TVL of layer 2 Optimistic Rollups group showed breakthrough growth while TVL of zkRollups and Validium group showed no signs of increasing. Specifically, Optimistic Rollups’ TVL increased from $ 1.2 billion to more than $ 4.5 billion (an increase of 275%) in Q3 2022 and is maintaining at $ 3.3 billion. It can be said that layer 2 using Optimistic Rollups technology had an impressive growth quarter.
TVL of the zkRollups group continued its downtrend in Q3/2022 and is maintaining at 600 million USD. The Validium group had TVL grow slightly in Q3, from $60 million to $80 million. As can be seen, in Q3/2022, layers 2 using Optimistic Rollups are dominating and attracting cash flow to the ecosystem.
Layer 2 transaction fees
Currently, layer 2 has almost completely solved the problem of transaction fees on Ethereum. Specifically, transaction fees on layer 2 range from 0.01 – 0.33 USD, 10 – 50 times cheaper than on Ethereum.
Which layer 2 projects have raised capital in Q3 2022?
The layer 2 blockchains mentioned in the article did not announce their fundraising deals in Q3/2022. However, in this quarter, there are 3 outstanding layer 2 projects that successfully raised capital.
- Eclipse successfully raised $ 9 million seed round in September with the participation of Trible Capital, Infinity Ventures Crypto, Coinlist… The project is building a layer 2 rollups development platform using Solana Virtual Machine on existing blockchains.
- Fuel Labs successfully raised $ 80 million in September with the participation of Blockchain Capital, Alameda Research, CoinFund, Maven 11, Spartan Group… The Fuel Labs team consists of more than 60 engineers who were involved in building a layer 2 blockchain with high throughput and scalability.
- Oasys Games successfully raised $ 20 million in July with the participation of Crypto.com, Gate.io Huobi, Jump Crypto, Kucoin, Amber Group… The project focuses on building a layer 1 and layer 2 connection protocol to bring the video game community to blockchain technology.
These Layer 2 projects are only in the early stages and have just successfully raised capital for the first time.
In short, in Q3/2022, layer 2 projects did not have too much new fundraising information. However, new names have emerged and it is possible that in the future they will strengthen the layer 2 blockchain group.
In the next section, we will explore in more detail the situation of layer 2 groups: Optimistic Rollup, zkRollup and Validium.
Optimistic Rollup Blockchain Overview Q3/2022
Arbitrum, Optimism, Metis and Boba Network are 4 prominent names, representing the Optimistic Rollups layer 2 group. Let’s take a look at the Optimistic Rollup landscape and why Arbitrum and Optimism are in the spotlight.
Before getting into the metrics, let’s take a look at some of the main events of Arbitrum and Optimism in Q3 2022.
Highlights of Arbitrum In Q3 2022:
- 09/08: Arbitrum Nova is launched. This is a layer 2 dedicated to gaming and social apps. The project has many large cooperation units such as Reddit, FTX, Consensys, Quicknode …
- 16/08: Arbitrum hires Andrew Saunders as chief marketing officer (CMO). He is a former CMO at Amazon and has many years of experience in entertainment and marketing.
- 31/08: Arbitrum One is officially upgraded to Arbitrum Nitro. This upgrade will bring higher performance and throughput to Arbitrum.
- 20/09: Arbitrum awarded 400 ETH (about half a million USD) to a character nicknamed 0xriptide for finding a bridge gap between the Ethereum network and Arbitrum Nitro. If this vulnerability is attacked by hackers, the damage could reach more than $ 250 million. Therefore, the discover of 0xriptide brings a lot of value to Arbitrum.
- 20/09: OpenSea supports Arbitrum networks.
- 12/10: Offchain Labs acquires software development company Prysmatic Labs, the company behind Prysm software for running Proof-of-Stake Ethereum nodes.
In Q3 2022, Arbitrum has two good news about network upgrades: Arbitrum One was successfully upgraded to Arbitrum Nitro and Arbitrum Nova was launched. These activities help improve the foundation for ecosystem development. Moreover, the Arbitrum development team took a professional step when awarding the person who discovered the security vulnerability.
While Optimism was running the OP Summer Space incentive program, an event for users to use its protocol and receive rewards, Arbitrum Odyssey was put on hold.
Highlights of Optimism In Q3 2022:
- 3/07: Optimism Summer Incentive officially started. There are many projects announcing incentive programs to attract users.
- 16/08: DeFi projects Iron Bank, Yearn Finance and Homora annouced integration with the Optimism network.
- 01/09: 1inch announced an airdrop of 300,000 OP to Optimism ecosystem users if they had used a 1inch wallet that interacted with the Optimism network.
- 07/10: The liquid staking platform Lido annouced integration with the Optimism network.
As can be seen, many top DeFi projects on Ethereum have integrated with Optimism to reach the userbase of this ecosystem. In addition, 1inch launched an incentive program that motivates users to engage more actively with the Optimism network.
Optimism Summer Incentive is one of the biggest events of the Optimism ecosystem at the end of 2022. Projects participating in this program will use OP to create incentives for users to experience their products in the Optimism ecosystem.
Currently, there are more than 21 projects running incentive programs on Optimism. Users can still participate in the OP summer.
At the end of Q3, layer 2 players such as zkSync, StarkNet, and Arbitrum had not officially released platform tokens, although the development teams had previously announced future token launches. As a result, Optimism’s OP token continues to dominate the Optimistic Rollups segment and continues to benefit from the influx of funds into this group.
Total Key Value (TVL)
Overall, Optimistic Rollups’ TVL is splitting into two groups: those that grow prominently and those that attract little attention.
- Arbitrum and Optimism are two outstanding active projects with growing TVL in Q3.
- Metis and Boba Network have been mainnet for nearly 1 year but have not shown sign of growth.
From the beginning of 2022, Arbitrum’s TVL tends to decrease, from $ 3 billion to a low of $ 1 billion. However, in Q3, the index grew significantly by about 70%, to $1.7 billion.
At the same time, Optimism’s TVL overtook Arbitrum, from $250 million to a peak of $2.7 billion (an increase). 980%). This shows that although Arbitrum and Optimism both attract cash flow, Optimism has seen more notable growth.
Besides the crypto market recovery in the period of 7-8/2022, the reason for this growth comes from the fact that the Optimism ecosystem has incentive programs such as Optimism Summer and Optimism Quests. Meanwhile, Arbitrum continues to delay the launch of Arbitrum Odyssey. So Optimism had a good chance of overtaking Arbitrum in terms of TVL metrics.
In Q3 2022, market cash flow continued to enter the Arbitrum and Optimism ecosystem while Boba Network and Metis were left behind. Optimism project was at the heart of Layer 2 cash flow in Q3.
The ecosystem expands in quantity
Currently, layer 2 using Optimistic Rollups technology has reached the stage of ecosystem expansion after basically completing the infrastructure. A complete ecosystem will include pieces such as DEX, lending/borrowing, yield farming, aggregator, name service, NFT, Gaming…
The number of Optimistic Rollups projects has grown strongly. Specifically, in Q3/2022:
- Number of projects on the Arbitrum Ecosystem increased from more than 100 to more than 300 projects (an increase of 200%).
- Next is the Optimism ecosystem increased from 60 to more than 200 projects (an increase of 230%).
It can be seen that in Q3/2022 alone, there were many developers getting on layer 2 blockchains to develop ideas.
The picture of layer 2 Metis and Boba Network is very blurred. In Q3/2022, the number of new projects participating in these two ecosystems is not much, only about 5 projects. The pace of ecosystem development of Metis and Boba Network is also not outstanding compared to the two projects of the same group, Arbitrum and Optimism.
The number of wallet addresses and daily transactions grew steadily
From the beginning of 2022, the number of wallets created on Arbitrum and Optimism increased sharply:
- The number of wallet addresses on Arbitrum increased from 300,000 wallets to more than 1.4 million wallets (an increase of 366%).
- The number of wallets on Optimism increased from 150,000 to over 1.5 million (an increase of 900%).
In Q3 2022 alone, the number of wallets on Optimism and Arbitrum increased significantly. However, Optimism has surpassed Arbitrum in the number of wallet addresses.
Trade on Aribitrum and Optimism
Arbitrum and Optimism’s total daily transactions are approximately equal, but about 6-10 times less on average than Ethereum’s total daily transactions.
In 2022, the Arbitrum network has 174 days with a higher number of transactions than Optimism, while Optimism has only 110 days higher. Therefore, in 2022, the Arbitrum network is more active than Optimism.
Stablecoins on Optimism grow strongly
The role of stablecoins In the crypto space is important because they have the function of connecting the pieces of the ecosystem. Moreover, investors can use stablecoins to preserve capital as well as launch investments quickly without much operation.
Since its launch, the number of stablecoins circulating on the Arbitrum network has always been larger than optimism. Specifically, from the beginning of 2022:
- The market cap of stablecoins on Arbitrum increased from $750 million to $1.25 billion.
- The market cap of stablecoins on Optimism increased from $250 million to over $750 billion.
As can be seen, the stablecoin marketcap on Optimism has caught up with Arbitrum’s previous $750 million mark.
In Q3 2022, stablecoins on Optimism increased sharply, from $350 million to over $750 million (an increase of about 114%). Meanwhile, stablecoins on Arbitrum have a increase from $1.1 billion to $1.25 billion (up 13%). At the current rate, Optimism could overtake Arbitrum in terms of stablecoin market cap in the future.
Currently, stablecoins USDC and USDT dominate the stablecoin segment on Arbitrum and Optimism. Looking at the chart above, it can be seen that on the Arbitrum and Optimism blockchains, the number of USDCs is outperforming USDT:
- USDC on Arbitrum increased from $750 million to $900 million (up 20%), while USDC on Optimism increased from $230 million to $450 million (up 95%).
- USDT on Arbitrum and Optimism shows only signs of flat movement and negligible growth compared to USDC.
The number of USDCs on Arbitrum and Optimism has grown impressively since Circle, the company behind USDC, announced it would integrate 5 more blockchains (Arbitrum, Cosmos, Near, Optimism, and Polkadot). As such, Circle is supporting USDC on 13 blockchains including Arbitrum and Optimism.
Meanwhile, according to data on its website, Tether, the company that developed USDT, has not made an official announcement about the release of USDT on Arbitrum and Optimism. This causes the amount of USDT on these two layer 2 solutions to be overwhelmed by USDC.
Besides centralized stablecoins such as USDC and USDT, on Optimism and Arbitrum there are other stablecoins such as DAI, FRAX, USX, MAI and many others. Based on the market cap, the supply of USDC, USDT and DAI circulating on Optimism and Arbitrum is significantly higher than the supply of other stablecoins.
The flow of stablecoins is pouring into the Optimism ecosystem, while stablecoins on Arbitrum remain stable. This sets a very good stage for the development of ecosystem pieces.
zkRollup Blockchain Overview Q3/2022
TVL of zkRollups group continues a downtrend
The zkRollups group consists of the following projects: dYdX, Loopring, zkSync, ZKSpace, StarkNet. According to L2beat, StarkNet’s TVL is only about $ 1 million, which is insignificant compared to other projects in the same group.
As can be seen, the TVL of the zkRollups group is on a downtrend from mid-2022. Specifically, dYdX’s TVL went from $1 billion to $300 million. Meanwhile, TVLs of Loopring, zkSync and ZKSpace were flat and showed no signs of growth.
In Q3 2022, the Optimistic Rollups team dominated most of the layer 2 market and successfully attracted cash flow. So the zkRollups team doesn’t have the same growth numbers as the Optimistic Rollups group.
In addition to the above indicators, let’s find out the good news of zkRollups in Q3/2022.
zkSync is expected to launch in October 10
In late July, Matter Labs announced that zkSync 2.0 would run the mainnet in 100 days. So after many years of development, zkEVM rollup will officially go mainnet in October. This event marks the beginning of the zkSync ecosystem.
In addition to the above highlights, the zkSync ecosystem has two other notable news:
- Uniswap V3 is being built on zkSync 2.0 and received nearly 100% of the votes in favor of the proposal on Uniswap. Although zkSync 2.0 has not officially run the mainnet, there has been a major project like Uniswap pioneering the integration of this blockchain network.
- Matter Labs will launch testnet Pathfinder, a layer 3 that helps scale the Ethereum blockchain faster.
At the end of Q3, Matter Labs and zkSync made positive developments on the technical side. The zkSync mainnet event in October is of particular interest to the community. The team also announced that it would launch zkSync’s token.
StarkNet ecosystem has many projects getting fundraising
- 17/08: MatchboxDAO successfully raised $ 7.5 million from Starkware, Geometry Research, ReadyPlayerDAO… The project focuses on building and developing crypto gaming DAO.
- 14/7: ZKX, a derivatives trading project on StarkNet, successfully raised $4.5 million from Alameda Research, Starkware and Huobi.
At the end of September, the StarkNet ecosystem had two funding rounds announced. Given that the StarkNet ecosystem is in its early stages, the cash flow from investment funds will help project developers implement their ideas.
Currently, the StarkNet ecosystem has more than 100 projects under development. This further reinforces the ecosystem development in the future.
The company Starkware, the company behind the development of StarkNet and StarkEx, confirmed the rumors about the StarkNet blockchain token. Many sources believe that StarkNet token will be released on September 9, but so far StarkWare has not officially announced the token launch date. Investors supporting StarkNet will likely have to continue to wait for an announcement from the development team.
dYdX’s Revenue and Market Cap decreased
Market cap and revenue of dYdX dropped in Q3. Currently, the project’s revenue only ranges from 100,000 to 150,000 USD per day. The dYdX team’s announcement that it will deploy the dYdX chain on Cosmos has caused users to leave the dYdX derivatives exchange. This cuts into the main revenue of the project.
Revenue of dYdX and GMX
It can be seen that the derivatives segment brings great revenue to the projects even in the downtrend of the whole crypto market. However, the race between derivatives platforms is very competitive. GMX‘s revenue has been increasingly overwhelming dYdX’s revenue.
In the future, the dYdX’s development team aims to build the dYdX chain dedicated to derivatives trading on Cosmos. Currently, dYdX’s new blockchain is still in development, so there are still many details that have not been announced. In addition, Cosmos’ launch of whitepaper 2.0 also bodes well for the future of the Cosmos ecosystem.
Validium Blockchain Overview Q3/2022
Layer 2 blockchains using Validium technology including Immutable, RhinoFi and Sorare projects.
TVL of layer 2 Validium
It can be seen that the Validium group does not attract much cash flow. TVL of ImmutableX, RhinoFi and Sorare projects maintained a downtrend from the beginning of 2022. Even in Q3 2022, there were many other layer 2 projects with growth, but the Validium team still did not have too many breakthroughs.
In Q3 2022, Immutable’s TVL grew but the TVL of the other two went sideways. Specifically, Immutable’s TVL increased from $ 30 million to more than $ 50 million. RhinoFi and Sorare’s TVL went sideways, hovering around $25 million.
Immutable has some outstanding news in Q3 2022. On 13/09, NFT marketplace Rarible partnered with Immutable to expand the NFT market in gaming.
In Q3 2022, layer 2 players such as Optimism and Arbitrum have grown strongly and taken the spotline. Other layer 2 like zkSync, StarkNet, Immutable, and dYdX don’t have too much positive news. These projects didn’t get much attention either.