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 hurries 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 opponents, 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 a substitute 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 a wide range of offshoot tasks that issued tokens themselves, like Zora (ZORA) and BaseIsForEveryone.
Optimism
Optimism’s development technique has relied on a wide range of company partnerships, even licensing and white-labeling its know-how for companions like Base.
Though a lot of Optimism’s agreements have income kickbacks to profit tokenholders, they comprise varied contractual provisions that would make planning for the long-term worth of OP troublesome.
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 know-how, 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, virtually all income on Arbitrum is immediately attributable to ARB tokenholders.
As a result of Arbitrum retains its liquidity on-chain relatively than in off-chain partnerships, it’s simpler for DeFi trackers to estimate its whole 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 extra chains that function their very own transaction sequencers. These orbit chains preserve some property as liquidity bridged from Arbitrum’s major chain.
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 nicely under Ethereum or Solana.
Even with the low charges it claims, the chain charges collected in a 24-hour interval reached thousands and 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.
