What’s The Reason Behind Ethereum Layer 2 Arbitrum’s Astonishing Growth?

Ethereum second-layer scaling solution, Arbitrum’s has managed to capture the decentralized finance [DeFi] market. The platform has witnessed rapid growth as market participants continue to deploy their capital in emerging yield farms. Developed by Offchain Labs, Arbitrum uses Optimistic Rollups to process transactions at an enhanced speed and is significantly cost-effective than Ethereum mainnet while simultaneously profiting from the security of the base chain.

If the latest stats are to be believed, the total value locked [USD] in the project skyrocketed to $2.23 billion. According to an analysis platform called L2beat, the TVL figures soared by an astonishing 2,411% over the past week alone. Ethereum locked in the protocol also has been climbing higher and stood at 669.7k ETH as of September 13.

Ethereum layer 2’s Growth Trajectory

During the weekend, the yield farms for speculative tokens launched causing bridge volume to spike. The FOMO kicked in and the bridge volume spiked. The main reason behind the abrupt upswing was the launch of a yield farm called ArbiNYAN. Arbitrum’s growth coincided with the shrinking TVK values of “Ethereum Killers” such as Solana, Fantom, and Harmony.

According to Nick Chong, an investment analyst at ParaFi Capital, Ethereum’s transaction costs has been one of the biggest narratives this year. At the beginning of 2021, users observed other networks that run the Ethereum Virtual Machine [EVM] that provided low transaction fees and low latency but often ended up compromising on security with smaller node sets and centralized bridging infrastructure.

Then entered Rollups. These are scaling solution that acquires the security of the underlying network while at the same time enhancing transaction throughput and fees. Rollups aimed to address the never-ending debate of trade-offs between fees, security, and usability. Chong expressed his optimism surrounding the Arbitrum project and tweeted,

“Really excited to see the Arbitrum ecosystem develop. Also keeping a close eye on projects launching on Arbitrum first, then branching out to other networks. This may increasingly become a commonly seen playbook for applications w/ users that have sensitivity around tx fees.”

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