Arbitrum and Optimism raked millions in profit despite the extended bear market that hammered decentralized finance (DeFi) activities and Ethereum (ETH) valuation in 2022.<\/p>\n
Per on-chain data\u00a0shared<\/a> on Twitter, Arbitrum, and Optimism, general-purpose Ethereum layer-2 platforms, made 2,906 ETH and 2,086ETH, respectively. In USD terms, it translates to around $4.6 million and $3.3 million for each protocol.<\/p>\n L2s are amazing businesses<\/p>\n Arbitrum made 2,906ETH ($4.6M) of profit in 2022<\/p>\n Optimism made 2,086ETH ($3.3M) of profit in 2022 pic.twitter.com\/ViOkPA0Juv<\/a><\/p>\n \u2014 Kofi (@0xKofi) January 17, 2023<\/a><\/p>\n\n Based on user activity and the number of dApps launched on Ethereum, solid statistics show that developers prefer the first smart contracting over competitors. Since launching, the network has become a hub of activity, spearheading exciting innovations in decentralized finance (DeFi), NFTs<\/a>, metaverse, and gaming.\u00a0<\/p>\n Trackers in mid-January 2023\u00a0state<\/a> that the total value locked (TVL) in Ethereum stands at $26.88 billion, representing more than half of the assets locked across DeFi. The drop in TVL mirrors the fall in ETH prices in 2022.\n<\/p>\n In essence, Ethereum dominates with DeFi activity over the Binance Smart Chain<\/a> (BSC), trailing at less than a quarter of the TVL of the leading platform, at $4.65 billion.<\/p>\n Despite this dominance, Ethereum\u2019s scaling problem directly impacts Gas fees. As demand picks up, Gas fees fluctuate, leading to as much as $50 on this blockchain to post a simple transaction. Deploying smart contracts cost much more, sometimes upwards of $80, when the network is congested. As an illustration, the average transaction fees on Ethereum stood<\/a>\u00a0at $0.63 on January 17. However, on May 1, 2022, this figure stood at over $23.<\/p>\n Ethereum layer-2 protocols are part of the scaling attempts made by developers to relieve the mainnet. By routing transactions off-chain, layer-2 solutions can help scale Ethereum but, most importantly, reduce Gas fees by several magnitudes.\u00a0<\/p>\n In Ethereum\u2019s layer-2 realm, Arbitrum and Optimism dominate. According to L2Beat\u00a0statistics<\/a>, Arbitrum and Optimism had TVLs of $2.52 billion and $1.45 billion, with a market share of 52% and roughly 30%, respectively.\u00a0<\/p>\n Although associated fees in Arbitrum, Optimism<\/a>, and all other layer-2 networks are negligibly low, these protocols can profit based on activity. For every transfer or smart contract execution of Arbitrum and Optimism, there is an associated fee.\u00a0<\/p>\n Arbitrum and Optimism\u00a0charge<\/a>\u00a0$0.11 and $0.23 for simple transfers, payable in ETH. If a smart contract is deployed, the fees rise to $0.30 and $0.35. They make more fees as more users deploy smart contracts or initiate transfers. Accumulating these amounts over months translate to a tidy profit for the protocol operator.\u00a0<\/p>\n In 2022, Ethereum layer-2 TVL fell roughly 40% from $7.45 billion to $3.3 billion in July 2022. Outflows were lower compared to layer-1 DeFi. As the market recovers, layer-2 operators may likely post higher revenue as users move assets to dApps launched on these scalable and low-fee protocols.<\/p>","protected":false},"excerpt":{"rendered":" <\/p>\n Arbitrum and Optimism raked millions in profit despite the extended bear market that hammered decentralized finance (DeFi) activities and Ethereum (ETH) valuation in 2022.<\/p>\n Per on-chain data\u00a0shared<\/a> on Twitter, Arbitrum, and Optimism, general-purpose Ethereum layer-2 platforms, made 2,906 ETH and 2,086ETH, respectively. In USD terms, it translates to around $4.6 million and $3.3 million for each protocol.<\/p>\n L2s are amazing businesses<\/p>\n Arbitrum made 2,906ETH ($4.6M) of profit in 2022<\/p>\n Optimism made 2,086ETH ($3.3M) of profit in 2022 pic.twitter.com\/ViOkPA0Juv<\/a><\/p>\n \u2014 Kofi (@0xKofi) January 17, 2023<\/a><\/p>\n Based on user activity and the number of dApps launched on Ethereum, solid statistics show that developers prefer the first smart contracting over competitors. Since launching, the network has become a hub of activity, spearheading exciting innovations in decentralized finance (DeFi), NFTs<\/a>, metaverse, and gaming.\u00a0<\/p>\n Trackers in mid-January 2023\u00a0state<\/a> that the total value locked (TVL) in Ethereum stands at $26.88 billion, representing more than half of the assets locked across DeFi. The drop in TVL mirrors the fall in ETH prices in 2022.\n<\/p>\n In essence, Ethereum dominates with DeFi activity over the Binance Smart Chain<\/a> (BSC), trailing at less than a quarter of the TVL of the leading platform, at $4.65 billion.<\/p>\n Despite this dominance, Ethereum\u2019s scaling problem directly impacts Gas fees. As demand picks up, Gas fees fluctuate, leading to as much as $50 on this blockchain to post a simple transaction. Deploying smart contracts cost much more, sometimes upwards of $80, when the network is congested. As an illustration, the average transaction fees on Ethereum stood<\/a>\u00a0at $0.63 on January 17. However, on May 1, 2022, this figure stood at over $23.<\/p>\n Ethereum layer-2 protocols are part of the scaling attempts made by developers to relieve the mainnet. By routing transactions off-chain, layer-2 solutions can help scale Ethereum but, most importantly, reduce Gas fees by several magnitudes.\u00a0<\/p>\n In Ethereum\u2019s layer-2 realm, Arbitrum and Optimism dominate. According to L2Beat\u00a0statistics<\/a>, Arbitrum and Optimism had TVLs of $2.52 billion and $1.45 billion, with a market share of 52% and roughly 30%, respectively.\u00a0<\/p>\n Although associated fees in Arbitrum, Optimism<\/a>, and all other layer-2 networks are negligibly low, these protocols can profit based on activity. For every transfer or smart contract execution of Arbitrum and Optimism, there is an associated fee.\u00a0<\/p>\nRiding on Network Effects<\/h2>\n
Arbitrum And Optimism Win Big<\/h2>\n
Riding on Network Effects<\/h2>\n