Arbitrum Surpasses Ethereum Mainnet in Trading Volume
Arbitrum, the leading Ethereum layer 2 network in terms of market capitalization, has achieved a significant milestone by surpassing the Ethereum mainnet in decentralized exchange (DEX) trading volume. This is the first time any layer 2 blockchain has achieved this feat.
What is Arbitrum?
Arbitrum is an Ethereum layer 2 scaling solution that enables faster and cheaper transactions by processing them off-chain and then bundling and finalizing them on the Ethereum mainnet.
Layer 2 Networks Gaining Momentum
- Ethereum layer 2 networks like Arbitrum are gaining significant traction.
- Their combined total value locked (TVL) is greater than that of all other layer 1 networks, excluding Ethereum, at $20.7 billion.
What is TVL?
TVL refers to the total value of funds invested and locked in a blockchain or DeFi protocol, indicating the network’s liquidity and popularity.
Layer 2s Contributing to Ethereum’s Success
Despite the growth of layer 2 networks, they are not competing with Ethereum but rather enhancing it.
- Layer 2 networks pay fees to roll up their transactions to the Ethereum mainnet for finality, generating revenue for Ethereum validators.
- Increased transaction activity on layer 2s contributes to Ether token deflation mechanisms, including EIP-1559.
FAQs
What is Layer 2 Technology?
Layer 2 solutions are built on top of existing blockchains, such as Ethereum, to process transactions off-chain and relieve congestion on the main network.
What is DEX?
Decentralized exchanges (DEX) allow users to trade cryptocurrencies directly with each other without the need for a central intermediary.
What is a Sequencer?
In the context of layer 2 networks, a sequencer is responsible for organizing and verifying transactions before submitting them to the mainnet for finalization.