Arbitrum breaks 1B transaction threshold, nearly 20% of traffic is DeFi activity

Arbitrum broke above 1B transactions in the chain’s lifetime. Close to a fifth of that activity is directed to DeFi tasks.

Arbitrum broke above 1B transactions, of which 17.71% went to DeFi activities, based on GrowThePie data. Arbitrum is among the most active L2 chains and has a relatively early arrival. The project started off as a VC-backed network but ended up drawing the bulk of L2 traffic. 

The Arbitrum One L2 rollup is also considered sufficiently decentralized and has been singled out by Ethereum’s founder Vitalik Buterin. According to metrics of decentralization, Arbitrum One is a Stage 1 chain, on track to achieve true rollups with decentralized consensus.

The Arbitrum team celebrated the 1B cumulative transaction milestone, though the total number reporting varies. Arbitrum also easily surpasses Ethereum in terms of transactions per day, as the L1 carries around 1.11M daily transfers. Arbitrum is one of the successful models to scale Ethereum as expected by rollups.

The transaction total was achieved as Arbitrum became the most widely used L2. The chain has the most active bridging, with more than $9.62B in value bridged. Arbitrum achieved the cumulative results, after three years of its launch.

The transaction count on Arbitrum also looks more organic compared to other L2s like Taiko, which subsidizes their transactions. Arbitrum is also way past its initial airdrop stage, showing that even VC-backed chains can host organic traffic after the airdrop hype. 

The Arbitrum chain growth pattern started off with under 100K transactions per day and reached up to 2M transactions as of September 2024. Arbitrum is only surpassed by Base, where traffic is driven by meme tokens, micropayments, and low-value transactions. 

Arbitrum handles 2M daily transactions and a cumulative 1B as of September 2024. | Source: GrowThePie

Arbitrum has emerged as a well-rounded chain, with a dominance of undefined or token-based activity. The chain is large enough to host multiple DeFi protocols. This is one of the reasons why Arbitrum is lagging behind niche chains with their specific brand of DeFi.  

One of the key growth areas for Arbitrum is its alignment with the Ethereum ecosystem. Arbitrum is one of the biggest net recipients of inflows from Ethereum, due to its technological and business alignment. Arbitrum received $2.63B of inflows from Ethereum, of which 25.5% were dedicated to bridged stablecoins. 

The other factor of growth is Aave V3, which makes up around 30% of the Arbitrum total value locked. The L2 chain has attracted $3.29B in liquidity, spread among relatively small DeFi protocols with under $500M in value locked. 

ARB points to potential future of VC-backed projects

Arbitrum raised a total of $123.7M from a collection of VC funds. Arbitrum held a small seed round, then raised $120M from some of the topmost funds in crypto. The Series B round included Panthera Capital, Polychain, and even now-defunct Alameda Research. 

ARB price action resembles similar VC-backed projects, as the market price has come under pressure. ARB peaked at $2.13 during the 2024 bull market, and has since slid to $0.61. 

As of September 2024, ARB is relatively advanced in its unlocking journey, with 45% of the tokens free to circulate. Until 2027, ARB tokens will be unlocked on a predictable bi-weekly schedule. 

Arbitrum has unlocked 45% of its tokens, next unlock expected on October 16. | Source: DeFi Llama

The Arbitrum project is one of the most successful examples where a VC-backed project has continued to grow beyond its airdrop phase. ARB now sets expectations for a potential breakout from its lows, to a slightly higher price range. ARB is closely watched for a potential breakout among L2 tokens, along with OP and other L2 tokens like Metis (METIS). 

The Arbitrum L2 chain continues to produce fees, with up to $3.5M on the busiest days. In the past month, Arbitrum fees slowed down to $10K to $20K per day. For now, Arbitrum is sustainable, still raking in net earnings after paying L1 fees to Ethereum. 

Arbitrum margins are thinner now, with $7,359 paid in the past 24 hours. Arbitrum currently achieves around 40% of the throughput of Base, showing a more conservative, but still competitive model. Throughput is a metric of gas usage, which also shows the complexity of transactions, especially DeFi routing. With the rise of DeFi on Arbitrum, some of the transactions may require more complex routing and gas usage. 

Cryptopolitan reporting by Hristina Vasileva