Arbitrum’s Resurgence: Huge Layer-2 Catalysts Coming this Year
Welcome to another Crypto Weekly Digest brought to you by VirtualBacon.
This week we’ll dive into why Layer-2s like Arbitrum and Optimism will have a massive resurgence by the end of 2023. the engaging this week, spotlighting its fresh comebacks and meaningful strides on both fundamental and promotional fronts. We'll take a look at the resurgence of Arbitrum with its incentive program, and highlight some of the top Arbitrum altcoins. We’ll also highlight EIP-4844 and its importance for the entire layer-2 space.
Arbitrum Incentive Program
The Arbitrum network has rolled out a Short-Term Incentive Program with a clear mission: distribute up to 50 million ARB tokens from the Arbitrum DAO Treasury to enhance its ecosystem and bolster decentralized application and DeFi use cases.
Initiating on September 1st with a forum post, the community recently stepped into a pivotal phase in early October, where they entered a voting period that will conclude on October 12th. Numerous projects within the Arbitrum ecosystem have already submitted applications for these funds, indicating a surge in user rewards across various applications in the coming three months. This carefully designed incentive structure is poised to attract new users and amplify activity within the Arbitrum network until January 2024, demonstrating a strategic effort to invigorate its growing ecosystem.
Playing the News: A Look at OP's Historical Moves
When Optimism introduced its OP Summer initiative last year, distributing 51 million OP tokens, it catalyzed a notable surge in both platform use and token value. Daily transactions on Optimism temporarily skyrocketed from an average of 50k-100k to over 150k.
Additionally, from July to August 2022, its Total Value Locked (TVL) impressively soared from $280 million to $1.1 billion.
The OP token’s value also spiked from $0.50 to $2. However, it's pivotal to note that once the incentive program concluded, the value plummeted, underscoring the short-lived, yet impactful, nature of such initiatives.
Arbitrum Price Analysis
While Arbitrum's Total Value Locked (TVL) hasn’t notably surged recently, resting around $1.7 billion, the anticipation is that once the incentive program comes to fruition and gains recognition, there could be rise in both TVL and short-term price action.
Learning from Optimism’s history, these effects may be notably short. Analyzing Arbitrum’s price, a potential entry target looms around 82 cents, with a clear stop loss beneath the all-time low at 72 cents, providing a somewhat constricted 16% stop-loss buffer. Aiming for highs at $1.30 yields a 5:1 profit-to-loss ratio. However, tread cautiously; rapid bounces post-incentive program launches can also fall swiftly.
Navigating the Arbitrum incentive program requires careful planning. I intend to engage in this short-term play only until January's end, aligning with the incentive duration. While the 50 million ARB tokens to be unlocked pose a moderate 4% surge in circulating supply, substantial sell pressure isn't anticipated. However, caution will dominate actions as March 2024 brings a significant token unlock, nearly doubling the circulating supply, and potentially negatively affecting the price.
Top Altcoin Picks on Arbitrum
Let's take a simple look at some altcoins on Arbitrum and understand why they might be worth paying attention to going into the Incentive Program.
GMX
GMX, recognized as a top DeFi project on Arbitrum, plays a pivotal role being a decentralized exchange that saw substantial use even before the Arbit token became active.
Currently, GMX has the largest application for ARB tokens, seeking a grant of 14 million tokens. With its price rebounding after a significant correction since April, GMX has a seemingly favorable bet, particularly within the narrative of gaining substantial grant funds.
JonesDAO
JonesDAO, one of the longest-standing projects on Arbitrum since January 2022, showcases not just endurance but also viability.
https://app.jonesdao.io/vaults
With a total value locked between 1718 million, they stand to gain potentially around 2-3 million ARB tokens in grants, which is notably impactful considering their relatively low circulating market cap of $5.9 million. As it starts to bounce back in price after the program announcement, a keen eye will watch whether its upward trajectory continues.
Radiant
Radiant brings multiple catalysts to the table: it stands second in total value locked for Arbitrum, plans to launch on the Ethereum mainnet on October 15th, and plays a key role with the Layer Zero airdrop, making it a proxy bet for the Layer Zero token before it goes live.
With three potentially significant catalyst events unfolding for Radiant until year-end, it aligns as a strong contender in the Arbitrum ecosystem.
Camelot
Camelot, a Uniswap fork exclusive to the Arbitrum ecosystem, represents an interesting watch despite its current low circulating supply against its total supply.
Having applied for 3 million ARB tokens, while it may ride a short-term hype, caution may be advisable due to possible significant token unlocks.
GMD Protocol
GMD Protocol, a yield aggregator, and smart vault specifically serving Arbitrum, emerges as a potentially overlooked gem.
Operating since November last year, they’ve applied for a grant of 1.5 million ARB tokens. Despite its low market cap, the significant grant could provide a notable boost, making GMD a noteworthy, albeit high-risk, consideration.
While GMX and Radiant solidify themselves as top picks for their apparent potential and upcoming catalysts, JonesDAO and GMD Protocol linger as sleeper picks that might surprise observers with their performance, especially considering their substantial prospective grants relative to their market caps.
EIP-4844
EIP 4844, or Proto-Dan Sharding, is set to significantly reduce transaction fees for Ethereum Layer 2 solutions by introducing a new type of storage named "blobs."
This upgrade, particularly beneficial for Ethereum rollups like Arbitrum, Optimism, and others, enables them to store their Layer 2 transaction snapshots on Ethereum Layer 1 more cost-effectively. Currently, transactions on Layer 2 platforms like Arbitrum cost 26 cents per decentralized exchange swap, but with EIP-4844, these costs are expected to plummet by at least 10x, enhancing the feasibility of more microtransactions and even potentially cost-free transactions for users. Although delays have pushed the earliest implementation timeline to potentially late 2023 or January 2024, the anticipation for substantially lower fees and the unlocking of new use-cases on Ethereum Layer 2s remains high.
Altcoin Market & Project Updates
Now, let's check out the major altcoin gainers and losers from the past week, and catch up on key project updates.
Best Performing Coins of The Week
Worst Performing Coins of The Week
🟠 OpenSea launches OpenSea Studio to help creators launch/manage NFT projects, supporting various blockchains and card payments for NFT minting.
https://x.com/opensea/status/1709283477168746997?s=20
🟠 Yuga Labs, BAYC's parent company, announces restructuring, layoffs, and a focus on 'Otherside' strategy, involving web3 components, Meebits, and 10KTF.
https://news.yuga.com/yuga-labs-update
🟠 Protocol Labs launches Venture Studio to support startups, focusing on projects utilizing Filecoin, IPFS, and other tech for innovative data solutions.
https://protocol.ai/blog/introducing-protocol-labs-venture-studio
🟠 The DAO solution Utopia, will cease all services on Nov 6, yet remains free until month's end. Despite $23M funding in June, the firm is changing direction.
https://utopia.beehiiv.com/p/winding-down
🟠 Conflux & LayerZero to develop blockchain SIM card (BSIM), enabling asset and message transfers between chains using LayerZero amid user decline.
https://blockworks.co/news/layerzero-china-blockchain-sim-cards
🟠 Stars Arena, an Avalanche app, was hacked, draining nearly all funds (~$3M in AVAX tokens).
🟠 StarkWare delays StarkNet (STRK) token unlock date from November 29, 2023, to April 15, 2024, focusing on technical development and will update roadmap as needed.
https://www.theblock.co/post/254142/ethereum-starkware-token-unlocks-delay
🟠 Galxe's web3 platform compromised in a DNS hijack; hackers redirected users to a phishing site, stealing over $160,000 in funds.
https://www.theblock.co/post/255260/web3-platform-galxe-hit-by-dns-attack-on-front-end-website
🟠 THORSwap pauses platform and enters 'maintenance mode' due to illicitly-linked funds from the FTX Exploiter, taking swift action against potential further illicit activity.
🟠 Solana's v1.16 update introduces Confidential Transfers for encrypted SPL token transactions and enhanced zero-knowledge-proof capabilities, improving privacy and reducing validator hardware requirements
https://www.theblock.co/post/255200/solana-under-the-radar-update-native-privacy-spl-tokens
This week, we took a good look at Arbitrum making a strong comeback and all the new updates that are sure to make waves in the next few months. We also zoomed in on the top altcoins on Arbitrum and checked out the biggest winners and losers in the altcoin world, plus all the must-know project updates from the last week.
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End
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