Adoption of Ethereum’s top two Layer 2 chains are gaining traction as lower ranked rivals are losing market share.
Optimism, Ethereum’s second-largest L2 by total value locked (TVL) with $741.5M, rocketed to new highs at the end of May, tagging a record $1.02B on June 2, double its level on May 28, according to L2beat. It overtook dYdX as the second-largest L2.
Arbitrum, Ethereum’s leading L2 with a $2B TVL and 51% market share, is also seeing increased usage amid its multi-week onboarding event, Odyssey.
Trade activity on Optimism is also booming, with its monthly trailing DEX volume up 254% with $1.5B exchanges over the past 30 days, according to Dune Analytics. By contrast, combined DEX volume across all chains is down 50% over the past week.
Why the surge? It’s hard to be sure, but the recent swoon in the market has frequently driven transaction fees on Ethereum DEXes up to hundreds of dollars. This suggests many on-chain traders may be moving their assets on Optimism to capture savings.
The increased adoption of Optimism and Arbitrum also comes as the initial hype surrounding the broader L2 landscape appears to have died down. Speculators were extremely bullish on Ethereum’s L2-based scaling roadmap in late 2021, but the bear market has wreaked carnage for smaller projects as traders scramble to consolidate liquidity
Loopring and Boba Network have shed nearly $2B in combined TVL since November, and dYdX is planning to leave Ethereum and launch as an independent blockchain built on Cosmos.
Meanwhile, activity has concentrated on Optimism and Arbitrum as network effects play out. Many projects continue to launch on both chains, with the two L2s currently boasting more than 250 projects in their combined ecosystems while rival chains have struggled to retain meaningful development and adoption.
Daily Optimism-based DEX volume surged to a new all-time high of $230.3M on June 1. Uniswap is the network’s most popular exchange representing 70% of trade volume, followed by Velodrome with 17.5%, and Curve with 7.3%.
Arbitrum Odyssey, which began on June 21, is an eight week event intended to showcase and encourage adoption of its top protocols, including decentralized exchanges, yield protocols, and NFT platforms. Odyssey has already driven 45,413.4 ETH getting bridged to the network and around 262,600 transactions in less than two weeks, according to Dune Analytics.
More than a quarter of ETH bridged to Arbitrum during Odyssey was moved over from Optimism, and 13,300 users have interacted with Arbitrum bridges in the past seven days.
The dominance of Arbitrum and Optimism has come while rival L2s that previously boasted significant market share are in decline.