Research Summary
The report discusses the competition between Layer 2 (L2) solutions, Arbitrum and Optimism, in the Ethereum scaling roadmap. It highlights Arbitrum’s Orbit, a tech stack that allows developers to launch their chains on Arbitrum One or Nova, and its potential to attract more projects in 2024.
Key Takeaways
Arbitrum and Optimism’s Different Approaches
- Arbitrum’s Focus on Tech Stack and Decentralized Governance: Arbitrum has dedicated more time and effort to perfecting its tech stack and decentralized governance. This approach contrasts with Optimism’s leaner strategy, which emphasizes growth.
- Arbitrum’s Dominance in Total Value Locked (TVL): Despite the competition, Arbitrum remains the L2 with the most TVL, with over $2.5 billion, and hosts one of the most entangled and composable DeFi ecosystems, with 500+ protocols live.
Arbitrum Orbit’s Potential
- Orbit’s Flexibility: Orbit allows developers to launch their chains on Arbitrum One or Nova, offering customization options for throughput, privacy, gas token, governance, and more. This flexibility could attract more projects to build on top of Arbitrum.
- Orbit’s Elastic Block Time: One of Orbit’s unique features is its “elastic block time,” which produces blocks based on demand. This feature can increase capital efficiency and save money in terms of L1 block settlement.
Arbitrum’s Licensed Model
- Full Permission to Adapt Arbitrum Codebase: When building a new Orbit chain, projects are given full permission to adapt the Arbitrum codebase to their needs. This licensed model contrasts with Optimism’s approach.
- Arbitrum’s Checks and Balances: Arbitrum prioritizes slower processes to ensure alignment between Arbitrum and Orbit-hosted L2 on top of it, ensuring checks and balances are in place.
Projects Building on Orbit
- Existing Projects on Orbit: Several projects are already building their L3 using Orbit, mainly revolving around gaming, DeFi, music, and new ways to stream incentives.
- Future Growth: With more Orbit chains coming soon, 2024 could show the potential of the Arbitrum tech stack at an infrastructural layer.
Actionable Insights
- Monitor the Development of Arbitrum Orbit: Given the potential of Arbitrum Orbit and the number of projects already building on it, it would be beneficial to keep an eye on its development and adoption rate.
- Research the Potential of Orbit Chains: With the expected launch of new Orbit chains in 2024, it would be worthwhile to research these chains and their potential impact on the Ethereum scaling roadmap.
- Understand the Implications of Arbitrum’s Licensed Model: Arbitrum’s licensed model, which allows projects to adapt its codebase, could have significant implications for the future of L2 solutions. Understanding these implications could provide valuable insights into the L2 wars.
