More than just an airdrop? Arbitrum builds a resilient DeFi fortress with unique primitives

Total value locked (TVL) in decentralized financial applications on Arbitrum, the layer-2 Ethereum network blockchain, has doubled since early 2023.

Investor hopes for ARBI token airdrops are the main factor attracting activity to Ethereum’s scaling network, but DeFi growth in the ecosystem is also showing strong growth.

Arbitrum has become a major hub for decentralized derivatives trading, offering high yields to cryptocurrency yield hunters reminiscent of the DeFi era of the Wild West in 2020.

Acquisition of Decentralized Derivatives Trading by GMX and Gains Network

GMX is Aribitrum’s primary DApp, accounting for 25% of the network’s total TVL. Perpetual swap trading platforms pit traders and liquidity providers against each other. The liquidity provider owns the GLP token, an index of cryptocurrencies and stablecoins that acts as a trader’s counterparty. On the other hand, the GMX token staker earns his 30% of the protocol’s fees, so the platform offers real yields without diluting the token supply.

GMX’s trading volume is almost one-fifth that of leading decentralized exchange dYdX, but it’s starting to threaten dYdX’s lead. Interestingly, dYdX’s TVL is half that of GMX, despite the high trading volume. This is probably because dYdX unwittingly encourages wash trading through his DYDX token issuance.

While the GMX platform is currently limited by the number of tokens traded on the platform, which only includes BTC, ETH, UNI, and LINK, dYdX offers perpetual swaps in 36 cryptocurrencies. I’m here. This will change after the launch of synthetic tokens on GMX, enabling synthetic mints for a large number of tokens.

GMX also offers spot trading on certain pairs, making it ideal for leveraged trading and integration with other platforms that want to use forex liquidity. For example, JonesDAO recently leveraged GMX’s design to deploy a liquidity provider vault.

Gains Network, a synthetic paper trading platform originally on Polygon, added its platform to Arbitrum on January 31, 2022. Stock market indices and gold.

Crypto analytics firm Delphi Digital recently discovered that Gains Network has reached roughly the same trading volume as GMX. This feat is commendable because, like GMX, Gains Network does not incentivize trading activity through token issuance. Instead, the platform follows the concept of real yield.

The report added that Gains Network had the fourth highest protocol revenue since September 2022. It will be interesting to see how these platforms compete after the launch of synthetic token trading on GMX.

It is worth noting that both platforms create a competitive environment for derivatives trading on Arbitrum. Ethereum Layer 2 is slowly establishing itself as the leading platform for decentralized paper trading. The current leader, dYdX, enjoys a first-mover advantage in this space, but the time spent developing its V2 Cosmos SDK-based version will likely benefit a fluid ecosystem like Arbitrum. It clearly offers an opportunity to thrive.

Arbitrum embraces high-risk, high-reward play

In addition to derivatives trading, the TVL and token prices of many other dApps in the Arbitrum ecosystem have skyrocketed since early 2023.

Camelot, a decentralized exchange with an efficient revenue-sharing token mechanism, has been one of the market’s biggest performers over the past few months. The price of GRAIL, Camelot’s native token, has jumped 15x since the beginning of the year, and his TVL for the protocol hit a record high of his $50 million.

Camelot’s token launchpad for public funding of the Arbitrum ecosystem project has been an astonishing success. Her five projects in the ecosystem have raised him over $20 million in a short period of time.

Radiant Network, a cross-chain lending platform whose TVL grew from $20 million to $120 million year-to-date, also played It will play a key role in the expansion of the Arbitrum TVL. Radiant’s success can be attributed to platform upgrades and improved tokenomics.

Related: Optimism’s 1inch users will receive an airdrop of 300K OP Tokens

In order to smooth the token vesting schedule and earn RDNT emissions, the Radiant community has added a 5% liquidity provision requirement for RDNT trading pairs on decentralized exchanges with total liquidity for users. In addition, Radiant will expand to 5 more chains to enable cross-chain money market functionality.

There is also evidence of funds accumulating Arbitrum ecosystem tokens. Arca Investments, a digital asset firm, has reportedly Accumulate Arbitrum ecosystem tokens such as GMX, Dopex (DPX) and Radiant Capital (RDNT). Nansen’s data also shows a significant increase in RDNT token balances among smart money wallets identified by the analytics firm.

The development of the DeFi ecosystem on Arbitrum shows promise for sustainable growth, especially in the decentralized derivatives trading space. It is highly likely that he is using Arbitrum only for some users to airdrop his ARBI tokens. However, his recent Optimism and Blur token airdrops show that user his activity doesn’t always fit after the airdrop. Instead, it provides an opportunity for the platform to encourage additional usage.