At the end of January, a mini-bull market was noticed in the cryptocurrency market. This came as a result of the interest rate rise that the Federal Reserve implemented, which slowed the pace. As a result, Bitcoin rose to a six-month high, reaching $23,700. Following the success of Shanghai upgrade, Arbitrum has added fresh impetus to the whole of the cryptocurrency industry, building on the undiminished popularity of Ethereum Layer 2. For one reason, Arbitrum launched an upgrade in 2022 to handle more frequent trading activity; for another thing, projects from Arbitrum's ecosystem have garnered unprecedented attention thanks to the Arbitrum Odyssey. Both of these things may be attributed to the fact that the Arbitrum Odyssey was released. The advancement of Arbitrum in light of technological advances and upcoming opportunities will be the primary emphasis of this article. In the meantime, from the perspective of the Arbitrum ecosystem, the reasons for the success and future development of the burgeoning projects in DeFi and gaming are analyzed, and conclusions are drawn. One example of this is GMX, which demonstrates disruptive power on mechanism in such a way that it empowered GMX to outperform others in terms of protocol revenue in the bear market. It is anticipated that Arbitrum's token sale will continue to be in a good position with the assistance of the contributors who are favorable.

Overview

Just like the forecasts of the vast majority of institutions and influential individuals, the performance of Layer2 at the beginning of the year 2023 is unparalleled. Optimism, Polygon, and the token on Arbitrum eco are also better in terms of token prices. For instance, the token $OP reached its all-time high of $3.17 in the month of February, while the token $MATIC reached its all-time high of $1.32. The future will still be controlled by Ethereum despite the fact that new L1 chains, such as Solana and Terra, are volatile as a result of the incidents in the bear market. It is arguable that the rivalry that is still to come will be between new L1 chains and Layer2. Arbitrum is the leader of the race among cryptocurrencies despite just reaching a minor peak in the market recently.

Arbitrum is now the project with the greatest TVL in Ethereum's Layer 2 scaling solution. It has reached $2.98 billion, which accounts for 3.01% of all networks combined and 49.51% in Layer2. To be more specific, Arbitrum is not a blockchain but rather an off-chain transaction that is uploaded to the main Ethereum network using a compression method. Arbitrum Rollup is an off-chain protocol that is handled by Ethereum contracts that run on the blockchain. This approach has the potential to tackle a portion of the congestion issue that Ethereum is now dealing with, which will allow for the construction of benefits on transaction speed, cheap gas fee, security guarantee, and enjoyable user experience.

Source: Flipside crypto

Arbitrum technical upgrades

Arbitrum has begun operating in the year 2022. In addition to the Odyssey event, other announcements about technological advancements were made. These announcements included the beginning of production on the Arbitrum Nova and the Arbitrum One, as well as the beginning of production on a whole new programming environment called Stylus. In the following, we will go through the fundamental technological elements as well as appropriate cases.

Arbitrum Nova

The completion of a new chain known as Arbitrum Nova was announced by Arbitrum Network on the 12th of July, 2022. This chain is based on AnyTrust, and it was developed with gaming, social apps, and other cost-sensitive situations in mind particularly. AnyTrust is founded on the presumption of a modest level of trust, which is maintained by the Data Availability Committee. The management of off-chain transaction data and the provision of such data to support batches will fall under the purview of this committee. Because of this, AnyTrust does away with the waiting time of seven days required for users to make a withdrawal, which in turn enhances the overall user experience. The following are the primary technological features:

Data availability certificates, also known as DACerts, must be signed before bulk transactions may take place, and DACerts must be issued.

If the committee is unable to reach a decision that everyone agrees on, the chain will switch to a protocol that uses Arbitrum to aggregate votes.

The execution of data will take place on L2, and when some time has elapsed, the newly aggregated state will be validated on Ethereum.

Arbitrum Nitro

At the very end of August 2022, the Nitro version of Arbitrum One was successfully updated, which resulted in a considerable increase in network speed and a reduction in the cost of individual transactions. In general, Nitro has been upgraded with the following kind of technological improvements:

Some changes were made to the original architecture of the AVM and the ArbOS.
The more traditional, user-specific AVM architecture will be phased out in favor of the more modern WebAssembly (WASM) architecture.
Geth has been implemented in place of the customized EVM simulator.
ArbOS will be reduced in size and rebuilt in Go to offer a bulk-processing and compression system that is more optimal and efficient for transactions.

A novel prover lies at the heart of the Arbitrum Nitro technology. This prover allows interactive fraud proofs of Arbitrum on WASM code, which can be constructed using standard languages and tools and can be programmed using the same languages. Additionally, in order to improve its compatibility with EVM, Gethcore is now built directly into Arbitrum.

Stylus

Offchain Labs, the official development team for Arbitrum, has made an announcement on the debut of Stylus, a next-generation programming environment that is compatible with both Arbitrum One and Arbitrum Nova. Stylus gives customers the ability to deploy apps using their preferred programming languages (such as Rust, C, and C++) by using the WebAssembly smart contract feature. This allows EVM programs on Arbitrum to execute concurrently. Stylus is a significantly quicker and more cost-effective alternative to the Ethereum Virtual Machine (EVM), which it is completely compatible with. Stylus will not be used in place of EVM despite the fact that Offchain Labs refers to it as EVM+.

Source: Arbitrum forum

Partnerships across the ecosystem

In the last year, Arbitrum has seen a large increase in its market share, which can be attributed to the following factors: 1. the ongoing bullishness of Layer2; 2. the anticipated token issuance of Arb; and 3. the expansion of apps within the ecosystem, particularly native applications. Applications such as Uniswap, Sushiswap, and Curve, which are the dominant DeFi protocols on the Ethereum Layer1 mainnet, have been integrated and deployed on Arbitrum One since the mainnet Arbitrum One went live in September last year. Other well-known cross-chain protocols have also been integrated and implemented on Arbitrum One since that time. The rapid increase in the number of these apps is another evidence that developers have high hopes for the Arbitrum scaling solution.

The organizers of the Odyssey event chose the 14 projects that were the most active on Arbitrum in June 2022. These projects included Cross-Chain Bridge, DeFi, NFT, and Games. The initial plan called for the event to take place over the course of eight weeks; however, after the first week, the schedule was changed. The fundamental reason for the suspension was the congestion that occurred on the network during the second week, which led to an increase in the price of gas. At that point, the gas charge was higher than what it was on the main Ethereum network. In point of fact, it has provided a comprehensive explanation for why Arbitrum was unsuitable for such user capacity in its existing condition at the time.

In spite of the fact that it was only held for a week, the Odyssey nonetheless managed to get a significant amount of attention. The combination of Arbitrum and NFT in the form of an event week encouraged users to take part and accelerated the learning curve of users about Arbitrum's ecology. As a result, not only does the total user base become more robust, but traffic is also introduced into the ecosystem. At the same time, it is a shrewd move because the anticipation of future token offers is retained rather than the quick technique of handing away tokens as airdrops. This is because airdropping tokens is a method that is frowned upon by the cryptocurrency community.

The commencement of the Odyssey on June 21 and the conclusion of the first week saw 207k new addresses added to Arbitrum, according to the data that was collected from browsers. The fact that the number of daily new addresses reached the record of 55,000 on June 27 is more evidence of the effectiveness of the Odyssey.

Following the Odyssey event, Arbitrum has increased the scope of its technological efforts and initiated initiatives in the biosphere that include novel mechanisms. As a result, the degree of anticipation for a mini-bull at the end of January has been increased to its maximum level. Arbitrum's average monthly active address count for October 2022-January 2023 is now at 608,365, representing a growth of 51.2% compared to September's figure. There has also been an increase in the total number of transactions and users using the Arbitrum platform.

Source: Dune Analytics

The DeFi landscape

Throughout the course of the last two months, native ecological initiatives on Arbitrum have been at the forefront of the whole cryptocurrency industry. The market capitalization of each of these projects is lower when compared to the market capitalization of projects in the same category on other L1 chains, which suggests that these projects may be undervalued. The projects are sorted in the section below. There will be a significant amount of space for advancement, both in conjunction with the token sale and the ongoing growth of Arbitrum.

There are already well-known applications deployed on Arbitrum with multi-chain deployments, such as Uniswap and AAVE. However, Arbitrum's native projects, such as the perpetual contract exchange GMX, revenue aggregators for derivatives, and the vault Jones DAO, have shown amazing momentum. Arbitrum has discovered the secret to maintaining a profitable business model: derivative protocols are comparable to casinos in that they generate ongoing business revenue; various types of revenue aggregators employ strategies to lure more capital inflow and expand the revenue streaming. As a result, as more people join revenue aggregators, there is more liquidity available, which in turn generates more revenue.

GMX

GMX is a decentralized marketplace for perpetual contracts. Rather than shorting or longing with leverage on centralized exchanges like Binance or FTX, users are given the opportunity to trade ETH, BTC, LINK, and UNI perpetual contracts with up to 30x leverage on a decentralized platform.

In terms of execution, it is more complicated than that on centralized exchanges, and oracles are required to provide price feeds in order to function properly. As a result, external forces will be engaged to accomplish opening and closing. Keeper, which acts similarly to crowdsourcing, serves as the external force to assist GMX with these activities.

When a user conducts a closing action on GMX, the process is split into two parts: the first portion requires the user to transmit a transaction, and the second part requires GMX Keeper to carry out the execution.

The sender needed to pay a gas fee to Keeper in order for the transaction to be carried out, in addition to the Gas cost that was already paid for sending the transaction.

The total value of GMX's TVL has reached $543 million, which is equivalent to 31.46 percent of the total TVL of all DeFi protocols on Arbitrum. GMX tokens are one of the finest assets to have in the turbulent 2022 market since the protocol earned $33.9 million in income over the previous year. The return on investment for GMX tokens was 84.0% in USD and 428.5% in ETH.

Camelot

Camelot, which is Arbitrum's native DEX, has finished its token sales as of December 2022. Camelot is a regular Uniswap V2 + Curve type of DEX in general, but it has additional features available, such as the addition of Launchpad, the incorporation of custom transaction fees, the combination of LP and NFT, and the ability to allow project parties to set their own incentives. The following is a condensed summary of the aspects that have been discussed:

The same AMM DEX that is used by Uniswap V2, but with liquidity distributed throughout the full interval, from 0 to infinity.

Trade pairings for stablecoins that are comparable to Curve.

Allow for the application of dynamic and targeted transaction fees. Camelot gives project partners the ability to choose the proportion of transaction fees depending on the current market circumstances and the needs of a particular protocol.

"The NFT will provide both revenue and incentive opportunities." Users that provide liquidity will be rewarded with spNFT, which represents the staking positions they hold.

The protocol does not need a license, and parties involved in the project may create incentives by using the incentive pool that Nitro Pools provides. These are extra pools for receiving incentives.

Launchpad makes it possible for stakeholders involved in a project to profit from a variety of actions, including but not limited to raising funds and directing liquidity.

Velodrome is the project that has the largest total project value (TVL) on OP, with $77.14 million in liquidity. This number is even higher than Uniswap V3, which has a current value of $44.87 million but an FDV of just $9.46 million and an FDV/TVL of 0.21. When compared to Camelot, Velodrome has a greater TVL but a lower valuation than its competitor.

Radiant Capital

Radiant capital is a lending protocol on Arbitrum that includes two main improvements. The first is multi-chain lending via LayerZero, and the second is revolve lending (which is currently unavailable). Although it has a better TVL than the Arbitrum version of AAVE V3, making it the current leader of its sort on Arbitrum, the level of competition will continue to be fierce in the long term.

Users are able to deposit any major asset on any major chain since it is an all-chain lending protocol. Additionally, users are able to borrow multiple assets with different underlying assets across chains. The operation is as follows: The lender puts up the assets, and then the borrower has the option of borrowing them; the lender receives 50% of the platform's income in the form of fees, and the remaining 50% will be in the form of RNDT as a reward, but it will be locked. Radiant V2 will include the following improvements:

Following the implementation of full cross-chain lending for Bitcoin, Ethereum, and USDC, further assets will be put up for a vote by the Radiant DAO.

The LPs will have a greater say in the fee structure, which will result in an increase in liquidity and a decrease in slippage.

The "Dynamic Liquidity" method has been introduced, which has great potential for investors with a long-term horizon.

If you withdraw funds from the liquidity pool, you will be subject to a penalty.

The Gaming landscape

The GameFi ecosystem in Arbitrum is thriving, and it is particularly prevalent on three projects that are now popular: Treasure DAO, The Beacon, and Trident DAO. The GameFi eco on Arbitrum does not possess the absolute advantage as the derivative sector in comparison to other chains; on the contrary, it is simply a temporary comparative advantage; the future growth is dependent on the performance in the following.

Treasure DAO

The goal of Treasure DAO is to create a "decentralized Nintendo," which is a collection of on-chain games that are linked to one another via the interoperability of in-game assets and the use of Treasure's native token, MAGIC, as a common currency. The strategy games Bridgeworld, The Beacon, and Smolverse, together with Realm, a game that combines elements of resource management and strategy, are among the most played video games of all time.

Trove, the primary hub of the Treasure ecosystem as well as a trading platform for in-game assets and treasure non-fungible token collectibles, allows players to access these games and play them. The two collections that have proven to be the most popular throughout the years are Smol Brains, which serves as the foundation for the Smolverse, and The Lost Donkeys, which is also the name of the game.

Source: Magic marketplace

Trident DAO

Arbitrum's most recent project, Trident, introduced a sustainable GameFi economic model of "Risk to Earn," which increased the enthusiasm of players and communities. After its public selling of tokens, Trident became the most sought-after project in the Arbitrum eco.

PSI is the official utility token of Trident. It may be used to buy products, redeem NFTs, make bets amongst players, and do a variety of other activities. When a bet is won, Trident will collect a fee, and then they will burn it forever. When the integration of Risk to Earn is finished, the supply of PSI will decrease, which will result in deflation.

Conclusion

Due to the success of Arbitrum, there is optimism that Layer2 will serve as the entry point for the subsequent bull market. However, prior to that, there were still certain technological obstacles to overcome in both Optimistic Rollup and zk Rollup. In the not-too-distant future, Arbitrum will see significant advancements in the following three areas: (1) constant technological upgrades; (2) continuous assistance to ecological initiatives; and (3) the attraction of users via the use of their expectations on the token sale.

To begin, the Optimistic Rollup algorithm is still subject to criticism from semi-centralized sequencers. At this time, Arbitrum has centralized sequencers in addition to whitelist-proof verification and scalable contract capabilities. Despite the fact that they do not yet present any hazards to security and are capable of safeguarding user assets, there is nevertheless a growing worry about the possibility of censorship and the loss of user funds. As a consequence of this, the most effective solutions are decentralized sequencers and proof verification that do not need permission. Additionally, Offchain Labs has offered the required technological ways to overcome these concerns, including the following:

Continue cutting expenses while simultaneously improving throughput
Decentralization
Upgrade the licensed software and move the administration to a decentralized location.
"Decentralization of Validators" (or "DEVCO")
A decentralized approach to the use of sequencers

Signature applications developed by Arbitrum fall under the areas of eco, Defi, cross-chain bridging, and gaming. However, in the not-too-distant future, as the developer community and user base continue to grow, more innovative apps will be launched on the platform. The projects in the social and NFT categories are the ones that are most anticipated at this time. In the meanwhile, assuming that Treasure is a success and that Arbitrum Nova has the capacity to develop, Arbitrum is destined to discover its ideal place in the gaming industry.

In terms of tokenomics, it is impossible to have higher expectations given that the token offering is essential to the long-term success of Arbitrum. This is true of (1) the token distribution plan, (2) the airdrop and incentive plan, and (3) the rule of governance, among other aspects of the token offering. Arbitrum will be led in a more positive path, which will appeal to both its users and its creators if it has a successful business model. In addition, the distribution of tokens is an essential factor in deciding who will control L2 and who will hold the majority of power in the ecosystem over the long run. Tokens may also be used to decentralize critical network services, such as sequencers, which are entities that sort transactions, process them in bulk, and transmit them to L1.

According to the analysis presented above, it is quite likely that the year 2023 will mark the continuation of a prosperous period for Arbitrum. The Odyssey event may be prolonged; existing DeFi and gaming will be improved, and unique native apps in the social and NFT sector are anticipated to become available. At the same time, the expected tokens will be in place in order to reward users and protocols, and Nova will witness the real implementation and deployment of protocols.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

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