Arbitrum Hits 1B Transactions, 20% Driven by DeFi

Arbitrum Surpasses 1 Billion Transactions, Significant DeFi Activity

Arbitrum has officially surpassed 1 billion transactions in its chain’s lifetime, with 17.71% of this activity directed towards decentralized finance (DeFi) tasks, according to data from GrowThePie. As one of the most active Layer 2 (L2) solutions, Arbitrum has made significant progress since its early days as a venture capital (VC)-backed network, drawing the bulk of L2 traffic.

Arbitrum’s Decentralization and Milestones

The Arbitrum One L2 rollup is recognized as sufficiently decentralized, even receiving recognition from Ethereum’s founder, Vitalik Buterin. Arbitrum One is considered a Stage 1 chain on its path to achieving true rollups with decentralized consensus.

The Arbitrum team celebrated surpassing 1 billion cumulative transactions, although the total number reported may vary. The chain also consistently outpaces Ethereum in terms of daily transactions, with Arbitrum handling a significantly higher volume than Ethereum’s 1.11 million daily transfers. This success exemplifies the intended scalability of Ethereum through rollups like Arbitrum.

After three years since its launch, Arbitrum has also become the most widely used L2 with over $9.62 billion in bridged value.

Organic Growth and DeFi Activity

Unlike some L2 chains like Taiko, which subsidize transactions, Arbitrum’s growth appears to be more organic, even beyond the initial airdrop hype. Initially starting with under 100,000 transactions per day, Arbitrum reached up to 2 million transactions by September 2024. The chain is second only to Base, where traffic is largely driven by meme tokens, micropayments, and low-value transactions.

Arbitrum has established itself as a well-rounded chain, supporting various types of activity including DeFi protocols:

• Hosting multiple DeFi protocols due to its scalability and transaction capabilities.
• Maintaining strong alignment with the Ethereum ecosystem, receiving $2.63 billion in inflows from Ethereum, of which 25.5% were bridged stablecoins.
• Benefiting from Aave V3, which contributes approximately 30% of the total value locked (TVL) on the chain, attracting $3.29 billion in liquidity across smaller DeFi projects.

VC-Backed Growth and ARB Token Dynamics

Arbitrum has set a precedent for VC-backed projects, raising a total of $123.7 million from several high-profile funds. After a small seed round, Arbitrum secured $120 million from prominent investors such as Panthera Capital, Polychain, and the now-defunct Alameda Research.

The ARB token’s price action mirrors other VC-backed projects, experiencing a peak of $2.13 during the 2024 bull market before dropping to $0.61. As of September 2024, 45% of ARB tokens are unlocked and circulating, with predictable bi-weekly unlocks scheduled until 2027. ARB remains a closely watched token for potential breakouts, alongside other L2 tokens like Optimism (OP) and Metis (METIS).

Transaction Fees and Competitive Positioning

Arbitrum continues to generate transaction fees, reaching up to $3.5 million on its busiest days. However, in the past month, fees have slowed down to a range of $10,000 to $20,000 per day. Despite thinner margins, Arbitrum remains sustainable, maintaining net earnings after paying Layer 1 fees to Ethereum. In the last 24 hours, Arbitrum paid out $7,359 in fees, achieving around 40% of Base’s throughput while maintaining a more conservative yet competitive model.

With the rise of DeFi activity, Arbitrum transactions are becoming more complex, often requiring sophisticated routing and higher gas usage.