Can Base Surpass Arbitrum as Ethereum’s Leading Layer 2?

Is Base Set to Overtake Arbitrum as Ethereum’s Top Layer 2 Network?

Competition among Layer 2 networks on Ethereum is heating up. Base, a Layer 2 solution developed by Coinbase, is currently experiencing explosive growth that could lead it to surpass Arbitrum, the current leader in this space. With Base’s Total Value Locked (TVL) reaching an all-time high and daily transaction counts far exceeding those of Arbitrum, the question arises: is Base set to emerge as Ethereum’s dominant Layer 2 network?

Base Network’s Rapid Growth

Base’s TVL stands at an impressive $1.96 billion, a staggering increase of approximately 37% over the past two weeks, according to data from DeFiLlama. This growth trajectory contrasts sharply with Arbitrum, which has seen little to no significant gains during the same period. Although Arbitrum still leads the market with a TVL of $2.54 billion, the pace at which Base is expanding suggests a potential flip in market dominance.

Data from Artemis indicates that Base has witnessed a surge in daily active addresses:

• Climbing from around 507,000 three months ago to more than 1.2 million today.
• In stark contrast, Arbitrum has seen its daily active addresses decline from 789,000 to approximately 466,000.

This shift in user engagement underscores a pivotal competitive change in the Layer 2 ecosystem.

Transaction Metrics Favor Base

Another key indicator of Base’s burgeoning popularity is its daily transaction volume. Currently, Base processes twice as many daily transactions as Arbitrum, highlighting a significant shift in user activity and network adoption. The increased transaction volume signals a growing trust in Base among DeFi participants and may indicate that users are migrating from Arbitrum to Base in search of better opportunities or performance.

The Surge in Stablecoin Activity

The increase in activity on Base is further illustrated by the growth in stablecoin supply. Recent data from Token Terminal reveals:

• The supply of USD Coin (USDC) on Base has surged by $300 million since the beginning of September.
• This brings its total supply to approximately $3.35 billion, a remarkable growth from under $50 million at the start of the year.

This influx of stablecoin liquidity suggests that users are not only engaging more with Base but are also adding substantial capital to the network, further solidifying its standing in the competitive DeFi landscape.

Arbitrum’s Market Challenges

While Base is thriving, Arbitrum faces a challenging environment. Despite a confirmed double-bottom price pattern suggesting a potential bullish reversal for its token, ARB has struggled to break through resistance levels. The token has repeatedly failed to surpass the $0.62 mark over the past four days, indicating significant selling pressure.

For ARB to rally to its next target of $0.82, it will need to see higher buying volumes. However, current indicators show that:

• Selling pressure is outpacing buying momentum.
• The Relative Strength Index (RSI) remains in bullish territory at 64, but its stagnation after a recent uptick suggests that buying interest may be waning.

Future Prospects for ARB and Base

Should Base continue its upward trajectory, the ramifications for Arbitrum could be substantial. The shift in user preference and capital allocation might lead to a consolidation phase for ARB, especially if it cannot break through its neckline resistance. If this occurs, the price could slip to a support level around $0.47.

Meanwhile, the broader Layer 2 industry is gaining increasing attention. Kaito AI ranks Layer 2 solutions as the fourth most prominent narrative in the cryptocurrency space this year. This could bode well for tokens like ARB, as renewed interest in Layer 2 ecosystems might stimulate trading activity and investor confidence.

Conclusion: A New Era for Layer 2 Solutions?

As Base positions itself as a formidable contender against Arbitrum, the next few months will be crucial in determining whether it can indeed overtake Arbitrum as the leading Layer 2 network on Ethereum. The metrics suggest a significant shift in user behavior and network engagement, which could pave the way for Base’s ascendance in the DeFi space.