Arbitrum season is here ! Here is what you need to know

2023년 3월 23일

This idea is less about the technicals of ARB and more about the fundamental value the network provides.

Arbitrum is a Layer 2 network. If you aren't familiar a Layer 2 refers to a crypto network that aims to increase scalability of another crypto network by launching a separate blockchain that connects to the larger one in some form. Ethereum has become so vast that without these Layer 2's it would become extremely slow and transactions would cost hundreds if not thousands of dollars per transaction. There are multiple Layer 2 projects for Ethereum but the two most compared to Arbitrum are Polygon MMATIC ($9.8 billion market cap) and Optimism OP (775M market cap). Both of these projects have seen an influx of applications and NFTs launching on their chain and have been around for some time now. Arbitrum is another Layer 2 that is arguably more hyped than both Polygon AND Optimism and that is what I want to analyze today.

What are the differences?
I will not be going through all the differences between Arbitrum vs Polygon vs Optimism but the main difference is the scalability solution these Layer 2's implement. Polygon MMATIC - is a sidechain. Sidechains are independent, EVM-compatible (just think of this as it can interact with Ethereum's smart contracts) solutions that run in parallel with Ethereum. This is different than Optimism and Arbitrum which are known as roll-ups. All transactions happening on the Arbitrum and Optimism network are collected as batches of transactions, settled on its own network, and then feeds the transaction data back to the Ethereum blockchain ledger. The main difference between Optimism and Arbitrum are highly technical, which of these two will win the battle is purely a game of user adoption, of which Arbitrum is currently already winning.

ARB airdrop and tokenomics
Today 3/23/23 - Arbitrum just launched their new token ARB which will be used to support the network. Users that were using the Arbitrum network, interacting with smart contracts, and moving money around on the network were rewarded with an airdrop of the token. A total of around 11% of the 10 billion total tokens was airdropped. Users were eligible for between 500-10,000 tokens which at these prices are about $600-$14000. The remaining 89% of tokens are locked up and will be distributed to multiple parties, exchanges, the team, etc over the next 4 years. When most projects airdrop a token, you have an initial dump and then it will skyrocket before retracing and following the market (see Optimism's airdrop last year: coinmarketcap.com/currencies/optimism-ethereum/)

Short term potential
As I write this ARB has had the initial dump from the airdrop claim and is looking for support levels. There is one piece of information which I think is very telling of what will happen with ARB short term. While all of these Layer 2's have applications that are thriving on their network, the real metric to watch is the TVL in their DeFI sector. According to defillama.com/chains - Arbitrum has surpassed both Polygon and Optimism COMBINED for the total locked value in DeFi. This was achieved before their token even dropped, an incredible achievement. In my opinion this is mostly because of the new smart contract based derivatives trading platform gmx.io which is currently available on Arbitrum and has taken the market by storm. Use up to 50X leverage to trade a few well known cryptos but you are interacting with smart contracts, not trusting a centralized entity. With the 2022 fall out of so many centralized protocols , many people believe this is the new way to trade. GMX has seen consistent growth since its launch in October 2022 which means it grew during the entire FTX fiasco, another amazing achievement that shows how strong this project is coinmarketcap.com/currencies/gmx/. I highly reccomend GMX as I use it almost daily to trade because you can stake their token and earn from the platform fees being collected. Polygon's TVL stems from well known protocols such as AAVE and Uniswap, both of which I would place a bet will be looking to expand to Arbitrum, thus increasing Arbitrum's TVL lead. When this news drops from these protocols, expect Arbitrum to have large 10, 20, or even 30%+ swings to the upside.

Long term potential
Partnerships, more protocols expanding their product to Arbitrum, new protocols launching on Arbitrum, new hyped NFTs, user adoption, more TVL locked, I believe Arbitrum is a great long term hold. It is a serious contender for Polygon which has been the premier Layer 2 for Ethereum for years. Arbitrum reaching Polygon's market cap would mean it does about a 9X from it's current price. Considering this is the absolute start of ARB , it would be a somewhat high risk but even higher reward to go long on ARB with low leverage for the long term. Many receivers of the airdrop including myself , have no intentions of selling anywhere near these prices. This opinion is based of of the many hours I have spent in the Discord, monitoring the hype. ARB is not another pump and dump or average coin that is just hyped, it has a true purpose which should not be underestimated. Ethereum is the largest smart contract network and is only poised to keep growing, these Layer 2's are absolutely critical to Ethereum's growth. With that in mind , going long on ARB at this stage could turn out to be one of the most lucrative moves in 2023. This is my opinion, not FA, we still have the turbulent status of the current banking crisis, the SEC's current all in on crypto regulation, and overall market sentiment to consider.

How can I capitalize on the next airdrop?
There is nothing quite like free money but it can be tough to know where to look. Arbitrum never announced this airdrop was coming; however, technical veterans such as myself knew that in order for them to run a network that features settling transactions, you need to have users helping you run the network via nodes. That is if you want true decentralization, which Arbitrum has been very clear they do. So which protocol is next? My money is on starkware.co/starknet/ and consensys.net/zkevm. To earn the air drop you will need to move some money into crypto, and eventually onto their network and begin using applications. When is it coming? That's the fun part - you don't know. It could be tomorrow , it could be end of the year. If you really want to stay up to date on potential airdrops, I recommend following this guy on Twitter: twitter.com/OlimpioCrypto/ - he has helped me find sooo many.

Anyway that's it! Hope you learned something new. If there is enough interest I will start posting more about these potential moon missions from a fundamental level. Cheers!