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Rise of Arbitrum projects: Here are some of the few that you should keep an eye on
Were you looking for information about Arbitrum and some promising projects? Look no further than this article.
A quick search about Arbitrum in your Twitter search bar would provide you with multiple threads and various people all talking about Arbitrum. You also might have heard rumors that a token or airdrop might be happening, thus capturing your attention.
However, there’s a problem: Which applications on Arbitrum are worth looking out for? Also, what on earth is Arbitrum?
In this article, we dive into what Arbitrum is, the metrics, and a list of the top few projects that are building on Arbitrum that you should look out for. Let’s dive in.
What is Arbitrum?
Arbitrum is software that sits atop the Ethereum blockchain to speed up transactions. The key features are that it is cheaper and quicker to use than Ethereum and allows the processing of 40,000 transactions per second compared to Ethereum's 14, and transactions cost about two cents on Arbitrum. In contrast, it costs several dollars to complete on Ethereum.
Because it sits atop the Ethereum blockchain, Arbitrum supports the Ethereum Virtual Machine (EVM), meaning that Ethereum DeFi developers can integrate their decentralized applications (dapps) with Arbitrum without having to make any modifications.
Now, before we even dive deep into the various applications on Arbitrum, let’s first look at some of the metrics from Arbitrum to see if it’s even worth exploring Arbitrum (apart from the fact that we are writing this article even though it doesn’t constitute financial advice)
Over the past year, the amount of addresses that have interacted on Arbitrum has flourished despite the market downturn, and right now, there are over 2.1M unique addresses.
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Now, when comparing this to Ethereum (the blockchain it sits upon), Arbitrum only makes up 1% of Ethereum’s unique addresses, as Ethereum has 200M+ unique addresses — meaning that Arbitrum has relatively enormous growth potential.
Having a high user base doesn’t matter if no one interacts with all the contracts on the blockchain (which, in this case, is Arbitrum).
Now, when we go onto the daily transaction chart, we see that this has been steadily growing as well, with a minimum of 300,000 transactions happening daily, a step up from 150,000 transactions a few months ago.
When we switch over to the weekly count, we can now clearly see that the growth has indeed been flourishing steadily, even amid this bear market.
However, when we compare this to Ethereum’s daily transactions, we see that the daily transaction is about 33% or 1/3 (300k minimum on Arbitrum vs. 1.3M on Ethereum) — which means to say that the users on Arbitrum are more active, and as they should be, given the gas fees.
Projects to look out for on Arbitrum
Thus, with that, we conclude Arbitrum is worth looking out for. So here are six promising projects with solid teams who are not only technically capable but also aim to deliver value to their communities despite the sentiment around the markets now being weak.
In the long term, these six projects have the potential to outperform the markets.
Dopex ($DPX) is a decentralized options protocol that aims to win the options market by offering fair prices, deep liquidity, and minimizing losses for option sellers.
The options market is enormous in the traditional finance world and outsizes the total market cap of all crypto options offered by a vast margin. Hence, some believe options will be one of the following big narratives in the crypto space.
Although we have yet to see this play out, we were thoroughly impressed by the Dopex team and their ability to ship innovative products.
Jones DAO ($JONES)
Jones DAO ($JONES) is a protocol built on top of Dopex that makes investing in options more straightforward and liquid. It takes the form of Jones Vaults and jAssets, liquid representations of illiquid vaults in Dopex.
The team behind $JONES comprises experienced individuals committed to the building during the bear market. Because options are super complex for newer users, this combination of an experienced team and simple-to-understand options is one of the six projects to keep an eye on.
Plutus ($PLS) is a governance aggregator for Arbitrum veTokens, and you can think of it like the Convex of Arbitrum, but for multiple tokens.
Furthermore, the creators of Plutus have just launched a new product called the $GLP vault, which offers higher yields, automatic compounding, and improved capital efficiency.
In our opinion, the market may not fully appreciate the potential of $PLS — and this is because $PLS controls a significant amount of governance power for other projects, such as 55% of Dopex's $DPX and 43% of Sperax's $SPA.
Umami Finance ($UMAMI)
Umami Finance ($UMAMI) is a protocol that aims to bridge the gap between DeFi and traditional finance by offering DeFi yield products tailored to institutional investors.
Their vaults will earn a sustainable, risk-hedged yield on core crypto assets such as USDC, BTC, and ETH. In November alone, the $UMAMI treasury performed similarly to the crypto market but in a hedged way — constituting a 23.5% APR return for the treasury.
Thus, the team behind $UMAMI is competent and has recently added new members who can bring a wealth of experience to further the project, with an example being the DeFi Yield Vaults that will come in Q4 of 2022.
Sperax ($SPA) is a protocol that mints $USDs, a 100% collateralized stablecoin with built-in yield for its holders. Alongside that, the team behind $SPA has also released a DEX liquidity manager called Demeter, which DAOs can use to launch incentivized farms on Uniswap v3.
But why is $SPA one of the six protocols we picked? This is because DAOs using Demeter will want to pair with $USDs to receive $SPA emissions, which essentially creates a potential upward flywheel effect for $SPA, where higher demand for $USDs leads to more yield going to $SPA stakers, which leads to higher demand for $SPA and an increase in its price.
Vesta Finance ($VSTA)
$VSTA is a decentralized stablecoin protocol allowing users to mint and redeem stablecoins backed by collateral assets.
This is one of our six picks, as the team behind $VSTA has a track record of delivering products that people want to use. Their newest upcoming product, the VSTA swap, has the potential to drive significant adoption — alongside the fact that no one is taking the niche of a key stablecoin player in the Layer 2 ecosystem for Ethereum across all L2s.
That concludes our dive into Arbitrum, alongside our top 6 picks for projects that have the outsized potential to grow as Arbitrum grows as well and eats into the market share of Ethereum.
If there is anything we may have missed out on or want us to look at, let us know in the comments below!
Stay safe, and see you in our next article.
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Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.