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One of the biggest success stories emerging from last year’s bear market could be the extraordinary growth of Layer-2 (L2) blockchains. According to Token Terminal’s data, Arbitrum (ARB), an undeniable barometer of the industry’s performance, generated over $72 million in revenue last year.
Issues in ARB’s Process
The mentioned data indicates nearly a fourfold increase. However, with approximately $53 million or 73% of the total earnings accruing to Ethereum (ETH) holders, questions about the incentives offered to ARB token holders are increasing. L2 blockchains built on top of Ethereum process transactions off the main chain, aiding in its scalability. As part of the settlement, transactions are batched together and sent to the main chain with security proofs.
This process might cover a significant portion of the revenue earned from L2s. A closer examination of the data revealed that Ethereum validators consistently received more than 70% of the daily transaction fees paid on Arbitrum. While the upcoming Dencun upgrade is expected to significantly reduce L1 storage costs, the tokenomics leave little for ARB holders to be excited about.
Santiment Reports
According to the website 21milyon.com, at the time of writing, ARB was trading at $1.86, reflecting a 9% growth over the past month. This is significantly lower than the gains made by other L2s such as Optimism (OP) and Polygon (MATIC). However, investors with strong holdings have shown interest in L2 tokens in recent months. Data from the crypto analytics firm Santiment indicates that addresses holding between 1,000 and 10 million cryptocurrencies have increased since December.
On a broader scale, approximately 140,000 new ARB holders were added during the period, which could indicate significant demand from the market. Consequently, while Layer-2 blockchains have shown significant growth over the past year, particularly Arbitrum’s high revenue generation and the debate over payments to Ethereum holders have increased interest in L2 tokens, and according to Santiment’s reports, there has been a notable increase in the number of new ARB holders.
