Transactions on Arbitrum Leapfrog Ethereum

Lower Fees Propel Layer 2 Blockchain Past Ethereum For First Time

By: Aleksandar Gilbert Loading...

Transactions on Arbitrum Leapfrog Ethereum

The vision is coming to fruition.

Carried by surging activity in its ecosystem, daily transactions on Arbitrum have surpassed those on Ethereum this week, marking a major milestone in the effort to scale the world’s second-largest blockchain.

On Tuesday, Arbitrum processed 1.1M transactions, about 20,000 more than Ethereum.

Arbitrum activity has skyrocketed this month. Source: Arbiscan

It was the first time a Layer 2 blockchain has surpassed Ethereum in daily transaction count. On Wednesday it repeated that feat, processing about 10,000 more transactions than Ethereum.

Lower Fees

“For the past two days, we had more transactions than Ethereum. But if you look at the [transaction] fees, we’re, like, way, way, way, way, way lower than Ethereum – which is the point of what we’re doing,” Steven Goldfeder, Arbitrum co-founder and CEO, told The Defiant in an interview Thursday. “That’s the rollup vision.”

Arbitrum and other Layer 2 blockchains — also known as rollups — batch and compress user transactions before appending them to the Ethereum blockchain. This makes it possible to use Ethereum while avoiding its notoriously high transaction fees and sluggish execution.

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Ethereum developers envision a “rollup-centric” future, in which most people will interact with Ethereum via rollups, making the blockchain fast enough and cheap enough to accommodate billions of users and replace legacy institutions such as banks.

Since Feb. 1, the number of transactions, number of transacting addresses, and the dollar value of Ether bridged to Arbitrum have more than doubled, per data compiled by competitor Optimism. On Tuesday alone, $50M dollars worth of ETH was bridged to Arbitrum.

Source: Dune Analytics

Total value locked (TVL) in the platform has doubled since the beginning of the year, to $2.2B. Its closest competitor, Optimism, has also seen its TVL double since Jan. 1, though it still lags far behind, at just over $1B. Taken together, Arbitrum and Optimism control about 83% of the L2 market, according to L2BEAT.

Andrew Thurman, an analyst at crypto data firm Nansen, said the promise of an airdrop had likely seeded organic activity on Arbitrum.


Crypto businesses that cede control to their community typically do so through airdrops, the distribution of newly minted or unlocked governance tokens to users who meet certain criteria. It can be lucrative: Optimism airdropped more than $200M worth of OP tokens to its users in May 2022.

But users often attempt to game the system, performing activity they believe will be rewarded with future airdrops.

“While a lot of this activity could be airdrop farming based on unclear parameters and speculation, that seems to have spurred organic activity as well,” Thurman told The Defiant in a message. “There’s enough native degeneracy happening there to be sustainable on its own merits.”

Arbitrum co-founder and CEO Steve Goldfeder wouldn’t rule it out.

“I wouldn’t be surprised if the user came for the wrong reasons and then tried it and was like, ‘Wow, this is actually really awesome, what else can I do here?’” he told The Defiant in an interview Thursday.

Network Effect

But Goldfeder believes the surge can be attributed to genuine interest in Arbitrum and the applications developers have built there. He cited the steady growth of ETH bridged to Arbitrum, as well as the fact that Arbitrum is now the second most popular blockchain for traders who use decentralized exchanges, having recently surpassed BNB.

“It’s really becoming a network effect for DeFi to launch on Arbitrum,” he said. “So I think there’s a bit of a snowball effect here, and I think the Snowball is starting to accelerate.”