Layer 2 Address Activity Slows, but Arbitrum Bucks the Trend

On-chain activity on leading layer 2 networks has been declining lately, but according to recent findings, the Arbitrum platform is bucking the trend.

Blockchain analytics firm Nansen reports that seven-day address activity has been declining across many leading networks. Only Arbitrum, the ethereum L2 scaling network, saw growth.

Arbitrum’s activity has increased by 12.7% over the past week, according to a Feb. 28 tweet. The network reportedly had 46,200 unique active addresses over the past seven days.

All on-chain activity slowed down in the last 7 days except Arbitrum (+12.7%): #BNB Chain 4.03M #Ethereum 1.99M #Ronin 1.09M #Polygon854k #Avalanche 269k #Fantom 204k #Arbitrum46.2k# Celo 29.4k #Optimism 9.52k

— NansΞn (@nansen_ai) February 28, 2022

While this number is much lower than the other chains, it is the only one to show an increase in activity during this period. Second-tier analytics platform L2beat reports that Arbitrum remains the industry leader, with a total value locked of just over $3 billion and a market share of 54.9%. Defillama reported that the most popular protocol running on the network is the SushiSwap DEX, but it also noted that the Polygon network had a TVL figure of just over $4 billion.

Collateral locked on Arbitrum has climbed over the past few days, up 5.7% since February 25. In contrast, the TVL of rival second-tier network Optimism declined over the same period. According to Nansen, Optimism has 8% of the L2 market share, with a total value locked of $444 million, and address activity is down 17.9% over the past week.

Other second-tier platforms, such as Polygon, have also seen a decline in activity, Nansen reported. According to DeFillama, Polygon’s 7-day active addresses are down 10.9% over the past two weeks, and the TVL on the network is down 15%.

Nansen also reported a 2.7% and 2.9% drop in weekly address activity on the BNB chain and Ethereum, respectively.

The decline in on-chain activity is likely related to the cooling demand for decentralized finance (DeFi) as the cryptocurrency market retreats this year. DeFiLlama is currently reporting that the TVL of all DeFi platforms listed is down nearly 19% from its all-time high in late November. However, it should be noted that this may be due to the decline in the price of the underlying asset being much larger than the decline in DeFi TVL.

It should also be noted that TVL metrics vary widely between different analytics platforms (in this case, DeFillama and L2beat), so the data should be taken with a grain of salt.

Other indicators supporting this trend include the stagnation of wBTC supply widely used on DeFi platforms.