• Arbitrum outperformed all other Ethereum L2s in overall inflows.
• Activity on the network grew, but TVL continued to decline.

Ever since Arbitrum [ARB] launched its token, it has taken over the L2 space, and how!

Over the last few months, the protocol has managed to retain its dominance in the Layer 2 sector despite new entrants.

Layer 2 networks see growth

According to Token Terminal’s data, Arbitrum has managed to see one of the highest amounts of inflows and has out-competed other Layer 2 solutions on the Ethereum [ETH] network.

Arbitrum was doing extremely well in terms of activity as well. AMBCrypto’s analysis of Artemis’ data revealed that the number of daily active addresses on the Arbitrum network had grown significantly.

In the past week, the number of active addresses grew from 250,000 to 400,000. The number of daily transactions grew as well, sitting at around 1.5 million at press time.

Some problems ahead

However, there were some problems being faced by Arbitrum on the DeFi front.

Notably, the DEX (Decentralized Exchange) volumes on Arbitrum had fallen from 2.2 billion to 500 million over the course of the last few days.

Coupled with that, the TVL (Total Value Locked) also took a hit. Since March, the TVL collected on Arbitrum fell from $3.30 billion to $2.65 billion.

The combination of these factors led to a loss of revenue for the network.

Another concern was the network development. AMBCrypto’s examination of Token Terminal’s data revealed that the number of code commits had declined.

Coupled with that, the number of core developers contributing to the network had also fallen. These factors could impede the overall growth of Arbitrum, going forward.

Even though these factors may momentarily impact Arbitrum’s growth, its rising activity proves that the protocol can improve in the future as users continue to stay interested in the network.

Moreover, the popularity of Layer 2 solutions such as Arbitrum, helps the popularity of Layer 1s, in this case, Ethereum.

Realistic or not, here’s ARB’s market cap in BTC’s terms

Layer 2 solutions help networks such as Ethereum scale, and make the network more accessible for users as well.

The growth of the Arbitrum protocol will invariably result in the rise in popularity of the Ethereum network as well.