Rising Dominance Of Arbitrum and Base Defies Liquidity Fragmentation Narrative

Base and Arbitrum account for half of the TVL, active addresses, DEX volume, and transactions on Layer 2s, while roughly 10 networks account for more than 90%.

Despite concerns regarding the fragmentation of liquidity across Ethereum’s expanding Layer 2 ecosystem, two chains have been increasing their dominance over L2 assets and activity.

Data from L2beat shows Arbitrum accounting for 39.6% of the total value locked (TVL) on Layer 2s with $16.9 billion, followed by Base with 17% or $7.22 billion — equating to a combined dominance of 56.6%. OP Mainnet ranks third with a respectable 14.9% dominance or $6.32 billion TVL.

According to GrowThePie, Arbitrum and Base also make up 59% of transaction volume across 23 Layer 2 networks. Base leads the pack with 3.16 million transactions in 24 hours or a 36.8% dominance, followed by Arbitrum with 1.99 million transactions or a 22.2% market share. Blast is third with 605,000 transactions or 8% of the total.

the-defiant — Layer 2 transaction count — Blast = dark blue, Arbitrum = teal. Source: GrowThePie.

Arbitrum, Base, and Linea are essentially tied by the number of active addresses, with the networks hosting 24%, 24.25%, and 24.8% of the 2.45 million daily Layer 2 users.

According to GeckoTerminal, Arbitrum and Base also account for 48.4% of the combined volume across the top 25 Layer 2 networks by decentralized exchange activity

The data repeatedly shows that based on key metrics, Arbitrum and Base make up roughly half of the Layer 2 ecosystem, with various networks coming in third place.

The data challenges the notion that Ethereum’s Layer 2s are establishing a fractured ecosystem of siloed chains, with the bulk of activity taking place on two networks.

Further, the top nine Layer 2s make up more than 90% of the L2 sector’s TVL, transaction count, active addresses, and DEX exchange volume. The data shows that a handful of networks host the lion’s share of assets, users, and transactions, despite an ever-expanding periphery competing for the crumbs.

Overcoming bridges

Despite the consolidation of Ethereum’s leading L2s, there are undeniable challenges associated with its Layer 2 ecosystem.

ZKsync, a top Ethereum scaling team, recently highlighted the capital inefficiency of cross-chain bridges as a significant drawback of the Layer 2 ecosystem.

“As the number of independent blockchains as well as optimistic rollups grows, the capital that needs to be available in these bridges will have to grow quadratically,” ZKsync said. “Ethereum-aligned rollups have achieved impressive cumulative throughput capacity, [but] this progress came with a massive deterioration in user experience, capital efficiency, and network integrity.”

ZKsync is among a growing cohort of scalability teams seeking to establish ecosystems of interconnected Layer 2 chains, overcoming the inefficiency of bridging in the process.

ZKsync laid the groundwork for “Elastic Chain” scaling with its 3.0 upgrade last month, following Optimism’s Bedrock upgrade in June 2023, and Polygon’s AggLayer in January. Each project seeks to foster a multi-chain ecosystem of symbiotic networks leveraging the same tech stack in the form of the ZK Stack, OP Stack, and Polygon CDK, respectively.