As we enter March, we continue to see strong demand for the Ethereum layer 2 space. One of its largest scaling solutions, Arbitrum, is experiencing new exponential growth through subsectors of the ecosystem.
The base blockchain (Layer 1, or L1 in crypto terms) remains the foundation of the web3 landscape, but the technology built on top of it (Layer 2 chain, or L2) is exploding. . Arbitrum recently surpassed the Ethereum chain on which it is built in terms of the total number of transactions processed.
Arbitrum is a L2 Ethereum-focused scaling solution that aims to work like Ethereum, but with much lower transaction costs and much faster processing. According to L2Beat data, it accounts for about 54% of Ethereum’s market share, with a total value of about $3.38 billion locked. Data shows that TVL, tracked through the amount of tokens locked in all escrow contracts at L2, is close to its highest point since May 2022.
L2 scaling solutions such as Arbitrum, Optimism, Immutable X and StarkWare are built on layer 1 blockchains such as Ethereum. However, L2 works in a faster and cheaper way, reducing the load on L1 by bundling transactions and recording only the final result on the main blockchain. That way the network won’t clog up.
