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Arbitrum Ecosystem Overview


If you haven’t tried Arbitrum yet, you’re missing out on one of crypto’s best user experiences.

As the largest and most prominent Layer-2 (L2) today, Arbitrum feels exactly like interacting with Ethereum, but transactions are a fraction of the cost and ultra-fast.


We expect it to be one of the hottest projects going in the next bull run (reasons discussed below), which leaves us with the following question…


What’s the buzz around Arbitrum & is there an Airdrop?

Arbitrum currently operates without a token.

However, for Arbitrum to decentralise and promote growth in the future, a token will be necessary to carry out those operations – we believe it will be soon!


So until the token drops, we will be researching the ecosystem for potential airdrop opportunities & emerging protocols throughout this bear market.


Disclaimer: This is not financial or investment advice. Only you are responsible for any capital-related decisions and only you are accountable for the results.


TLDR

  • Arbitrum is leading the Layer-2 race.

  • Arbitrum’s traction throughout this bear market hints at a promising future.

  • Since the start of the year, we have been using protocols on Arbitrum, hoping to qualify for the airdrop!

  • New potential airdrop opportunities are in this report!


Growth

As the bear market progresses, DeFi activity in most blockchains continues to slow down because of plummeting token prices.

However, Ethereum Layer-2 solutions grew as activity and demand for cheaper fees increased.

We track Arbitrum by analysing user growth and development within the ecosystem since there is no native token (yet).

Arbitrum captures $2.6 billion from $4.3 billion liquidity.

Transactions have reached record highs, and gas prices have fallen since Nitro (Arbitrum’s most recent major upgrade) was completed in August.


Transactions are now as cheap as $0.05. This is a driving factor for a better user experience (UX) alongside the improved user interface (UI).


This contributes to more users and liquidity, reflecting the network’s value.

Transactions have dramatically increased on Arbitrum over the past year while continuously declining on Ethereum.


Many Ethereum users are migrating over to Arbitrum.

This was the point of L2s, to take the load off Ethereum and improve its usability. It’s working, and that is bullish for the whole ecosystem!


Ecosystem Overview

Arbitrum’s Total Value Locked (TVL) is $1.02 billion, ranking the blockchain at number 6 in DeFi ahead of Solana.

We’ve covered amazing protocols on Arbitrum throughout the year, including Synapse, GMX, Stargate and Premia.

Today, we will briefly cover the new and interesting ones.



Sperax USD (USDs)

Sam Bankman-Fried (SBF) and Alameda Research are venture capitalists in this innovative project. Let’s find out why!


Sperax USD (USDs) is a collateralised algorithmic stablecoin on Arbitrum – think of it as a hybrid of a DAI & LUNA mechanism.


The collateral combines 95% stablecoins and 5% Sperax’s native token (SPA).

Stablecoins act as 100% collateral and SPA tokens account for the uncollateralized algorithmic component, where arbitrage traders are incentivised (through profit) to mint and burn USDs when trading below or over its peg.


Minting USDs burns SPA, while redeeming USDs mints SPA – similar to LUNA & UST.

USD’s model can handle volatility better than an algorithmic stablecoin like UST because USDs depends primarily on stablecoin collateral to remain fixed in value.


As Sperax matures, USDs will be nearly entirely dependent on the algorithmic component, which is the project’s main goal: a scalable stablecoin.


However, the shift in dynamics can increase the risk of de-pegging USDs if things go wrong in volatile market conditions. Still, a long way to get there, but a potential factor to consider.


You can also earn yield just by holding USDs!

Collateral backing USDs is sent to DeFi protocols (Aave, Curve, Frax & Stargate) to produce yield from liquidity pools. This yield is distributed to USDs holders in their wallets (no staking required).


Yield is generated from token rewards & fees from liquidity pools – organic yield and not from inflation.

SPA is the governance token of Sperax. SPA holders can stake SPA tokens to receive veSPA.

VeSPA holders are decision-makers that govern the protocol.


All veSPA holders also receive rewards from yield, swap fees from USDs redemptions and incentive rewards by the treasury to bootstrap the staking protocol.


Rewards are distributed weekly to USDs & veSPA holders.

USDs is the only decentralised stablecoin to implement a yield-generating model.

TVL is still low compared to other protocols – $3.7 million

All stablecoins impose various risks, especially with new ones like Sperax – USDs is yet to be tested.

Also, USDs is only available on Arbitrum. To increase TVL, Sperax needs to integrate USDs into other chains and protocols. This will increase the yield generated and provide more incentives to hold USDs & veSPA.


Moreover, SPA becomes more deflationary due to more burning when minting USDs, which should increase SPA’s price.


However, if TVL stays low, holders of SPA will be diluted by inflation and emissions, earn less yield, and SPA would probably perform poorly.


Both USDs and FRAX use a similar dual mechanism. FRAX has already gained traction by capturing more than $2 billion in TVL.


Can USDs steal market share from FRAX? Well, it is still extremely early to tell, but USDs novel model of yield sharing and being on L2 offers advantages over FRAX that can factor in capturing market share if incentives align well with the vision.


TreasureDAO (MAGIC)

If you are active on Twitter, you probably heard of Treasure – the Nintendo of Web3.

Treasure’s vision is to become a base layer for other Metaverses.


Treasure is building an infrastructure where gaming projects interconnect through Treasure’s native token MAGIC as a currency.


Treasure’s ecosystem is governed by the TreasureDAO and staked MAGIC holders.

TreasureDAO would bootstrap other Metaverse projects by incorporating them into its ecosystem.

Treasure provides a ready infrastructure with MAGIC tokens and users for developers struggling to roll out their games. In exchange, projects sell their NFTs exclusively on Treasure’s marketplace, Trove.

The DAO generates 2.5% of all NFT sales.


Users purchase NFTs required for gaming. Staking MAGIC & NFTs are also required to play games and receive a relative share of emissions.


Treasure has generated over $260 million in total NFT volume and captures almost $40 million in TVL.

MAGIC launched with no venture capitalist funding – less price manipulation and selling by whales.

The bull thesis for MAGIC is for Treasure to integrate as many games as possible. More users stake MAGIC to play games, more supply is removed, and MAGIC’s price goes up because of higher demand. Also, more games trading on Treasure means more revenue for the DAO.


Non-gaming NFT creators can also list their NFTs on Trove, where Trove can emerge as a competitor to other marketplaces like Opeansea due to high trading volumes.

Marketing is critical in attracting users and developers, and the most noticeable form of marketing is MAGIC’s price pumping.


MAGIC emissions mimic Bitcoin’s halving, but this event occurs yearly instead of every four years.

However, the team opted for high inflation at the beginning of the project to help bootstrap other projects. High inflation will likely affect prices negatively but is great for long-term sustainability.


Treasure does have a better model than play-to-earn games like Axie Infinity, which presents a promising opportunity to keep an eye on. But it is still early to judge whether the project will be 100% successful because there are two live games today only.


The gaming sector is still new, and the previous projects have failed to build a sustainable model.

Also, the Metaverse/NFT bull run has ended, and there are more promising sectors, like DeFi derivatives and Layer-2s, that capital could flow into instead.


But if we were to cover the Gaming/Metaverse sector, Treasure is one to keep an eye on because of its innovative model on Arbitrum Layer-2.


Airdrops


We present to you the ultimate list of potential airdrops!


35 token-less protocols on Arbitrum for you to try out for a chance to receive an airdrop.

We will be following this report with some commentary on the protocols, and those that we’re farming for an airdrop! Keep your eyes peeled!


Final Words

Since the beginning of the year, we have been striving hard to obtain the Arbitrum airdrop.

We have made many interactions with Arbitrum that hopefully qualify us for an airdrop.


But since that’s one of our most desired low-risk plays, we will try out the tokenless protocols from the list and wait for the Arbitrum Odyssey to resume to increase our odds of gaining the airdrop.


Until macroeconomic conditions turn bullish, we will focus more on airdrops rather than deploying large amounts of capital into altcoins.

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