The Arbitrum ecosystem is gradually emerging, reviewing the current status of on-chain applications

Original Title: "Arbitrum Ecosystem Gradually Reveals Its Edge"

Author: Tangyuan

On February 10, according to L2BEAT data, the total value locked (TVL) in Ethereum's Layer 2 sector is $6.29 billion, with an 11% increase over the past week. Among various Ethereum Layer 2 scaling solutions, Arbitrum ranks first in on-chain TVL, reaching $3.37 billion, accounting for over 50% of the total TVL in the sector.

Arbitrum's ability to attract a large amount of locked crypto assets is mainly due to the prosperity of its on-chain ecosystem. Since the launch of the Arbitrum One mainnet last September, leading DeFi protocols on Ethereum Layer 1, such as Uniswap, Sushiswap, and Curve, have integrated and deployed their applications on Arbitrum One. The influx of well-known DeFi applications also indicates developers' optimism about Arbitrum's scaling solution.

Among various Layer 2 solutions, Rollup technology is an unavoidable core, and Arbitrum is no exception. The development team OffchainLabs has retained this technology, allowing it to "process the actual computation and storage of smart contracts off-chain while keeping transaction data on-chain," which enhances network processing efficiency and reduces gas fees while ensuring the security of on-chain assets.

Why has Arbitrum become the preferred choice for migrating DeFi applications among Layer 2 solutions that utilize Rollup technology, such as Optimistic Rollup and ZK Rollup?

This can be attributed to Arbitrum Rollup's decisive compatibility with Ethereum. It fully supports the Ethereum Virtual Machine (EVM) and integrates support for developers to migrate DApps with one click without changing the underlying code. In this regard, Optimistic Rollup has not yet achieved 100% compatibility, while ZK Rollup's compatibility with Ethereum's EVM is still under development.

The increased compatibility has enhanced the willingness of DeFi application developers and users to migrate. Under the flow of traffic, major centralized crypto asset exchanges have begun to support deposits and withdrawals on the Arbitrum mainnet.

As early as last November, Binance supported the deposit and withdrawal of ETH on the Arbitrum mainnet, meaning that users no longer have to rely solely on cross-chain bridges to move assets in and out of Arbitrum; exchanges have also become a channel for deposits and withdrawals. On February 8 of this year, FTX also announced support for asset deposits and withdrawals on Arbitrum.

With the channels for asset movement becoming increasingly convenient, it is no surprise that Arbitrum's TVL has risen. It is worth noting that the gas fees on the Arbitrum chain are still settled in ETH; it has not issued any tokens, and users only need ETH to participate in the Arbitrum ecosystem.

So, apart from the deployment of mainstream DeFi protocols like Uniswap and Sushiswap, what other applications are there on the Arbitrum chain? This issue of DeFi Hive will review the current state of applications on the Arbitrum chain.

Cross-Chain Bridge Hop Protocol Targeting Rollup Pain Points

Introduction

Hop Protocol is a cross-chain bridge that primarily supports the transfer of crypto assets between Layer 2 (L2) networks and Layer 1 (L1) networks. Currently, it only supports L2 scaling networks that use Rollup technology, such as Arbitrum, Optimism, and Ethereum sidechain Polygon, with supported assets including ETH, USDT, USDC, DAI, MATIC, etc.

The emergence of Hop Protocol is related to the current pain points of asset cross-chain transfers. Although there is a significant demand for cross-chain asset transfers, the usability of L2 cross-chain bridges that utilize Rollup technology is not very smooth—transfers from Layer 1 to Layer 2 can take several minutes or even days, with gas fees and transaction fees being extremely high.

In addition, some Ethereum sidechains and Rollup-type L2s are isolated from each other, making it even more difficult for users to transfer assets from sidechains to L2, which has accelerated the rise of third-party cross-chain bridges.

The Arbitrum mainnet has an official original cross-chain bridge, which is relatively secure but offers a poor user experience. For example, the Arbitrum Bridge supports a limited variety of assets for transfer, currently only supporting ETH and ERC20 format assets from the Ethereum mainnet to the Arbitrum mainnet, but not supporting asset transfers from other L1 public chains like BSC or Avalanche.

Moreover, while it is easy to enter Arbitrum, it is difficult to exit—if users want to move their assets from the Arbitrum mainnet back to Ethereum, they must wait for a period of 7 days.

The Hop Protocol cross-chain bridge aims not only to solve the asset transfer and efficiency issues from L1 to L2 but also to address the "island problem" between various L2 scaling solutions, fully opening up cross-chain pathways for assets.

Operational Mechanism

Common asset cross-chain transfers are mainly completed through "asset mapping," meaning that when an asset needs to be transferred from chain A to chain B, a contract can automatically mint that asset on chain B while "destroying or locking" the same amount of that asset on chain A, ensuring that the actual supply of the asset does not increase or decrease due to cross-chain transfers.

For example, WBTC is the Ethereum version (ERC20 standard) of BTC, which maps BTC from the Bitcoin network to Ethereum 1:1 through a cross-chain bridge.

The operational mechanism of Hop Protocol is different; this cross-chain bridge has designed "h" assets (h-Assets) as intermediate assets and combines the automated market maker (AMM) mechanism commonly used by decentralized exchanges to achieve cross-chain asset transfers and rapid circulation.

Hop Protocol Cross-Chain

When using the Hop Protocol cross-chain, users deposit assets from chain A into a contract, minting "hAssets" at a 1:1 ratio, and then exchange "hAssets" for the same asset going to chain B.

For example, when a user transfers USDC from the Arbitrum chain to the Optimism chain, the workflow of Hop Protocol is as follows:

1. Utilizing the AMM liquidity pool on the Arbitrum chain, Hop Protocol mints USDC as "hUSDC";

2. Cross-chain transfers "hUSDC" to Optimism, and through the AMM liquidity pool on the Optimism chain, exchanges "hUSDC" for USDC;

3. The user receives USDC on Optimism.

Hop Protocol dares to leverage the on-chain AMM pool because it has the intermediate asset "hAssets" as a guarantee. This method solves the efficiency problem of assets crossing between L2 and L1, especially when users exit from L2 networks like Arbitrum and Optimism, allowing for instant transactions without waiting periods.

Currently, Hop Protocol is a popular cross-chain bridge on the Arbitrum chain. Its attention is not only due to the user experience but also because it has not issued any tokens. Some users hope to gain a future airdrop eligibility for the application token by using Hop Protocol.

Decentralized Perpetual Contract Trading Application GMX

Introduction

GMX is a decentralized perpetual contract trading application built on the Arbitrum chain. Users can trade by simply linking their wallets without needing to register an account, and it supports cross-chain operations. It was deployed on the L1 network Avalanche last September.

GMX Official Website

Operational Mechanism

Decentralized futures contract trading applications mainly have two modes: one is the order book model represented by dYdX, which uses a funding rate mechanism to balance long and short positions, similar to centralized contract exchanges (CEX); the other is the AMM (automated market maker) model represented by Perpetual (PERP), often referred to as the "contract version of Uniswap."

GMX differs from both of these models; it does not choose the "trading pair" method for trading funds but instead uses a multi-asset pool called "GLP" (GMX Liquidity Provider) for users to execute exchanges and leverage trading. This "GLP" pool is composed of GMX's liquidity providers (LP).

The trading process on GMX is not a traditional confrontation between long and short parties but a three-way game involving longs, shorts, and "GLP." Both longs and shorts trade against the GLP pool.

After depositing USDC, ETH, or WBTC as collateral in GMX, users can start trading. Currently, GMX supports up to 30x leverage trading for BTC and ETH, with trades executed in real-time based on oracle prices, and profits can be withdrawn in real-time.

GLP is not only the name of the liquidity pool but also a special token composed of BTC, ETH, and USDC in proportion. GLP holders are liquidity providers and also the trading counterparties for platform users, meaning all trades are countered by GLP holders.

To become a GLP holder, users can purchase GLP using single assets like BTC, ETH, or USDC and deposit them into the GLP pool. Since providing liquidity only requires a single asset, there is no need to consider the impermanent loss commonly faced by LPs.

Since GLP holders provide liquidity for leveraged trading, and all trades are countered by GLP, the relationship between GLP and contract traders remains a zero-sum game—when leveraged traders incur losses, the collateral is directly allocated to GLP, benefiting GLP holders; when leveraged traders make profits, the profits earned by traders also come from GLP, resulting in losses for GLP holders.

In addition to earning GMX application token rewards, holding GLP also allows users to share in the trading fees generated by the GMX application.

GMX is also the code for the platform's namesake token, with a total supply of approximately 13.25 million, currently priced at $44.4. It is a utility token that can be used for governance voting.

Metaverse Ecosystem Treasure DAO

Introduction

Treasure DAO is a foundational platform for the metaverse on Arbitrum, integrating NFT, DeFi, and GameFi applications. Treasure DAO aims to support NFT and metaverse projects in building their ecosystems and achieving integration between projects.

This vision arises from the current state of NFT projects being independent of each other, where NFT assets do not interoperate. Operating in isolation, the lack of combinatorial NFT projects may hinder long-term development once the initial hype fades. The Loot system that emerged on Ethereum attempted to address this issue, and Treasure DAO is a project that arose from the Loot community.

It draws on the composability of Loot NFTs, aiming to provide a bridge for numerous closed NFT projects, connecting NFT assets and applications to games and the metaverse.

Treasure DAO Official Website

Operational Mechanism

Currently, the Treasure DAO ecosystem mainly consists of three parts: GameFi games, NFTs, and the token MAGIC.

The "MAGIC" token is the native token of Treasure DAO, first issued in September 2021, with a total supply of 350 million, currently priced at $4.2.

Initially, users could earn MAGIC by staking Loot NFTs. Currently, the staking mining method has been discontinued, and players can earn MAGIC rewards by staking MAGIC.

MAGIC is the core asset of the Treasure DAO ecosystem; it can be used to purchase NFTs, serve as a medium of exchange, and can also be consumed to participate in games or upgrade and forge characters within the game, generating new resources, etc.

MAGIC is a limited resource within the Treasure DAO ecosystem, with the output quantity decreasing over time. Participants must find ways to acquire the scarce MAGIC, and the more they have, the greater their influence within the Treasure DAO ecosystem. Treasure DAO is also building various narratives around the acquisition of MAGIC.

"Bridgeworld" is the original game of the Treasure DAO ecosystem, themed around commerce, strategy, and domination, and serves as the center of the Treasure DAO metaverse.

In this game, "Legion" represents the hero characters and important NFT assets, with players entering the game as legions. Legions can be purchased on the NFT market or obtained through "summoning." Players can arrange legions to complete tasks to earn reward attributes in the form of "Treasure NFTs," which include various magical items such as masks and elixirs. Players can use Treasure NFTs to generate new resources or items, or stake Treasure NFTs and Legion NFTs to earn MAGIC rewards.

BridgeWorld connects resources to narrate the metaverse space, providing a foundation for the construction of other games. For example, players can create new stories and games around "Treasure NFTs" or "Legion NFTs."

In addition to original NFT games, Treasure DAO also welcomes external NFT projects, with "SmolBrains" and "Smol Bodies" being two collaborative projects.

"Smol Brains" is a series of pixel images of monkey heads, originally allowing users to mint NFT images for free. However, due to its gaming attributes, it has become a favorite among players, making it one of the most popular NFT projects in the Treasure DAO NFT market.

In this game, players can stake SmolNFTs to increase the IQ of their monkeys, with IQ levels represented by the size of the monkey heads—the higher the IQ, the larger the head. Players can also breed other small monkey NFTs to generate new monkey babies for mining MAGIC. Currently, the floor price for Smol Brains is 1869 MAGIC, approximately $7960.

"Smol Bodies" features pixel-style images of limbs, and staking Smol Bodies NFTs can strengthen the muscles of the limbs. The current floor price for this NFT is 1182 MAGIC.

Treasure DAO has incorporated the "Smol series" NFTs into its metaverse world, integrating them into its development roadmap. As shown in the official roadmap for Bridge World, its rare NFTs will merge with the Smol series.

The successful operation of the Smol series NFTs has also made Treasure DAO an incubator for new NFT projects, forming a complete construction chain from project inception and operation to subsequent narratives. Treasure DAO is also referred to by users as the "NFT launch platform," where collaborating NFT projects can not only receive initial resource support but also have the opportunity to integrate into the Treasure DAO metaverse ecosystem later on.

In the Treasure DAO NFT market, players can use MAGIC as a means of payment to buy and sell NFTs within the ecosystem. Recently, Treasure DAO launched a new NFT trading platform, Trove Marketplace, where users can purchase NFTs using ETH, aiming to become the "OpenSea" on Layer 2 networks.