After receiving the ARB airdrop, what other investment opportunities in the Arbitrum ecosystem should be focused on?

Author: Grapefruit, ChainCatcher

On March 23, the ARB tokens airdropped by Arbitrum to community users will be available for collection. According to data statistics from @Blockworks_ on Dune, the total amount of ARB airdropped to community users is 1.162 billion, with approximately 625,000 wallet addresses receiving the airdrop, averaging 1,859 ARB tokens per address.

After announcing the airdrop, major centralized exchanges such as OKX, Binance, and Coinbase scrambled to list the ARB token. Even before official trading began, many people started buying and selling the airdropped ARB tokens in the over-the-counter market, with each ARB priced around $1.1 to $1.3. Based on an airdrop of 1,200 ARB per wallet address, the airdrop's value is estimated to be around $1,320 to $1,560. The wealth effect brought by the ARB airdrop has caused community users to celebrate and has encouraged more users to participate in the ecosystem.

According to L2beat, on March 21, the total value locked (TVL) in the Ethereum Layer 2 sector was $6.29 billion, with Arbitrum's on-chain TVL at $3.85 billion, showing a 21.2% increase over the past week. Additionally, the number of users and activity in its ecosystem has not cooled down despite the temporary end of airdrop incentives. Dune data shows that daily active users and transaction volumes on Arbitrum continue to reach new highs.

Arbitrum Trading Volume and Daily Active Users

Currently, the Arbitrum ecosystem has laid out applications across multiple sectors, including wallets, cross-chain bridges, DEX, lending, gaming, and NFTs. Especially in the DeFi sector, well-known mainstream applications such as Uniswap, Sushiswap, Aave, and Curve have been deployed on this chain. So, aside from mainstream applications, what new applications and investment opportunities are there on the Arbitrum chain?

A Macroscopic View of the Arbitrum Ecosystem

Before introducing specific projects, we can gain a more macroscopic understanding of the Arbitrum ecosystem from the perspectives of token economics, DAO governance, and technical roadmap------

On the evening of March 16, the Arbitrum Foundation announced the launch of a DAO organization for the Arbitrum One and Arbitrum Nova networks, introducing the governance token ARB and unveiling the community airdrop reward plan.

The former, Arbitrum One, is a chain built using Arbitrum Rollup technology, with all transaction data stored on the Ethereum mainnet, primarily used for building DeFi and NFT projects, launched in 2021; the latter, Arbitrum Nova, is a new mainnet based on AnyTrust technology, designed for gaming, social applications, and high-throughput DApp use cases, with transaction data stored off-chain and managed by a data committee, launched in August 2022. Currently, these two chains operate independently in parallel, and the L2 and on-chain ecosystem applications we usually refer to mainly run on the Arbitrum One mainnet.

The initial total issuance of ARB is 10 billion, with a maximum annual inflation of 2%. The Arbitrum community will hold approximately 56%, which includes 11.62% airdropped to community users, 1.1% provided to the DAO organization, and the remaining community tokens will enter a treasury controlled by the new Arbitrum DAO, with distribution determined by votes from ARB holders; the remaining 44% will go to the development team of Offchain Labs, the company that established Arbitrum, and investors.

ARB Distribution

ARB is a governance token and is not used to pay any fees on the Arbitrum chain. Currently, users still pay Gas fees in ETH when interacting on the Arbitrum chain.

ARB will be used to participate in Arbitrum DAO governance, which will manage the Arbitrum ecosystem, including decision-making authority over the Arbitrum One and Arbitrum Nova chains and their underlying protocols. This means that ARB token holders can vote on key decisions regarding networks like Arbitrum One and Arbitrum Nova through the Arbitrum DAO organization, including decisions on how to upgrade the chain's technology and how to allocate chain revenue to support the ecosystem, allowing ARB holders to collectively decide and shape the future and development direction of Arbitrum.

It is worth mentioning that Arbitrum's DAO governance is self-executing. Typically, most DAOs allow governance token holders to vote through proposals, and then the core team of the project executes the results by changing the network code. The difference with the DAO established by Arbitrum is that the codebase will automatically change based on the final voting results, meaning that votes on on-chain actions will directly have the authority to influence and execute their on-chain decisions, directly controlling the network.

Of course, this also poses some risks; if malicious actors change the code through the voting process, it will also be automatically updated in the code. To address this, the Arbitrum Foundation has also established an Arbitrum Security Committee consisting of 12 members who can act quickly in emergencies to ensure the security of the chain, such as when serious, urgent bugs are discovered in the software, allowing the security committee to take swift action.

In addition to the airdrop announcement and the initiation of DAO governance, Arbitrum has also released the toolkit Arbitrum Orbit for developers, enabling them to easily build their own L3 (Layer 3) blockchains within the Arbitrum ecosystem.

L3 (Layer 3 network) refers to blockchain networks built on L2 Arbitrum, which is Arbitrum's L2. In the L2 network Arbitrum, Rollups technology is used to batch transaction data to the L1 Ethereum mainnet. L3 built on Arbitrum will use similar Rollups to batch its on-chain transaction data to Arbitrum, which will then be rolled up to Ethereum, allowing for increased transaction throughput at relatively low costs.

TVL Leaps to Fourth Place, What Applications Are in the Arbitrum Ecosystem?

With the ARB token as an on-chain incentive, more users and funds will flow into the Arbitrum ecosystem, and projects within its ecosystem will see growth in users, protocol TVL, and related KPI data.

On March 17, a core member of the Arbitrum community, @Hunter, posted in the Discord community, "Do you think Odyssey won't come back? Think again," leading many users to interpret this as a sign that the second round of the Odyssey ecosystem incentive event for Arbitrum is approaching.

Core member of the Arbitrum community @Hunter's comments on the Odyssey event

According to DeFiLlama data, on March 21, the TVL on the Arbitrum chain was $1.81 billion, ranking fourth among all public chains, second only to BSC, with 243 on-chain applications.

In addition to mainstream DeFi protocol applications like Uniswap, Sushiswap, Curve, and Aave, what other applications are there on Arbitrum?

1. Official Cross-Chain Bridge Arbitrum Bridge

Arbitrum Bridge is the official cross-chain bridge on the Arbitrum chain, allowing users to transfer assets from the L1 Ethereum mainnet to the L2 Arbitrum One and Arbitrum Nova networks; it also supports users withdrawing assets from L2 back to the L1 mainnet.

Arbitrum Bridge Cross-Chain Bridge

It is important to note that when using the Arbitrum Bridge to transfer assets from L1 to L2, it takes about 10 minutes to an hour for the assets to arrive; however, when withdrawing assets from L2 to L1, there is at least a 7-day waiting period, and the assets need to be manually claimed to reach the L1 address account.

However, there are now third-party cross-chain bridges that support instant withdrawals from L2 to L1 without a waiting period, such as Hop Protocol.

2. Decentralized Perpetual Contract Exchange GMX (GMX)

GMX is a decentralized derivatives exchange built on the Arbitrum chain, supporting spot and perpetual contract trading, with its core business still being perpetual contract trading. Currently, GMX has also expanded to Avalanche, allowing users to trade without registering an account by simply connecting their wallets. According to the official website, as of March 21, the historical trading volume on the GMX platform has exceeded $113.3 billion, with over 250,000 users and a position volume of $160 million.

Users can start trading on GMX by depositing USDC, ETH, or WBTC as collateral, with GMX supporting up to 30x leverage trading on assets like BTC and ETH, with trades executed in real-time at oracle prices, and profits can be withdrawn in real-time.

Currently, the common decentralized contract trading applications on the market mainly have two models: 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."

However, GMX differs from both of these models; GMX's counterparty is the GLP pool, which consists of a basket of crypto assets (such as BTC, ETH, USDC, USDT, DAI, FRAX, LINK, UNI) that provide liquidity for users to execute swaps and leverage trades. The assets in the GLP pool are deposited by liquidity providers (LP) on the GMX platform.

Additionally, GLP is a special token on GMX, also known as a liquidity token, representing a collection of crypto assets (similar to an index fund), with its price fluctuating based on the assets in the pool. When users provide liquidity to GMX, they can directly purchase GLP with a single asset like BTC, ETH, or USDC and stake it, rather than providing two tokens in a 1:1 ratio like ETH/USDC; when users withdraw liquidity, they only need to exchange GLP for the desired asset. Since users can provide liquidity with a single asset, they do not need to worry about the impermanent loss commonly faced by LPs.

GLP Price and Data

As of March 20, the value of crypto assets stored in the GLP pool on Arbitrum is approximately $480 million.

Since GLP holders provide liquidity for GMX leveraged trading, all trades' counterparties are GLP, meaning that both long and short traders are countered by the GLP pool. Therefore, GLP and contract traders still engage in a zero-sum game—when leveraged traders incur losses, the margin is directly allocated to GLP, causing the GLP price to rise, benefiting GLP holders; when leveraged traders make profits, the profits earned by the traders also come from GLP, causing the GLP price to fall, resulting in losses for GLP holders. Additionally, holding GLP also allows users to earn a share of the trading fees on the GMX platform.

The governance token of GMX is also named GMX, with a total supply of approximately 13.25 million, currently priced at $82, with a market cap of $700 million.

3. Native Decentralized Exchange Camelot (GRAIL)

Camelot is the native DEX on Arbitrum, supporting instant exchanges and trading of native assets within its ecosystem. Currently, Camelot's application TVL is $99.84 million.

Camelot claims to be an innovative and highly flexible DEX, adopting a dual AMM mechanism of Uniswap V2 + Curve, supporting low-slippage trading for volatile and stable token pairs.

Building on these features, Camelot has also added a Launchpad function, supporting dynamic directional trading fees, allowing project parties to set different fees for each liquidity pool and define fees based on the direction of trades. For example, newly launched projects may need to limit selling pressure by setting higher fees for selling than for buying. For instance, for Camelot's own platform token GRAIL, the fee for buying with USDC is 0.3%, while the fee for selling is 1%.

Additionally, Camelot combines LP assets with NFTs, allowing project parties to set specific incentive measures based on their needs.

Currently, most liquidity incentive policies on DEXs require users to deposit LP assets into reward-bearing liquidity pools, with the amount of rewards depending on the share held in the total liquidity pool. However, this model has a drawback: all LP rewards in the liquidity pool are the same, regardless of how long the LP has been provided, leading to an inability to differentiate between capital chasing yields and loyal users supporting the application long-term, as their impacts on the sustainability of the application differ. Capital chasing yields may withdraw liquidity at any time as the price of reward tokens falls or yields decrease. Moreover, once users provide liquidity, their LP assets are occupied and cannot generate other yields. Camelot aims to address these issues through the combination of LP and NFTs.

On Camelot, when users provide LP, they can create LP tokens into staked positions called spNFTs. Compared to ordinary LP liquidity certificates, spNFTs are income-generating position certificates that not only earn regular trading fees but also additional rewards from project parties, such as enhanced yields from locked LP.

Camelot Converts LP to spNFT

For instance, when providing liquidity on the Camelot platform, users can choose "Position" or "LP only." If they choose the former (Position), they will automatically create a staked position when providing liquidity, selecting a lock-in period for liquidity, with different yields based on the lock-in period. In this case, users will receive spNFT representing their staked position in Camelot instead of LP tokens; if they choose the latter (LP only), liquidity providers will only receive a share of the trading fees from the liquidity pool.

Additionally, project parties can set extra incentive measures through the incentive pool Nitro Pools. For example, if users add liquidity to the GMX/USDC pool and create LP as a staked position spNFT, project parties can reward long-term liquidity supporters by setting additional rewards in Nitro Pools. Users can then stake their spNFT in the Nitro pool to earn extra yields.

Overall, Nitro Pools aims to reward users based on how long they provide LP and hopes to achieve higher capital efficiency for LP assets.

Camelot's native token is GRAIL, with a maximum issuance of 100,000, currently priced at $4,087, with a market cap of $39.92 million.

4. All-Chain Lending Platform Radiant Capital (RNDT)

Radiant Capital (abbreviated as Radiant) is an all-chain liquidity lending platform built using LayerZero cross-chain technology, meaning you can deposit assets on one chain while borrowing on another. For example, users can deposit collateral USDT on Arbitrum and borrow ETH on Polygon or wBTC on BNB Chain.

However, as a single chain, Radiant is an over-collateralized lending platform, supporting users to deposit or borrow crypto assets. Radiant aims to become the first all-chain currency market, allowing users to deposit any major asset on any major chain and borrow various supported assets across multiple chains. As of March 21, the TVL on the Radiant platform was $80.19 million.

Currently, Radiant only supports users depositing or borrowing DAI, USDC, USDT, BTC, ETH, etc., on the Arbitrum chain. Radiant is also very simple to use; you can choose DAI, USDC, USDT, ETH, and WBTC as collateral to deposit into the protocol, allowing you to obtain new liquidity for use without selling tokens, thereby improving your capital efficiency.

After a successful deposit, you can enter the borrowing page to borrow, with the system automatically calculating your borrowing limit based on your deposit amount. After selecting the currency you want to borrow, you only need to enter the borrowing amount and the public chain you wish to borrow from.

Radiant Supported Lending Assets

On March 19, Radiant launched its V2 version, which will support more assets and expand to multiple new chains, with cross-chain expansion deployment on BNB Chain coming soon.

Radiant's platform token is RDNT, with a total issuance of 1 billion, currently priced at $0.46.

5. Decentralized "Nintendo" Treasure (MAGIC)

Treasure DAO (abbreviated as Treasure) is a native metaverse gaming ecosystem on Arbitrum, aimed at bringing games and players together through its ecological token MAGIC.

Treasure initially started as an NFT project on the Loot ecosystem but later became an independent decentralized gaming ecosystem that shares resources, community, and infrastructure. The platform integrates applications from NFT, DeFi, and GameFi, aiming to support NFT and metaverse projects in building their own ecosystems on the platform and achieving integration between projects.

Treasure Products

Currently, the main products within the Treasure ecosystem include the resource token MAGIC, the NFT trading market Trove, the DEX trading platform Magicswap, and original and collaborative blockchain games.

• MAGIC is the native token of Treasure DAO, first issued in September 2021, with a total supply of 500 million, currently priced at $1.81. MAGIC is the core asset of the Treasure ecosystem, used to purchase NFTs, serve as a payment medium, and participate in games or upgrade and forge characters in games by consuming MAGIC, generating new resources, etc. MAGIC is a limited resource in the Treasure ecosystem, with decreasing output over time, and participants must find ways to obtain scarce MAGIC; the more they have, the greater their energy in the Treasure ecosystem. Treasure is also building various narratives around the acquisition of MAGIC.
• Trove is the NFT trading platform of the Treasure ecosystem, supporting users to collect and purchase NFTs within the Treasure ecosystem, launched in November 2021, aiming to become the Arbitrum ecosystem's NFT trading platform comparable to OpenSea. Currently, NFTs listed on the Trove platform are priced in ETH and MAGIC, with most NFTs on the Trove market being from the Treasure ecosystem. However, according to official plans, Trove will allow unlicensed collectibles to be listed in the future and plans to open up a multi-chain ecosystem.
• Magicswap is the DEX within the Treasure ecosystem, currently supporting MAGIC/Gfly and MAGIC/ELM trading, with the latter two being game tokens within its ecosystem.

Blockchain games include original games like Bridgeworld, The Beacon, and community games like Smolverse.

• Bridgeworld is the original game of the Treasure ecosystem, a competitive strategy game where users can mine and harvest MAGIC tokens. The game incorporates multiple DeFi concepts, aiming to build a more open metaverse narrative connected by resources and storytelling, serving as the center of the Treasure metaverse. In this game, Legions are the hero characters and important NFT assets that can be purchased in the NFT market or minted with MAGIC. Players enter the game as Legions and can arrange them to complete tasks to earn reward attributes called "Treasure NFTs," which can be used to mine MAGIC tokens or generate new resources or mining tools, accelerating the production of MAGIC. Additionally, Bridgeworld supports players in creating new stories or games for NFTs within the game and allows for the integration of NFTs from other projects.
• The Beacon is a pixel-style action RPG game launched by Treasure, where players can obtain character NFTs for free or for a fee, then venture into dungeons or answer questions in taverns, both of which can yield NFT drops. NFTs obtained from paid character adventures can be sold for profit in the NFT trading market, and the game gained immense popularity after its launch.
• Smolverse originated from an NFT project driven by the Treasure community, currently integrating three main series of Smol NFTs, including Smol Bodies (pixel-style body images that can grow larger), Smol Pets (pixel-style pets that are companions to Smols), and Smol Brains (pixel images of monkey heads that can grow larger with IQ). On March 3, Treasure announced the launch of the game studio Darkbright, responsible for developing games for the Smolverse NFT project within the ecosystem.

From this perspective, Treasure has become an incubator for new NFT or gaming projects, providing a series of infrastructure such as NFT trading platforms and DEXs, while also forming a complete construction chain from project inception and operation to subsequent storytelling. Treasure has clearly become a decentralized "Nintendo," a platform for the incubation and release of NFT or gaming projects.

6. Decentralized Derivatives Trading Platform Gains Network (GNS)

Gains Network is a decentralized derivatives trading platform built on Polygon and Arbitrum, providing leveraged trading for cryptocurrencies, as well as for forex, tokenized stocks, indices, and more.

The launched decentralized leveraged trading platform gTrade is the core product of Gains Network. According to Dune data, gTrade has generated a trading volume of $32.27 billion, with trading fees amounting to $23.23 million.

The gTrade platform offers traders up to 150x leverage on crypto assets, 100x leverage on stocks, and 1000x leverage on forex trading.

Regardless of the trading pair, on the gTrade platform, the liquidity for leveraged trading is provided by a treasury holding only DAI, similar to how GLP acts as the counterparty for users on GMX. Users can deposit DAI to open short or long positions, and they can also deposit DAI into the DAI treasury to act as LP, earning trading fees while also bearing the profits and losses as the counterparty for leveraged traders.

gTrade Trading Pairs

Additionally, the minimum position size on gTrade is 1500 DAI on Polygon and 7500 DAI on Arbitrum, calculated based on the user's collateral multiplied by the user's leverage. This means that if a user wants to use a position size of 10 DAI on Polygon, they should use 150x leverage (10150=1500); of course, users can use higher collateral to employ lower leverage, such as using 100 DAI as collateral and 15x leverage (10015=1500).

The Gains Network platform token is GNS, with a total issuance of 30.44 million, currently priced at $7.95.