Layer 2 address activity slows, but Arbitrum bucks the trend

Published at: March 1, 2022

On-chain activity for the leading Layer 2 networks has been declining recently, however, the Arbitrum platform is bucking the trend according to recent findings.

Blockchain analytics firm Nansen has reported that seven-day activity in terms of addresses for many of the leading networks has been in decline. Only the Ethereum L2 scaling network Arbitrum has shown gains for this metric.

According to its Feb. 28 tweet, Arbitrum activity has increased by 12.7% over the past week. It reported that the network has had 46,200 unique active addresses over the past seven days.

In the last 7 days, all but Arbitrum's (+12.7%) on-chain activities have slowed down:#BNB Chain 4.03M#Ethereum 1.99M#Ronin 1.09M#Polygon 854k#Avalanche 269k#Fantom 204k#Arbitrum 46.2k#Celo 29.4k#Optimism 9.52kCheck out their public dashboard links in the pic.twitter.com/BlxkNG35rh

— NansΞn (@nansen_ai) February 28, 2022

Although the figure is far lower than other chains, it is the only one to have shown an increase in activity for the period. Layer two analytics platform L2beat is reporting that Arbitrum is still the industry leader in terms of total value locked which is just over $3 billion giving it a market share of 54.9%. Defillama reports that the most popular protocol running on the network is the SushiSwap DEX but it also notes a higher TVL figure of just over $4 billion for the Polygon network.

Collateral locked on Arbitrum has crept up over the past few days, increasing 5.7% since Feb. 25. Conversely, rival layer two network Optimism has seen a decline in TVL over the same period. Optimism has an 8% L2 market share with a total value locked of $444 million, and address activity has fallen by 17.9% over the past week according to Nansen.

Other layer two platforms such as Polygon have also seen declines in terms of activity as reported by Nansen. Polygon has slowed by 10.9% in terms of seven-day active addresses and TVL on the network has fallen 15% over the past fortnight according to DeFillama.

Nansen also reported weekly address activity declines of 2.7% and 2.9% for Binance Smart Chain and Ethereum respectively.

The fall in on-chain activity is likely to be related to cooling demand for decentralized finance (DeFi) as crypto markets have retreated this year. DeFiLlama currently reports that TVL for all listed DeFi platforms is down almost 19% from its all-time high in late November. However, it should be noted that this is likely due to a decline in the prices of underlying assets which has been far steeper than the DeFi TVL drop.

It should also be noted that there are large discrepancies in the TVL metric between different analytics platforms (DeFillama and L2beat in this case) so figures should be taken with a pinch of salt.

Other indicators supporting the trend include a plateau in the supply of wrapped Bitcoin (wBTC) which is also widely used on DeFi platforms.