- Three major Ethereum Layer 2 protocols—Arbitrum, Optimism, and Base—are competing for market dominance in the $52 billion DeFi space.
- Arbitrum and Optimism both have similar $3.2 billion valuations despite different growth strategies, while Coinbase-backed Base operates without a native token.
- Each platform reports billions in total value locked (TVL), with Base claiming $3 billion, Arbitrum $2.3 billion, and all three pursuing different partnership and expansion strategies.
A battle for dominance is underway in the Ethereum Layer 2 market, with three major protocols—Arbitrum, Optimism, and Base—competing for control of the $52 billion decentralized finance (DeFi) ecosystem. Despite their different approaches, Arbitrum and Optimism maintain nearly identical fully diluted valuations of approximately $3.2 billion, while Coinbase-backed Base operates without a native token.
Layer 2 solutions, though somewhat misnamed, function as separate blockchains that publish data to Ethereum while offering faster and cheaper transactions. Some investors believe these platforms could eventually capture portions of Ethereum’s $220 billion market cap or even challenge competitors like Solana and Avalanche.
Strategic Approaches to Market Growth
Optimism has pursued corporate partnerships, including licensing its technology to Base. While these agreements often include revenue benefits for token holders, they contain provisions that complicate long-term OP token valuation. According to Delphi Digital research, Optimism’s main chain is “trending to ghost town,” prompting the company to develop Superchain interoperability for apps. Optimism highlights partnerships with major DeFi platforms like Uniswap, Curve Finance, and Aave.
Arbitrum takes a different approach by keeping most of its liquidity on its main blockchain, making revenue more directly attributable to ARB token holders. This on-chain focus allows DeFi trackers to more easily estimate its total value locked at approximately $2.3 billion. Bridged TVL, which includes assets counted across multiple blockchains, exceeds $11 billion. Arbitrum continues expanding through “orbit chains” that operate their own transaction sequencers.
Base’s Corporate-Backed Model
Unlike its competitors, Base doesn’t have a native token, instead financially benefiting its corporate founder Coinbase through transaction fee savings. Base reports approximately $3 billion in TVL and $14 billion in bridged TVL. The platform claims transaction fees below one cent, undercutting both Ethereum and Solana.
Despite these low fees, Base collected millions in chain fees during peak days in late March and early April 2024. With technical foundations in Optimism’s OP Stack, Base shares some application overlap with Arbitrum, including major DeFi protocols like Aave and Uniswap that operate across multiple Layer 2 networks.
Base has also leveraged social media to promote subsidiary projects that issued their own tokens, including Zora (ZORA) and BaseIsForEveryone, further extending its influence in the Layer 2 ecosystem without issuing a native token.
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