Layer-2 Wars could be the next big trend in crypto leading up to The Merge
DeFi analyst and YouTuber Patrick Dynamo DeFi, highlighted several exciting trends in the DeFi world on Monday, including the rise of the “L2 wars.” Over the past week, revenue for Polygon, Optimism, and Arbitrum, popular scaling solutions for Ethereum, have increased by 36% – 54% following Ethereum’s price rise.
Another strong performer was Ethereum Name Service ($ENS). .Eth hype has proven to be more resilient than many predicted.
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— Patrick | Dynamo DeFi 🧨 (@Dynamo_Patrick) 25 July 2022
In the DeFi ecosystem, Optimism has been the prominent player, increasing the total value locked by almost 29%. TVL is now pushing toward a record high of just over $500 million to $438 million. The basket supported growth as it saw an influx of liquidity that “increased TVL by 54.5%.”
TVL growth was not limited to Ethereum, with Bifrost and Parallel increasing TVL by 33% and 11% respectively. According to Dynamo DeFi, when the TVL of the parachains is combined, Polkadot now has a TVL of over $1 billion.
One statistic that is not often tracked is the revenue earned by DeFi protocols across crypto. While investors often forget that DeFi companies generate revenue through transactions, it is integral to any successful project. The chart below shows the earnings of the top DeFi protocols over the past week.
Revenue growth highlights a robust business model for the DeFi protocols that have so far survived the bear market. The shake-up of legacy platforms has left DeFi in an arguably stronger position than at the start of the year.
Dynamo DeFi highlights Optimism as the standout performer in DeFi this week with growth in TVL, revenue, DEX volume and number of transactions. Optimism turned Cronos around in the number of transactions, increasing 55% to 124,000 transactions compared to 108,000 on Cronos. Interestingly, Ethereum transactions fell by 1%, while all layer-2s and other scaling solutions increased in transaction volume.
It’s worth noting here that across every statistic I track, the growth of Optimism has stood out.
TVL, revenue, DEX volume, transaction numbers. Optimism shows strength across them all.
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— Patrick | Dynamo DeFi 🧨 (@Dynamo_Patrick) 25 July 2022
Until The Merge, while the price of Ethereum may bounce back, the adoption of tier-2 DeFi projects is also on the rise. A DeFi summer may not be quite on the cards just yet, but the on-chain signals have been positive for DeFi over the past seven days.
