Welcome to The Map and the Territory, Nansen’s weekly alpha leak newsletter where we try to cut through the noise – the headlines, the tweets, and the mania – with onchain data in an effort to surface actionable signal.
This week we’re taking a look at a simmering rivalry between competing Layer 2 networks: Arbitrum and Optimism. Both scaling solutions are hovering around $1 billion in Total Value Locked (TVL), and have enjoyed recent surges in activity, users, and buzz. Let’s take a look at how you can use Nansen to analyze these networks!
Layer 2 Playgrounds
It’s a weird market! Even seasoned traders are struggling to make sense of it.
Ethereum is on the move, up roughly 20% on the week, while other majors labor to keep up. Alts, meanwhile, are a grab-bag, with unexpected names like Celsius and Nexo counting among the few who’ve managed to outpace ETH on a 7-day basis. It’s an idiosyncratic bid, with the overwhelming majority of the market’s attention focused on The Merge and the LSD (Liquid Staking Derivative) trade.
Want to track how top-performing wallets are playing the LSD trade? Sign up for a Nansen account today!
However, there are a handful of ecosystems that are managing to outperform – specifically, two scaling solutions for Ethereum: Arbitrum and Optimism, both of which have seen native projects surge in recent weeks.
The networks have long been entangled in an unofficial rivalry, with both teams boasting different technical solutions to the same problem. They raced to be first to market, and now are engaged in a back-and-forth battle for TVL with a different leader seemingly by the week. More importantly, though, the rivalry is also stoked by loudmouth CryptoTwitter investors and ecosystem projects – everyone is worried that only one L2 will emerge victorious, and no one wants to be left holding a bag.
So what’s the tale of the tape? While Nansen’s watchful eye has yet to cast its full gaze over Optimism, there’s a number of promising metrics the platform tracks that point to Optimism’s growing health. For starters, the number of transactions is extremely choppy – a chart that’s to be expected from a young chain experiencing brief bursts of farming and NFT minting activity – but ultimately on an uptrend.
Likewise, for the moment Optimism is enjoying more 7 day volume on its cross-chain bridge – well over 33% more. However, there’s a worrying trend at play for OP boosters – the volume is moving solidly in Arbitrum’s favor as volumes are down a staggering 78% for Optimism and up 25% for Arbitrum – possibly the “hot ball of money” rotating to Arbitrum as OP is experiencing a pullback after a torrid run.
On Arbitrum, we have a much clearer picture of activity, including a cohort of fast-moving Smart Money buyers into key ecosystem projects.
Take, for instance, staked GMX:
The top depositors list includes a pair of Smart LPs, as well as none other than Arthur Hayes. We covered how funds and Smart Money have been battling it out over GMX in a previous newsletter with massive buys and sells, but recently it’s been more of a steady uptrend with two Smart Money addresses staking in the last two weeks.
It’s a similar picture for Radiant. After an initial rush to farm the RDNT token (and a brutal subsequent dump), the token is bouncing back in volume, price, and number of transactions.
Perhaps more importantly, the Smart Money is betting on a turnaround, with two Smart Money addresses buying a significant ownership percentage for the first time in the past week.
In all, while it might seem that the two ecosystems are passing liquidity back and forth as traders chase ponzis and new yield farms, the reality is that between the peaks and valleys there’s a steady uptrend for both ecosystems across several key measurables. While there might be only one winner in the future, for now both L2s are promising destinations for intrepid explorers.
Odds And Ends
This week’s edition of Office Hours spotlighted Nansen’s Scouts program, which is a great way for young Web 3 talent to expand their skillset and get their foot in the door of the industry (while earning some cash in the process). Check out our notes, courtesy of our intern Kate. Additionally, she put together some notes on this week’s Nansen Unsupervised – an especially fun episode featuring a gaggle of well-known industry ‘interns.’ Give it a look!
That’s it for this week, explorers. As always reach out with comments, questions, or critiques at email@example.com