How to Invest in Arbitrum: A Comprehensive Guide
Arbitrum is a layer 2 scaling solution that provides fast and affordable transactions on the Ethereum network. Unlike other layer 2 scaling solutions, Arbitrum does not have its own native utility token, and as a result, there was no token sale. However, traders may find exposure to Arbitrum by investing in Arbitrum Native Projects and farming Arbitrum airdrops.
What is Arbitrum?
Arbitrum is a layer 2 scaling solution that uses Optimistic Rollups to increase the speed and efficiency of Ethereum transactions. It was developed by Offchain Labs and has quickly become one of the most popular scaling solutions for Ethereum. It offers fast and cheap transactions, making it an attractive option for users and investors alike.
Arbitrum Native Projects
One of the key advantages of Arbitrum over other layer 2 solutions is that it doesn't have its own native utility token. This means that there was no token sale and users can enjoy the benefits of layer 2 scaling without having to invest in a new token. However, traders looking for exposure to layer 2's growth can consider investing in GMX, Dopex (DPX) and Mycelium (MYC)
What is GMX?
GMX Protocol is a decentralized perpetual trading platform native to Arbitrum and is already generating an average of $400,000 in daily fees . Holding GMX allows users to participate in the governance of the protocol and earn a share of the trading fees..
When traders use the GMX trading platform they pay fees. 30% of these fees are distributed to GMX holders, while GLP holders receive 70% of the fees generated from the trading protocol. GLP tokens are automatically staked upon purchase and can only be obtained on the GMX protocol. Although GLP offers higher rewards than GMX, its performance is influenced by market conditions and the execution of traders because GLP holders serve as the counterparty to the leveraged traders on the exchange.
What is Dopex (DPX)?
Dopex is a decentralized options exchange that enables traders to buy or sell options contracts for digital assets without any permission. The platform uses liquidity pools to facilitate trading, similar to GMX. Dopex also has two tokens, DPX and rDPX.
DPX is the governance and utility token of the protocol with a fixed total supply of 500,000 tokens. About 60% of these tokens are already in circulation, and the emissions are scheduled to end in early 2026. The token is currently valued at around $419, with a previous all-time high of $4,222. However, DPX has undergone a significant drop in value, having reached a low of approximately $113 in June and still being 89.7% below its previous all-time high.
DPX token holders can earn fees generated from option purchases, swaps, and exercises. Of these fees, 70% go to Dopex liquidity providers, and 15% go to DPX stakers. The multi-purpose token rDPX can be utilized to boost the rewards generated by fees.
According to DeFiLlama, the total value locked in the Dopex protocol has declined from $154 million to approximately $29 million. In contrast, GMX has experienced significant growth and currently has a total value locked of over $369 million. Although this metric may not always be reliable, it suggests that Dopex is not enjoying the same level of momentum as the futures exchange. Additionally, DPX token does not seem to be as responsive to changes in the Arbitrum ecosystem as GMX. For instance, it did not react to the Nitro upgrade.
What is Mycelium (MYC)
Mycelium, previously known as Tracer DAO, is developing a range of derivative products on Arbitrum. Among these are perpetual pools, a unique derivative product that functions much like a leveraged ETF, enabling users to either hedge or take on greater exposure to a particular asset. Mycelium has recently unveiled Perpetual Swaps, which is a fork of GMX, and enables users to provide liquidity to traders via the MLP pool.
Farming Arbitrum Airdrops
Investors can gain exposure to the Arbitrum ecosystem through airdrop farming, which doesn't require purchasing any tokens. This makes it an ideal option for risk-averse investors who want to share in the network's potential upside.
While Arbitrum has yet to officially confirm the launch of a token, it is widely believed that one is on the horizon. A token can provide investors and team members with upside potential and serve as a powerful tool for incentivizing desired behaviors and bootstrapping the ecosystem. With other rollup providers like Optimism, Polygon, ZK Sync, and Starkware all launching or planning to launch tokens, it's imperative that Arbiturm launches one of their own to remain competitive.
Assuming an Arbitrum token launch is inevitable, early users are likely to receive an airdrop (Optimism and Starkware have allocated 19% and 9% respectively to early users). Therefore, positioning oneself accordingly could potentially yield significant benefits.
Q: What is the difference between Arbitrum and Ethereum?
A: Arbitrum is a layer 2 scaling solution for Ethereum that uses Optimistic Rollups to increase transaction speed and efficiency. It is built on top of the Ethereum network and is designed to work seamlessly with Ethereum.
Q: What is the potential for growth in the Arbitrum ecosystem?
A: The potential for growth in the Arbitrum ecosystem is significant, as the platform has already gained widespread adoption in the crypto community. As more developers and users begin to use Arbitrum, its value and potential for growth could increase.
In conclusion, Arbitrum has proven to be a valuable layer 2 scaling solution for those seeking fast and affordable transactions on the Ethereum network. Despite not having its own native utility token or conducting a token sale, investors can still gain exposure to the Arbitrum ecosystem through various means such as investing in Arbitrum Native Projects or participating in airdrop farming. As the demand for layer 2 solutions continues to rise, Arbitrum's innovative approach to scaling may prove to be a game-changer in the world of decentralized finance.