The total value locked in Arbitrum's Layer 2 solution for Ethereum scaling hit $2.5 billion following 2,500% growth. According to data from L2Beat, on Sept. 17, Ethereum's Layer 2 TVL has reached $3.6 billion. Arbitrum has the highest amount of funds locked, which accounts for almost 75% of the L2 solutions market.
The closest "competitor" protocols, dYdX and Optimism, have reached $370 and $250 million TVL, respectively.
The main reason for skyrocketing TVL in Layer 2 solutions, and Arbitrum especially, is the constantly elevated fees within the Ethereum network and constantly appearing network congestion. Arbitrum's Optimistic Rollups allow for the computing of bundles of data off-chain in order to make transactions cheaper and faster.
Arbitrum is a Layer 2 solution that enhances the Ethereum user experience by improving its scalability. The solution is reducing Ethereum transaction fees and solving the network congestion problem.
Arbitrum utilizes Optimistic Rollups technology, which is the actual Layer 2 scaling solution that combines thousands of sidechain transactions into a single one verified and settled on Ethereum. The solution allows decentralized apps to easily migrate their smart contracts on Arbitrum with minimal changes.
What are Layer 2 solutions?
Layer 2 solutions act as various smart contracts that change the process of transaction processing on the main network. Without changing the main network's protocol, L2 allows users to make the same transactions without paying huge fees and avoiding network congestion.
Layer 2 solutions can also be implemented outside of payment scalability and can be used for any goals that require a large amount of data processing.