Arbitrum finds a new challenger in zkSync Era and that means…

• zkSync Era outperformed Arbitrum in various areas. 
• ARB’s price remained relatively stable.

Since the start of 2023, Arbitrum [ARB] has demonstrated remarkable advancement. The protocol has successfully garnered a substantial user base. And the recent airdrop served as a catalyst for further enhancing activity on the network.

Realistic or not, here’s ARB’s market cap in BTC terms

Is Arbitrum falling behind?

However, it appeared that zkSync’s rapid progress could provide a challenge to Arbitrum. According to recent data, the L1 to L2 bridge of zkSync Era accounted for more than 63% of all bridged ETH to L2s through native bridges. This amount is three times higher than the ETH bridged to Arbitrum via the official native Arbitrum bridge.

For context, most L2 projects on Ethereum encourage users to bridge assets via their official bridge rather than third-party multichain bridges. As a result, the deposit activity of users into these new chains via their native bridges provides useful information with regards to progress in this sector.

Source: Dune Analytics

The observed disparity between the amount of ETH bridged to Arbitrum via its official native bridge and zksync Era’s L1 to L2 bridge holds several implications. Firstly, it signifies intense competition from zksync Era as it has attracted a significant portion of users seeking to bridge their ETH to Layer 2 solutions. This highlights the need for Arbitrum to enhance its value proposition and address any potential shortcomings in its native bridge to remain competitive in the market.

Secondly, Arbitrum could focus on prioritizing improving the functionality, performance, and user experience of its native bridge to streamline the process of transferring assets from Layer 1 to Layer 2. By doing so, the network can attract more users and increase its share of bridged ETH.

The current state of Arbitrum

In terms of activity, it was seen that Arbitrum’s daily active addresses dwindled significantly. Over the last month, the number of active addresses on Arbitrum fell from 311,000 to 119,000 according to Artemis’data. Due to this, the number of transactions occurring on the protocol also fell materially.

Source: Artemis

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Coming to Arbitrum’s token ARB was trading at $1.13 at the time of writing. According to Santiment’s data, its velocity fell significantly along with its network growth. This indicates a lack of interest from new addresses in the token.

Source: Santiment