Demand for Arbitrum continues even as trading activity declines

• Demand for ARB continued to rise as the number of holders increased. 
• Transaction fees on the network plateaued signaling the lull in trading activity.

The recent market rally fueled by institutional interest in cryptocurrencies has injected optimism into the popular layer-2 (L2) rollup token, Arbitrum [ARB] as well. The token gained more than 5% since the rally according to CoinMarketCap data, bringing relief from the gloom that pervaded since the U.S. regulators’ onslaught.

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

Fees, revenue plateau

The token has garnered significant attention since its much-publicized AirDrop event in March, witnessing a steady surge in daily active wallets and new wallet creation. This was also tracked by a popular Twitter user who regularly analyzes trends in the crypto space.

According to the tweet, the number of addresses with ARB token balance has been on an uptrend since the launch. However, what stood out was the stagnancy in transaction fees paid on the network and consequently, the protocol revenue.

Source: Token Terminal

This was largely on expected lines as ARB still functioned as a governance token.

Will EIP-4488 make a difference?

The Twitter user highlighted the dip in Arbitrum transaction fees to bring out the upcoming Ethereum Improvement Proposal (EIP)-4488.

Proposed by Ethereum co-founder Vitalik Buterin, the main purpose of EIP-4488 was to reduce the cost of uploading off-chain data (from the rollups) to on-chain (Ethereum base layer) without compromising on the security aspect. While L2 rollups have undoubtedly risen to the occasion to address Ethereum’s scalability woes, a big impediment is the high upload cost of L2 data on the base layer.

With EIP-4488, this fee will be slashed by 80%, further lowering the end user’s gas fees. The upgrade was expected for a full production launch by the end of 2023.

As per L2Fees, the cost of sending one ETH on Arbitrum was $0.05, a fraction of Ethereum’s cost but higher than other optimistic rollups like Optimism [OP].

Is your portfolio green? Check out the ARB Profit Calculator

TVL observes growth

The market rally led to a recovery in the chain’s liquidity. This happened as its total value locked (TVL) jumped more than 8% over the last week.

Arbitrum had assets worth more than $2.72 billion at the time of publication, making it the fourth-biggest blockchain. It was also the largest L2 solution in terms of TVL.

Source: DeFiLlama