Polygon Takes the Lead, but Optimism is Gaining Ground

A key question emerging from the comparison of Polygon, Optimism, and Arbitrum is which network has the most practical applications. Each network has the potential to create valuable assets; however, the utilization of the native asset, ETH, offers a clearer view of their relationship with Ethereum's primary blockchain.

Over the past six months, since October 2022, both Optimism and Polygon have demonstrated a notable increase in ETH transactions. In contrast, Arbitrum's activity peaked during the tumultuous FTX crisis in November when users migrated to GMX, a decentralized exchange, for trading purposes.

It’s important to note that we are discussing the daily ETH transaction counts rather than their monetary value. Even with the growth of Arbitrum and Optimism, Polygon remains the clear frontrunner with 2,814,330 transactions, while Arbitrum and Optimism are much lower at 517,787 and 576,656 transactions respectively, indicating a similar level of activity.

Polygon Dominates ERC20 Transactions

In terms of ERC20 token transactions, Polygon stands out as the leading network, although Optimism has been experiencing rapid growth in this area. From just under 400,000 transactions in October, Optimism has surged to nearly 1.5 million, suggesting a rising interest in altcoin trading. Arbitrum, however, holds a distant third place in this category.

Optimism has seen its share of ERC20 token users climb from 5% to 20%, while Arbitrum has declined from 25% to 15%. Polygon continues to lead with a substantial 60% market share in this domain. Additionally, Polygon excels in NFT transactions, largely due to its collaboration with Reddit, commanding 80% of the market, while Arbitrum lags significantly with just 4%.

Wealthy Investors Flock to Optimism and Arbitrum

Next, we examine the user base across these networks. The total number of wallets serves as a key metric, even if it doesn’t directly translate to user counts.

Polygon leads in this category, benefitting significantly from its Reddit partnership, which has contributed to over 4 million of its 13 million wallets. In contrast, wallets on Arbitrum and Optimism account for less than a tenth of Polygon's total.

During the NFT boom on Reddit in October, Polygon captured nearly 96% of new wallet creations. However, Optimism and Arbitrum have since regained some attention, now collectively comprising 27% of new wallets created.

A deeper investigation into wallet activity is warranted, especially considering that many may be inflated due to airdrop farmers. The analyst Mochi focused only on wallets with ERC20 balances, revealing that 63% of Arbitrum wallets hold tokens worth less than $10, while a notable percentage hold over $100,000.

Optimism's wallets, although still containing a substantial number with under $10 (45%), show a slightly lower proportion of wealthy wallets compared to Arbitrum.

Most Polygon wallets are primarily NFT holders, with only 5 out of 13 million containing ERC20 tokens. Thus, it is not surprising that nearly 75% of these wallets hold less than $10 in ERC20 assets.

What Do These Insights Reveal?

While Arbitrum has seen declines in transaction volume, it exhibits a higher concentration of wealth within its wallets. More than 25% of its wallets contain over $100,000 in ERC20 tokens, despite having significantly fewer wallets overall compared to Polygon.

Optimism and Arbitrum collectively house nearly 40% of the wealthy wallets, while Polygon boasts more than three times its number of ERC20 wallets. This suggests that the Layer 2 solutions have a greater proportion of affluent wallets compared to Polygon.

Arbitrum is Nearly on Par with Polygon in DeFi Capital

Lastly, we’ll consider the total value locked (TVL) and its recent changes across the networks. Notably, Arbitrum has experienced remarkable TVL growth, now holding a 2.46% share of the entire DeFi TVL in the cryptocurrency market, almost matching Polygon's 2.58%. Optimism, however, trails behind with just 1.29%.

In the past month, both Optimism and Arbitrum saw slight decreases in their TVL, while Polygon’s TVL increased by 7%.

Conclusion on Ethereum's Scaling Solutions

The analysis reveals key distinctions between the three Ethereum scaling solutions. Recently, Optimism has experienced heightened activity, as evidenced by rising ETH and ERC20 transactions, potentially signaling increased interest in altcoins and decentralized applications.

This uptick could be attributed to the upcoming Bedrock update, which aims to enhance the protocol's efficiency and drastically reduce transaction fees, while also significantly speeding up node synchronization.

Despite this, Optimism currently possesses the least number of wealthy wallets and the lowest TVL. It will be interesting to see if recent activity and the anticipated Bedrock update alter this trend.

Conversely, Arbitrum shows a decrease in daily transactions but has the highest concentration of wealthy wallets and a TVL nearly equal to Polygon's. If Arbitrum introduces its token soon, it could lead to significant changes.

In a direct comparison, Arbitrum holds a slight advantage over Optimism. However, recent developments suggest that this balance could shift favorably towards Optimism in the near future. The long-term impact of either Arbitrum’s token launch or the Bedrock update on Optimism remains to be seen.

Ultimately, both Layer 2 solutions are attracting a greater number of affluent wallets, indicating a potential shift in investment focus from Polygon to Optimistic rollups. While Polygon remains the most established network among the three, Arbitrum's TVL is rapidly approaching that of Polygon, suggesting a dynamic shift within the ecosystem.

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