The Ultimate Guide to Protocols on Arbitrum

Arbitrum is a layer 2 scaling solution built on Ethereum, using Optimistic roll-up technology. Arbitrum allows for cheaper and faster transactions as compared to the Ethereum mainnet. L2s, such as Arbitrum and Optimism, have gained significant traction, especially after the Ethereum Merge in September 2022. Arbitrum is now the fourth largest chain across crypto by Total Value Locked (TVL). Today, Arbitrum’s two billion in TVL across the chain is steadily gaining week-on-week, and it has recently overtaken Ethereum in terms of daily transactions.

Source: DeFiLlama

But what’s there to do on Arbitrum? Let’s check out some of the largest protocols on the chain by TVL!

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Top Protocols on Arbitrum by Total Value Locked

1. GMX

Source: GMX App

Known for its unique dual-token model using GLP, a basket of stablecoins and blue-chip assets, and the GMX token, GMX is a spot and perpetual decentralized exchange (DEX). Originating from Binance Smart Chain as Gambit, GMX expanded to Avalanche as GMX and eventually to Arbitrum in August 2022.

Due to its high-yields on GLP during the bear market, GMX gained popularity alongside the “real-yield” narrative, quickly taking the top position in Arbitrum and dominating the position since. In fact, GMX is the fourth highest revenue-generating project across all blockchains and decentralized applications (DApps) in the last 180 days.

Source: Token Terminal

2. Uniswap V3

Source: Uniswap

As one of the first AMMs to gain significant traction in DeFi, Uniswap is a household name in the space, with more than $4 billion in TVL across 5 chains. Uniswap also popularized the concentrated liquidity model with Uniswap V3, which greatly increased the capital efficiency of the protocol and has since been duplicated on several other DEXs. Today Uniswap holds more than $150 million on Arbitrum alone.

3. Radiant Capital

Source: Radiant Capital

Radiant Capital is currently the top money market protocol of Arbitrum. Radiant facilitates lending and borrowing on-chain, but with a twist. It aims to be an omnichain money market platform. This means that their goal is for users to be able to deposit assets on one chain and borrow against their collateral on another chain. Radiant Capital partnered with Stargate to facilitate their omnichain vision.

Radiant is also uniquely designed to incentivize constructive user behavior. RDNT emissions on deposited assets are vested over 90 days with Radiant’s V2. Users may withdraw early but face penalties which are paid out to RDNT lockers. Moreover, V2 ensures that only lenders who provide liquidity to RDNT pools will earn incentivized rates on their deposits on the platform. On the flip side, users who deposit only without providing liquidity only earn the base lending rates, which are determined by market forces.

4. Sushi

Source: Sushi.com

Hot on its heels, fellow multi-chain AMM and Uniswap fork, Sushi, is fourth in the Arbitrum ecosystem. Sushi has long pursued a more aggressive expansion across chains compared to Uniswap and has operations on almost 20 chains with more than $600 million in TVL.

Although Sushi launched on Arbitrum three months before Uniswap in May 2021, they eventually lost their first-mover edge to their close rival.

5. ZyberSwap

Source: ZyberSwap Docs

ZyberSwap is a traditional automated market maker (AMM) with liquidity pools for users to deposit into and earn yield on. ZyberSwap currently supports extremely high yields on native token pairs, using native token emissions.

The high yields on these pools have successfully bootstrapped a significant pool of liquidity for ZyberSwap, quickly sending them into the top 10 highest TVL protocols on Arbitrum in just a short span of 3 weeks, against strong competitors such as Uniswap and Sushi.

6. Synapse Protocol

Source: Synapse Protocol

Originally launched as a stableswap protocol, Nerve, on the Binance Smart Chain, they later rebranded to Synapse as a bridging protocol, bridging stablecoins across various supported chains. Today, Synapse services 17 different chains, with Arbitrum holding the largest portion of its TVL at $88 million. Synapse has also increased their list of supported assets to include ETH and tokens of established projects such as GMX, OlympusDAO and Vesta Finance among many others.

Synapse also has hinted at plans for their very own chain, Synapse Chain, in the future with single sided staking for the SYN token to become possible with such an implementation.

7. Camelot DEX

Source: Camelot DEX

Camelot DEX is an Arbitrum-native DEX, with an AMM as its main product and multiple complementary offerings to support the protocol. Some of the innovative features that Camelot has implemented currently include dual-liquidity types, which support volatile swaps (WBTC-USDT) and stable swaps (USDC-USDT), and dynamic trading fees, which allow each pool to have their own trading fee and variable trading fees based on the direction of trade.

On top of that, Camelot also represents staked liquidity pool positions using NFTs, also known as spNFTs. SpNFTs continue to earn yield and fees as with traditional liquidity provision. However, they can also be locked to boost yields on their positions. Certain pools also require locked positions to be utilized for additional yield.

Camelot’s native token GRAIL can also be converted to xGRAIL, which can be put to work across various Camelot plugins, which are different ways to generate return on your xGRAIL, for example, protocol fee sharing, boosting yields on pools or launchpad access.

Camelot’s launchpad has also seen some of the hottest token launches on Arbitrum so far, Dsquared Finance, Factor DAO and Arbitrove Protocol.

8. Curve Finance

Source: Curve Finance

Curve Finance is an AMM designed to provide low slippage swaps between assets with identical pegs, such as stablecoins or ETH liquid staking derivatives (LSDs). Since its launch, Curve has become the de facto DEX for stablecoin swaps across more than 10 chains and solidified its position as a DeFi titan.

Curve is also well-known for its vote-escrowed CRV tokens, where CRV token holders can lock their tokens for up to 4 years in exchange for voting power, rewards and bribes from external protocols. This tokenomics model continues to be copied across new projects, highlighting its continued success many years after their launch.

Curve continues to innovate and is expected to ship out their native stablecoin, crvUSD, sometime in early 2023.

Also Read: What Is Curve's Decentralized Stablecoin — CrvUSD

9. Aave

Source: CoinMarketCap

Anyone who has engaged in lending or borrowing activities on-chain before would definitely have heard the name, Aave. Beginning as ETHLend in 2017, Aave rose to prominence as DeFi’s dominant money market protocol, quickly climbing to become the 4th largest DApp by TVL. Spanning across 7 chains, Aave however, does not rest on their laurels, with the recent deployment of Aave V3 and their upcoming stablecoin, GHO, which has just been launched successfully on Testnet.

Also read: What Is Aave's Decentralized Stablecoin — GHO?

10. SolidLizard

Source: Solidlizard

Modeled after the famous Solidly project on the Fantom blockchain. SolidLizard brings the ve(3,3) model to Arbitrum. The ve(3,3) model combines the vote-escrow (ve) token model from Curve Finance and the (3,3) rebasing model from Olympus DAO. The result? A unique system of governance and liquidity incentivization.

SLIZ token holders can lock their tokens as veSLIZ for a chosen duration, which grants them voting powers to direct liquidity emissions to specific pools on SolidLizard. The longer the SLIZ lock, the greater the voting power bestowed. In return, voters receive 100% of bribes and 50% of trading fees generated by the pool(s) they voted on. Bribes are payments made by external protocols to incentivize specific pools, such as pools for their native token.

Honorable Mention: Y2K Finance

Source: Y2K Finance

While not anywhere close to the top 10 highest TVL protocols in Arbitrum, Y2K Finance is a one-of-a-kind protocol. Y2K Finance is designed to provide a range of structured products to speculate on or hedge against depegging risk of selected assets. Currently, the range of assets supported include a variety of stablecoins and wrapped BTC (WBTC).

While Y2K Finance has only launched in November 2022, they could not have picked a better time, as the ripples from the collapse of FTX resulted in the swift depegging of two stablecoins, MIM and USDT, in the same week, benefiting users who hedged on Y2K Finance!

Beyond their hedging vaults, Y2K Finance also uses a well-designed vote-locked model, similar to Convex Finance, for users to earn a share of protocol fees as well as exercise their voting power to direct Y2K Finance’s liquidity emissions.

Honorable Mention: Vela Exchange

Source: Vela Exchange

Adopting a model similar to a hybrid between GMX and Gains Network, Vela Exchange is an up and coming perps DEX on Arbitrum. Currently 12th by TVL, Vela allows users to deposit USDC into the protocol which provides the liquidity necessary to facilitate trading on the platform. This is similar to provision of DAI liquidity on Gains Network. Just like Gains Network, assets traded on Vela are also purely synthetic, allowing them to provide forex trading pairs too, alongside their crypto pairs.

Much like GMX, Vela’s tokenomics model uses the escrowed model, allowing VELA token stakers earn escrowed VELA (esVELA), which can be vested over a period of time to receive VELA tokens.

Conclusion

As speculation continues to swirl around the possibility of an Arbitrum airdrop, Arbitrum continues to see healthy TVL growth week on week. Furthermore, new projects and tokens continue to launch almost every other day, signaling the strong and bustling ecosystem of users and builders on Arbitrum today.

As the ecosystem matures over time, will the current top protocols consolidate TVL and cement their position as the best of Arbitrum? Or will new players swoop in to dethrone them? Only time will tell.

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