The competition between Layer 2 (L2) networks has taken an interesting turn. Polygon (MATIC), once the most popular L2 network, is now facing stiff competition from a recently launched L2 network, Arbitrum (ARB).

Comparing Polygon and Arbitrum

Volume Analysis

Polygon’s volume trajectory, as indicated on DefiLlama, showed an uptrend, reaching its second-highest volume of the year, approximately $435 million, towards the end of December. The peak volume for 2023 occurred in March, reaching around $669 million. Notably, Polygon’s volume surpassed $1 billion only once in 2021, exceeding $2 billion. As of this writing, its volume was around $106 million.

Polygon Volume Source Defilama

In contrast, Arbitrum’s volume in the last 24 hours was over $405 million. Notably, in the new year, Arbitrum’s volume has surpassed $1.8 billion twice.

Arbitrum Volume Source Defilama

TVL Comparison

Examining the Total Value Locked (TVL), there has been an overall decline for Polygon in recent weeks, with the TVL at around $845 million at present. Conversely, Arbitrum’s TVL was over $2 billion, showing an upward trend in the past few weeks.

The L2 Conversation

According to data analyzed by AMBCrypto via L2 Beats, Arbitrum stood as the most dominant Layer 2 (L2) network at press time. During this time, Arbitrum commanded nearly 50% of the market share, boasting a total value locked (TVL) of over $9.8 billion. In stark contrast, Polygon ranked 12th with a comparatively modest $111 million, holding less than 1% of the market share.

This data underscored a significant shift in the L2 landscape, signaling that other networks have moved past Polygon. Not only were these alternative L2 networks generating higher volumes, but they were also attracting a larger user base, as indicated by their growing market shares.

MATIC and ARB Market Trends

The shift in L2 dynamics is also reflected in the market trends of MATIC (Polygon’s native token) and ARB (Arbitrum’s native token). On the 3rd of January, Polygon experienced a significant price crash of around 11.8%, and since then, it has struggled to recover. Before the crash, its trading price was around $1, but as of this writing, it has declined to around $0.8.

In contrast, Arbitrum demonstrated a different trend during the market crash. Despite the broader market downturn, Arbitrum gained over 8%. However, it faced a decline recently, losing over 2% and more than 10% on the 5th of January. As of this writing, it was showing a gain of almost 5%, with a trading price of around $1.8.

Conclusion

The rise of Arbitrum and the comparative decline of Polygon highlight the dynamic and competitive nature of the blockchain space. As these L2 networks continue to evolve, they will play a crucial role in shaping the future of blockchain technology and the adoption of digital assets. The competition between Arbitrum and Polygon underscores the importance of continuous innovation in this rapidly evolving field. As we move forward, it will be interesting to see how these developments shape the future of L2 networks.