The implied rate is the rate of return that liquidity providers expect for locking up their capital to provide near-instant settlement (they lock their token X on L2 through the exit gateway for 1 week and provide you some token X which already exists on L1)
Probably starts near 1% fee as opportunity cost in low risk yields are high in crypto currently, but as competition grows and more capital enters this space, this will probably trend lower to 0.2 - 0.4% over the next year or two
The narrative has started picking up for other L1s recently, and I think they will see a lot of growth in the short term, but they lose a lot of value prop to a fully functioning OR layer.
I think it will be fairly simple to get liquidity to move to L2 through incentives
The incentive war will shift from between dapps on ETH to dapps across ETH L1 , L2 and other L1s.
Actually, rates at first might be lower because projects with large treasuries (@synthetix_io , @AaveAave@UniswapProtocol ) would be willing to provide expedited exit liquidity for cheap since they care more about growing the network rather than optimizing their yield
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This was pretty insane memecoin alpha from AVAX foundation
Whenever a big player says they are buying, it never fails to ignite momentum when market conditions are ok (CZ/Binance in March, early Saylor buys, etc). Suddenly, the technology improves
Think you see this strategy replicated across all chains/foundations in the future, just as all of them launched DeFi incentive programs
It’s a very high ROI/probability way to increase onchain activity, bridging inflows, community members, etc
It’s the same reflexive loop that chains saw with NFTs last cycle where people needed to buy the chains coins to buy the NFTs and every chain wanted NFT collections but I think there’s more power in this loop because tokens are better speculative vehicles than their NF counterparts
1/ The road ahead for Arbitrum ($ARB) - Mega thread
2021
- Arbitrum launch
2022
- Nitro upgrade for improved performance
- Arbitrum Odyssey introduced but paused
- Arbitrum Nova, a separate chain built for lost-cost transactions focused on gaming and social apps was launched
2/ 2023 was the year of big launches and announcements
- Launched highly anticipated $ARB token, with 1.162B tokens distributed to ~580k wallets
- TVL doubled since the start of the year
- 4th highest TVL chain - more than Solana and Optimism combined
- Resuming Arbitrum Odyssey
3/ But things are just getting started for Arbitrum.
Believe that these following catalysts/narrative will really kickstart the arbitrum flywheel going into 2024:
1/ At $5B and $2B TVL, Aave and Compound are currently the largest money markets in crypto
By innovating while others cruise, @RDNTCapital is the top competitor to challenge the throne and has the potential to become the new King of Money Markets in all of crypto
2/ At a glance:
-$260m TVL across Arb/BSC
-First functional cross-chain MM (lend on X chain, borrow on Y)
-Launching on ETH & zkSync next
-Safely adding more collateral like $ARB (other MMs move slowly)
-Token design optimized for demand & protocol growth
Accumulated spot position in $STX last 2 weeks as well
As an investment, it hits the sweet spots of good supply schedule, strong marketability, cheap relative valuation, important catalysts ahead, proven bear market resistant builders
Main catalyst is the Bitcoin Halving in a year and I think Hal's comparison to LDO & the merge is pretty apt
Second big catalyst would be potential catalysts for DeFi on Stacks - potentially catalzying a 9-10 figure DeFi ecosystem built around $BTC
On relative valuation, my proxy would be Lightning network who i believe if they had a token would be valued at least multi-billion FDV just based on brand value alone, regardless of usage
But if DeFi on Stacks takes off, it probably leap frogs Lightning on actual usage
A thread presenting evidence for a mid term bottom and oncoming "echo bubble" with thorough confluence from technical analysis, onchain data, and exchange/derivatives data
/2 From a TA perspective, we have just given every person that considers technicals in their trading/investing reason to start to look for long exposure. $BTC & $ETH have broken above diagonal trendlines & MAs, started weekly momentum crossovers, reclaimed important supports
3/ The most important indicator of an oncoming rally is the weekly RSI crossover from a previous very long period of bearish momentum implying large potential energy for a move higher based on a supply squeeze.