TLDR 📃

• Arbitrum has passed its first governance proposals and is now planning to distribute a huge amount of tokens to DAOs. Who will benefit most from this move, and what will the DAOs do with all those tokens? We reveal all.
• Check Shanghai worries off the list. Sorry to disappoint the prophets of doom. The next big Ethereum upgrade is EIP-4844, and it could be a game-changer for layer 2s.
• EIP-4844 will make layer 2 transactions as cheap as Solana, which means lots of new dApps will start to make economic sense. Exciting times ahead!

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your responsibility and yours only.

Layer 2 overview 🔭

The crypto price roller coaster has been climbing lately, with prices surging across the board. No wonder total value locked (TVL) in the layer 2 ecosystem has now surpassed the $10B mark!

 

Key developments 🗝️

Arbitrum's first two governance proposals have been approved: This is a significant milestone: The first proposal adopts the Arbitrum constitution and the second establishes the Arbitrum Foundation, which means that Arbitrum governance can move forward.

Attempted hack on ZkSync's Twitter: ZkSync has reported a hack attack against its Twitter account, but their robust two-factor authentication foiled the would-be hacker.

Uniswap V3 to launch on Polygon zkEVM: Uniswap is all set to launch V3 on Polygon's new zkEVM layer 2 network. The decision was made with a unanimous governance vote.

Arbitrum is picking up steam again 🚂

Arbitrum has taken to Twitter to announce that it’s getting ready to distribute a whopping 112,834 million ARB tokens to DAOs within the Arbitrum ecosystem. This is a clear indication that the highly anticipated airdrop is just around the corner. It will give projects a lot of money to use as incentives for more growth. Bullish.

4/6 🎉With most of the DAOs having completed this, today we will begin test transactions to those that have publicly provided their treasury wallets, followed by a full distribution later this week.

We’re still waiting on a few DAOs to provide their addresses.

— Arbitrum (💙,🧡) (@arbitrum) April 18, 2023

Arbitrum keeps on growing. TVL is sitting close to $7B and rising. They’re definitely on a roll.

What’s better is that Arbitrum is doing 36% of Bitcoin’s revenue! This shows that layer 2 networks are not only racking up a lot of TVL, but also generating a ton of revenue. 

Alternative layer 1 networks have also built up a lot of TVL, but they never came close to these revenue levels. It's fascinating to see how different networks are performing in this rapidly evolving crypto space.

Want a slice of the ARB airdrop pie? Check out Arbvalues, which is tracking all the protocols that are receiving airdrop funds. As you can see, some are receiving a considerable amount of ARB compared to their market cap. Yes, these can be great investments (if their teams have the brains).

For the best chance of scoring free tokens, find out the protocol’s airdrop plans by joining their Discord channel or visiting their governance forum.

Why EIP-4844 matters📑

Shanghai was a big deal, but Ethereum's development journey marches on. The next big event on the horizon is a significant upgrade known as EIP-4844.

Ethereum developer Tim Beiko recently appeared on a podcast to discuss this new upgrade - but don’t worry, you don’t need to listen to the full hour to find out what it’s all about. We’ve got you covered.

Controlling transaction costs

Ethereum has always struggled with the problem of transactions becoming too expensive as demand increases. L2s were a solution but still not as cheap as Solana which is a disadvantage. 

That’s where EIP-4844 comes in to save the day.

🔴 Problem: As more people use L2 networks, they generate more data to keep in the ledger. This makes transactions more expensive.

🟢 Solution: A new transaction format called "blob-carrying transactions." These transactions include a lot of data that can't be directly accessed by the L2 network - BUT the network can still verify that the data is there. This makes transactions cheaper because users don't have to pay as much to store all the data on the L2.

With EIP-4844, L2 transactions will be lots cheaper. This means networks like Arbitrum and Optimism will be able to charge less than $0.01 per transaction.

Why it matters

Cheaper transactions are about to shake things up, and we can’t wait to see what new use cases will emerge on layer 2 networks. Thanks to the EIP-4844 upgrade, apps requiring lots of microtransactions suddenly become feasible. 

Imagine decentralised social media, for example, or gaming, where players do a lot of buying and selling. With such low transaction costs, we can expect to see many previously unthinkable products emerge.

Networks like Solana have been leading the way with low-cost transactions for quite some time, making them the go-to platform for these use cases. But with this upgrade, Arbitrum will be about to compete with Solana for this business and take even more market share!

When will it go live?

EIP-4844 is expected to launch during the Ethereum Cancun-Deneb upgrade. Schedules are fluid, but we expect it to happen sometime during the second half of 2023. We’re eagerly anticipating this upgrade and all the exciting developments that it will bring.

Other news 📰

• Unstoppable Games announces strategic investment from StarkWare: The plan is for Unstoppable to build on-chain games on Starknet, which should help drive growth for StarkWare.
• Hundred Finance hacked on Optimism and lost $7.4 million: Multichain lending protocol Hundred Finance suffered a security breach on the Optimism layer 2 scaling network, losing approximately $7 million.
• INTMAX raises $5M to build a stateless zkRollup: INTMAX has recently announced a successful round of seed funding, raising over $5 million from prominent investors. The company’s stateless zkRollup, which leverages zero-knowledge proofs, is attracting attention as a layer 2 scaling solution for Ethereum.
• Lido considers using Its ARB airdrop to boost activity on Arbitrum: Under the new governance proposal, Lido would accept $1.2 million in ARB tokens and award them to liquidity providers in wrapped staked ether pools.

Cryptonary’s take 🧠

As predicted, Arbitrum has been able to move past its governance debate and is now focusing on the upcoming airdrop to DAOs.

If you’re interested in how we’re positioned in the Arbitrum ecosystem, we invite you to check out our Skin In The Game report. It’s a monthly update on our investments for Cryptonary Pro members, and it’s always jam-packed with insights on the latest developments in crypto.

Ethereum’s EIP-4844 is the next major upgrade, and it’s big news for L2s. The upgrade will make transactions cheaper, and we predict that the narrative around EIP-4844 will benefit layer 2s in the same way that Shanghai buzz boosted liquid staking.