The whole cryptocurrency ecosystem is growing at such an incredible pace that it already contains countless smaller ecosystems. Those are growing almost as fast as the whole cryptocurrency sector itself.

One of such examples is Arbitrum with its whole ecosystem. Arbitrum as such is not only solving several problems on its own, but allows its ecosystem to grow on it and help solve other problems. And this allowed some projects to blossom. Two of the best examples of that are GMX (GMX) and Treasure DAO (MAGIC), which will be introduced in the following article.

What is Arbitrum?

While this article is not meant to be about Arbitrum, but rather its ecosystem and two wonder-projects that have emerged from it, it might be better for the overall understanding to look at what Arbitrum is and why its ecosystem is growing in numbers.

Arbitrum is a layer-2 protocol that is designed to improve the capabilities of Ethereum and its smart contracts. One of the main problems it aims to solve is scalability and speed of transactions, as well as the size of gas fees. On top of that Arbitrum is also expected to improve the privacy of the transactions thanks to different features.

To put it very simply, Arbitrum allows developers to run unmodified Ethereum Virtual Machine (EVM) contracts on Ethereum and its transactions, however, on the second layer. Yet, it also allows the developers to still benefit from the security of layer-1, improving not only its efficiency, but also execution costs and thus the overall user experience.

To do this, Arbitrum uses transaction rollups. These record batches of transactions are submitted on the main chain of the Ethereum, while being executed on the layer-2 sidechain. This simply means that there is not such a pressure on Ethereum, as transactions on Arbitrum take the computational burden of the main chain.

Fees of ETH vs Arbitrum, Source: dune.com

This can be for instance seen through gas fees that are being paid for Ethereum and Arbitrum transactions. While it seemed that Arbitrum was off to a rocky start with higher gas fee per transaction at its inception, ever since July 2021, the average gas fee paid per transaction is significantly lower for Arbitrum than for Ethereum.

Current state of Arbitrum ecosystem

This solution has quickly gathered a lot of attention. The overall transacted ETH volume is approximately about 28 million solely on ARB. The number of users is steadily rising since its inception and so is the inflow of new users per month.

Number of new users vs existing users of Arbitrum, Source: dune.com

Similar trends can be spotted when looking at the overall ecosystem of Arbitrum and its transaction volume. A steady rise in the number of transactions per month can mean two things. Either there are more projects being built on top of Arbitrum or the projects already using Arbitrum are getting more popular. Both of these could also be true at the same time, which would only amplify the growth of this ecosystem.

Number of transactions on Arbitrum per month, Source: dune.com

While Arbitrum does not only solve a significant problem of Ethereum, it also has a huge network of projects and ecosystem that is connected to it. Some of the most intriguing and promising projects from the cryptocurrency world are built on this very platform, such as GMX and Treasury DAO (MAGIC).

What is GMX (GMX)?

GMX is one of the most promising decentralized derivative exchanges that has been deployed on Arbitrum One Layer 2 (L2), as well as Avalanche blockchain. It is also one of very few coins and tokens that has not seen a drastic double digit drawdown of its price this year. GMX is one of the more complex projects that combines advanced decentralized finance (DeFi) and the idea of the crypto exchange.

Its success might be mostly attributed to the nuanced and rather complex solution that GMX wants to deploy. This decentralized spot and perpetual exchange aims to bring low swap fees and deep liquidity to everyone. Through this, GMX wants to guarantee a zero slippage during trading.

Currently GMX offers spot trading of several different assets. Vast majority of them belong to the biggest cryptocurrency and stablecoin projects based on market capitalisation. These are for instance ETH, USDT, USDC, WBTC, LINK or UNI.

Current data of GMX, Source: gmx.io

It does not use a traditional order book model that most exchanges use. On the contrary, just like many decentralized exchanges, it has decided to go another way and that is to use liquidity pools (GLP). This is a multiple asset provider that executes trades thanks to the usage of automated market maker (AMM) and pricing via oracles.

GLP is a token for liquidity providers that accrues 70% of the platform’s generated fees. GMX is a utility and governance token that accrues 30 % of the platform’s generated fees. Users and stakers can for instance stake GMX on Arbitrum or Avalanche and earn different rewards such as escrowed GMX (esGMX), multiplier points or ETH fees on Arbitrum or AVAX fees on Avalanche.

GLP might be one of the biggest innovations that GMX has come up with. The price of the GLP tokens is derived based on the total value of the assets in the given pool divided by the total supply. This also influences the minting and burning process. For instance, if the liquidity provider adds more assets to the LP, they mint GLP tokens. If they remove them, the GLP tokens are burned. This means that if the liquidity of the pool is low, so are the fees. That incentivises liquidity providers to add more assets to the given pool.

GMX is offering a wide range and variety of different assets as well as financial instruments. These include for instance swaps, leverage, perpetual trading or GLP, its native liquidity provider. GLP consists of an index of assets with target component weights. It is also one of two native tokens that the exchange currently offers.

Historic price development of GMX, Source: gmx.io

Since the GMX token has been introduced, its price has risen by more than 300%, from around $16 to $48. The ATH of this token was at almost $60, which happened fairly recently. GMX is one of very few tokens that has seen such a drastic bull runs this year.

What is Treasure DAO (MAGIC)?

Another interesting and important project connected to Arbitrum is Treasure DAO (MAGIC). Treasure DAO is a decentralized project that aims to connect NFT and DeFi worlds. It is regarded as one of the best and most promising NFT marketplaces built on Arbitrum.

Its goal is to build this through NFT marketplace as well as different efforts and plans, in which Treasury DAO plans to bridge the gap between non-fungible tokens and decentralized finance. Currently it is trying to achieve its goal through acquisitions of new partnerships with DeFi and NFT projects. 

The main audience and user base for Treasure DAO are gamers and artists, as the project currently dabbles mostly into the gaming industry. It thus also brings on the table GameFi and projects connected to this sector, while having gamers, game developers or artists still as the main target group. All of these groups are expected to see an increase in the value and use of either DeFi or NFTs, so a project that blends them together might get the best of both worlds.

Treasure DAO Launches MagicSwap, Source: NFTgators

There are several components that can help with integration of DeFi and NFTs. First of them is Bridgeworld, which is a metaverse and the flagship product of Treasure DAO. It offers DeFi functionality such as staking, providing liquidity or trading NFTs. It also allows minting of MAGIC token, a native token of the whole Treasure DAO ecosystem.

MAGIC is a true centerpiece of the project. It is a fair launch token that powers the whole infrastructure of the Treasure DAO. MAGIC acts not only as a native currency, but also as a gameplay mechanism or in-game reward system. Moreover, it also acts as a reserve asset across different games or Treasure NFTs. Through this, it turns them into productive assets, instead of just an art piece.

MAGIC can not only be earned through staking, but it can be earned by playing various games in the Treasure-verse. It is a deflationary asset, which means that the early investors will be rewarded the most as the price is expected to rise with decreasing supply, if the demand increases or stays the same.

Arbitrum ecosystem offers much more

Arbitrum as such is becoming one of the most complex ecosystems in the cryptocurrency world. It is by no extent only about GMX and Treasure DAO, however, these two projects seem to be gaining more and more ground in its ecosystem.

However, there are other projects, platforms or protocols worth looking at that are built on or are using Arbitrum. These are for instance SushiSwap (SUSHI) with $300 million locked on Arbitrum, Curve (CRV) with over $150 million on Arbitrum or Uniswap (UNI) with around $50 million. However, it also contains new and interesting projects such as Dopex (DPX), Beefy Finance or (BIFI) or Sperax USD (USDs).

Conclusion

Arbitrum has one of the fastest-growing ecosystems in the cryptocurrency world. No wonder, with its solution as well as underlying technology it works as a great incubator for many established as well as emerging cryptocurrencies. The rise of GMX and Treasure DAO on Arbitrum can only attest to that.

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