Across The Cryptoverse #23 The Layer-2 Holy Trinity: Polygon, Arbitrum and Optimism

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3 months ago

The Ethereum blockchain has the merit of elevating the crypto sector being the spark that fueled the rise of crypto DeFi.

The blockchain saga started with BTC but Ethereum opened the gates for DeFi and Web3 Dapps.

This was possible because the Ethereum open source chain platform has a base layer on which decentralized applications (dApps) can run. The Ethereum mainnet was able to create new crypto and pushed the crypto market into the era of decentralization and financial opportunities.

Ethereum transactions are not cheap, and also require a not too green amount of electricity! The annual carbon footprint and the annual power consumption of Ethereum is 43.17 TWh, same as the annual power consumption of Hungary. It's not getting any better, as the the carbon footprint is 20,5 Mt CO2, equal to the annual Carbon Footprint of Bolivia

Scalability comes into the mix when we analyze the power consumption and carbon footprint for single ++transaction++. One transaction will consume power similar to an average US household in nearly 3 days while the carbon footprint is equal to the equivalent of 84k VISA transactions.

The above issues required solutions and this was the genesis of layer-2 chains! New blockchains were built on top of Ethereum to scale the ecosystem. There are several around but for me Polygon, Optimism and Arbitrum are the Holy Trinity!

The Polygon Blockchain

The Polygon blockchain was the first layer-2 I ever used, and I was instantly impressed by how low the fees were compared to the Ethereum mainnet.

The Polygon protocol is an advanced framework for building and connecting Ethereum-compatible blockchain networks. It has aggregating scalable options and tools supporting the multi-chain Ethereum ecosystem.

MATIC is the native token of the Polygon protocol, an ERC20 token on ETH blockchain that is used for payments and rewards. This is what makes it a bit different than Optimism and Arbitrum, which are using a wrapped version of Ether ($ETH)

I dived into DeFi protocols and had my first contacts with DAOs, learned how to provide liquidity and expolred new ways to earn more assets.

A leap of faith followed when UMA expanded to Polygon, as my search for new markets found a brandnew world. Risk Labs was a pioneer in crypto economics, innovating both the Etherum mainnet and layer-2 chains with tools such as KPI options, Range Tokens, Success Tokens and on-demand synthetic currencies.

The UMA infrastructure built adispute resolution layer known as the Data Verification Mechanism (DVM) and the contract layer, the current set up offers flexibility. The DVM was able to be deployed on added on the mainnet and layer-2 chains, helping Dapps developers and protocols to take advantage of Layer 2 scaling with trusted DVM securing the financial contracts.

The Optimism Blockchain

Paying fees of $100 - $150 per ++transaction++ will never encourage small investors to join the DeFi revolution. What's the point of earning crypto if the fee to claim is higher than the earned income?

The ETH gwei is term is used to define the cost of gas on the ++Ethereum++ ++blockchain++ and how much a ++transactions++ on the ++network++ will cost, depending on the amount of traffic and chain usage. The value will always be lower on layer-2 chains and this is why Optimism become one of the best chains for DeFi exploration..

My optimistic dive happened when PoolTogether expanded on Optimism. The chain is a layer-2 scaling solution that derives its’s name from its underlying technology, the Optimistic Rollup. The Optimism Network brings fast and cheap, while maintaining the primary security of the Ethereum network.

I didn't thought I was eligible when the OP airdrop was announced, as I had low interactions with Optimism. I checked and I was surprised to see that I was also eligible for the airdrop and 271.83 OP tokens due to my involvement on decentralized governance on mainnet.

The Optimism Collective implemented a new economic model to fund public goods, as communities, companies, and citizens are united in a positive synergy that will help all parties to improve and earn. This Collective is governed by the Token House and the Citizens House, both parts with equal rights and power.

The two governance bodies are in charge with balancing long-term vision with short-term incentives by creating the framework which governs the network parameters, protocol upgrades, and the distribution of retroactive public goods funding.

The harmony between the Token House and the Citizens House will enable a collaborative ecosystem to grow and flourish on Optimism. Claiming the airdrop and delegating the voting power is part of the governance, as the delegate will use the voting power in the holder's best interest. The voting power made me eligible for the OP airdrop, as my share of tokens was for being a DAO voter.

I decided to HODL and delegated my voting power to someone dude that will promote NFTs, marketplaces and support NFT projects in the Optimism space. I thought that selling $OP tokens under one dollar will be a big mistakes and said pass to a small bag of money!

And then .... February 2023 ... 11,700,000 $OP tokens were shared to over 300,000 unique wallets! The OP Airdrop #2 focused on rewarding positive-sum governance participation and power the Optimism users.

The $OP Airdrop #2 didn't required a claiming process, as the tokens were sent straight into the wallets of the users that delegated their tokens. I was smart not to sell and I was even smarter to delegate my $OP tokens. There were tow criteria and some multipliers that enhanced the drop ... have delegated the voting power of their OP tokens and/or have spent more than $6.10 on gas (the average cost of a transaction on L1 Ethereum) on Optimism since May 2022.

The bonus attributes were Substantial delegation (delegated 272 OP for ≥ 200 days), Gas guzzler (spent more than $20 on L2 gas since May 31 2022), Consistent Optimist (used an application on OP Mainnet in six different months since May 31 2022) and Active delegator (had ≥ 20 OP delegated at the date of snapshot) One bonus category gave 1.05x, two categories gave 1.10x, three 3 categories gave 1.50x and ticking the boxes for the four categories maximized the airdrop by 2.00x.

No idea about my multipliers and bonuses but I was happy to find 133.9 $OP tokens in my wallet! I said 2023 will be good ... I said I will go Beast Mode! Not I got extra ... optimistic!

The Arbitrum Blockchain

The Arbitrum lore says that a professor observed scalability issues in the blockchain technology that predated Ethereum's launch! This issue was solved through "Arbitration".

Arbitrum is an Ethereum layer-2 chain scaling solution that supports smart contracts without the limitations of scalability and privacy. The chain become popular due to low transaction fees and less congestion than mainnet, and FOMO and hype were added in the mix when the token airdrop rumors started.

Both crypto savvy people and degens turned their eyes to Arbitrum, joining the early developers that created Arbitrum that implements the contract’s functionality. It was just the start of the great Arbitrum migration, as the crypto community found fertile grounds on layer-2. You didn't had to be as smart as Elon Musk to realize that Ethereum is not money-friendlyand move to L2 chains

The airdrop hunters and crypto investors were kept in stand-by for months, with no clear criteria... until one sunny day! BOOM! ... the airdrop was confirmed and the eligibility page was live! Went to check, not hoping for much, and I was blown away by the eligibility!

I was eligible for 2250 $ARB tokens, due to my activity on Arbitrum. The claim date was announced and those eligible for the airdrop could check which boxes they ticked to qualify. More points were given for transaction frequency and interaction, and I've conducted more than 25 transactions or interacted with more than 25 smart contracts. I always said that consistency is the key to success!

The Ethereum mainnet days of glory are long gone, as layer-2 chain are rejuvenating the market through cryptocurrencies and blockchain solutions at a lower transaction price! with less impact on the environment.

I spent some time exploring the Arbitrum website and was amazed how well set it was. Everything is one click away, from proposal and ecosystem ... to vision and governance. Now is the time to make some cash and grow my portfolio.

The $ARB tokens will be used for decentralized governance, and for me were the gate way to discover GMX! The perpetual trading platform was launched in September 2021, offering perpetual contract trading with up to 50x leverage, but I only discovered it in 2023!

GMX doesn't trade tokens, as users will deposit collateral to take long or short positions. The traders will be paid in USDC as settlement profit for shorts or the pair token for longs. The Arbitrum airdrop announcement turned GMX into "El Dorado", as the token-hunters tapped into zero price impact trades to tick boxes.

The market prices are based on Chainlink's oracles, which aggregates price feeds from leading exchanges. This makes positions safe from liquidations due to random ticks on a single automated market maker. This innovative system helped GMX to became the top dapp on Arbitrum by TVL and the leading perpetual exchange in DeFi. You may see GMX as an ++altcoin ++but this crypto is a powerhouse!

The $GMX token powers the GMX ecosystem, and the total maximum supply is estimated at 13.25 million. Staking $GMX tokens will bring three types of rewards: escrowed GMX (esGMX tokens), variable ETH and multiplier points that boost APRs and encourage long-term staking.

The leveraged trading on GMX bloomed thanks to the low fees on Arbitrum and Avalanche, as crypto savvy people dived into leveraged positions without an expiry date.

GMX relies on the liquidity pool to enable instantaneously transactions. The liquidity pool has it's own token, called $GLP, and the holders will provide liquidity to the exchange, whilst getting exposure to an appealing mix of underlying crypto-assets.

GLP is no memecoin with no utility, is sharing the remaining 70% of the generated fees. The implications in decentralized governance are huge and will also innovate the blockchain sector.

GMX shares 30% of the accrued platform's generated fees to the holders, while GLP holders will share the remaining 70% of the generated fees. Which of them is a better token to hold? Probably GMX, but I didn't bought any when it was $40 so I had to chose GLP.

The core feature of GMX is the community-operated ‘unionized' liquidity pool (GLP Pool). The $GLP token is in fact an index used to provide liquidity for leveraged trading, which can be bought with any of the assets that are in the LP. The fee depends on the liquidity pool demand, being cheaper to buy GLP with index assets that are demanded by the market but are underrepresented in the pool.

I decided to explore GMX and add GLP tokens in my portfolio, mainly because of the impressive APR. The GLP’s APR is generated by real yield, meaning the profit is not generated by deflationary mechanics such as token emissions, but by awarding token holders a share of actual revenues.

The GLP price was lower then usual, so felt like a bargain to get it at $0.862 per token. The low volatility is given by the 52% stablecoin percentage, which is reassuring ... unless USDC depegs again!

Unfortunately I got busy with other stuff and never completed the trade. I came back to GMX and bought 322 $GLP tokens, now at a higher price then the previous day. From $0.862 to $0.971 may not feel like a big deal, but the price change made me buy 15 GLP less.

No need fore oracles or fancy data analysis ... GMX and GLP are an economic boom that will constantly pushe the technological boundaries of the system!

The Arbitrum hype made the APR surge, and at one point I was enjoying 51.94% yields on my GLP tokens. Farmed $0.52 worth of ETH in two days and this accelerated rate made me consider a GLP top-up.

Back to GMX for another share of GLP tokens, this time as a discounted price. Go big or go home they say... and I went big on GLP! Increased my stash by 200% and was looking forward to more ETH power farming.

Checked in a week and claimed $2.87 in ETH, as I wanted to explore and stake into GMD vaults. The GMD Protocol is a platform for maximizing yields and aggregating data built on top of already existing software and using GMD’s reserve token on Arbitrum. The best part is that the GMD's vaults are single-stake pools for ETH, BTC and USDC, taking impermanent losses out of the discussion.

Across Protocol is the bridge that connects them all!

Across Protocol created a pioneer bridge between mainnet and the Holy Trinity of layer-2 chains. The innovating bridge made it possible to move assets more efficiently between Ethereum, Optimism, Arbitrum and Polygon.

The Across bridge is the bridge that Ethereum deserves, being fast and financially efficient! Across connects Layer 2 and rollups to L1 Ethereum, being secured by the UMA's optimistic oracle. It has a single liquidity pool, a competitive relayer landscape, and a no-slippage fee model.

The launch of the $ACX token was one of the bold moves made by the team, creating a DAO governance and synergy between the project and the community. Was this the end of the innovation? No.... Across constantly implements ground breaking solutions and tools, constantly promoting the crypto decentralization and implementing blockchain technology in the Cryptoverse.

But why is the ACX Reward Locking a game changer? Most liquidity mining programs do not encourage and reward long-term supporters of the project, as token dumps are a common thing.

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