A blockchain network is as good as the economic activity happening on it.
@Arbitrum has, over the years, fulfilled this aspect by building a strong ecosystem of apps, providing space for new ones, and fostering experimentation.
The chain’s total value locked (TVL) peaked at the beginning of October 2025, up 42% from the start of 2025, and is now back to similar levels.
This retracement occurred for the reasons most crypto traders are aware of: the October Liquidation Event.
Given the setbacks and assets such as Ethereum down ~38% and Bitcoin down ~28% from their all-time highs (touched before the Liquidation event), Arbitrum managed to retain TVL at approximately its previous level of ~$3 billion.
While TVL provides a general bird’s view of the whole ecosystem, let’s go beyond the numbers to focus on key areas where Arbitrum witnessed growth.
Established partnerships with traditional businesses, such as Robinhood, to issue equities onchain.
Growing its revenue through the launch of Timeboost, which allows Maximum Extractable Value (MEV) searchers to bid for priority transaction inclusion.
Launched major incentive programs like DRIP (DeFi Renaissance Incentive Program).
Focused on Real World Assets (RWAs) and scaled the value tokenised to over $800m.
Deployed capital to grow and diversify Arbitrum Decentralised Autonomous Organisation (DAO) revenue and achieve the sustainability needed to constantly fund growth.
In 2026, Layer 2 (L2s) must expand beyond its initial proposition, as blockspace becomes cheaper over time. Reinventing oneself requires serving as a credible, neutral network for economic activity, offering high-quality products to consumers, and, most importantly, maintaining deep liquidity.
To put it simply, L2s need to focus on organic product growth and attract liquidity.
Since these go hand in hand and the growth of one would benefit the other, Arbitrum's focus has been on bringing more and better use cases and building where it can deliver unique value. This approach can also be categorised as top-down, as building good products will attract liquidity over the long term. In the sections that follow, we will discuss the underdeveloped areas that Arbitrum focused on and sought to grow.
Revenue and Sustainability
To grow, every business needs a sustainable revenue stream, and for blockchains, this requires a careful balance of incentives to drive ecosystem growth. In turn, this creates a flywheel effect in which growth trickles down across the ecosystem, attracting more users and revenue, driving further activity, and sustaining the chain's growth.
In the case of Arbitrum, the focus on Ecosystem Growth has been advanced through the launch of its milestone-based grants program, a scaled-down version of previous incentive programs such as STIP, STIP.b, and LTIPP.
However, incentives alone don’t guarantee success and sustainability.
To become independent of ongoing subsidies for ecosystem growth, Arbitrum has launched several initiatives to increase its revenue. Among those, the Arbitrum DAO has unlocked a new monetisation channel by introducing mechanisms such as Timeboost in April 2025.
Timeboost is a transaction ordering policy that enables the chain to capture MEV and reduce spam across the network. This enables searchers to get ahead of the line through the “express lane” introduced by this mechanism. A slot in the express lane remains valid for 60 seconds and is awarded to the highest bidder among searchers.
Timeboost has generated over $6 million in revenue and has regularly accounted for more than 30% of the net chain revenue of approximately $25 million since the start of 2025.
Contributions from Timeboost and broader network activity increased revenue and drove growth in the Arbitrum DAO Treasury. Since enough work has been established towards growing the revenue source, Arbitrum also focused on other key areas:
The treasury grows in terms of non-ARB assets.
Ensuring the treasury assets produce revenue.
Currently, ARB still represents about 78% of the Treasury. Notably, the share of non-ARB assets (stablecoins such as USDC, USDTBL, ETH, RWAs, etc.) increased from $94 million to $161 million in 2025, a 71.8% growth.
Furthermore, Arbitrum DAO deployed over $100 million from the treasury across the ecosystem protocols, allocating funds to categories such as Lending, Liquid Restaking, RWA, and Perps to generate interest. Regarding numbers, accrued interest to date is ~$2.3 million at an average 30D Annual Percentage Yield (APY) of ~3%, which aligns with the initial focus on making the treasury productive.
Revenue from different sources contributes to the treasury's expansion and diversification while increasing ecosystem usage through strategic deployment. Beyond this, the DAO grants program welcomes new products and experimentation on the chain, providing a space for new ideas to work.
RWAs on Arbitrum
RWAs on Arbitrum have grown immensely during 2025, starting from $150 million to now $870 million, a 480% growth in the value tokenised on the chain. This growth also outperformed the broader market, with net tokenised value across all chains up over 300%.
On Arbitrum, growth is driven by issuers including Exodus, Robinhood, Spiko, Theo, BlackRock, Franklin Templeton, and many others. By asset type, Stocks lead on Arbitrum, followed by U.S. Treasuries and EU Gov Bonds, accounting for 35%, 34.7%, and 27.9% of RWA value, respectively. Compared with similar metrics for chains such as Ethereum, Solana, Stellar, and BNB Chain, the RWA value is heavily represented by U.S. Treasuries.
This trend indicates a faster-growing market for tokenised stocks on Arbitrum, but it is important to note that private equity currently leads, while public equity accounts for a smaller share. On the other hand, chains like Solana with products and initiatives such as @xStocksFi and @OndoFinance (which are tokenising 200+ stocks, commodities, and ETFs), make them a leader in onchain tokenised public equity.
To support the growth of RWAs on Arbitrum, the DAO deployed ~$44 million from the treasury across various assets, including BUIDL from BlackRock, BENJI from Franklin Templeton, USDY from Ondo, and others. These investments were made as part of the Stable Treasury Endowment Program (STEP) and have generated $1.78 million in cumulative interest to date.
While the majority of the chain's tokenised stock representation comes from Exodus, the partnership with Robinhood (launched in July 2025 on Arbitrum) also contributed by tokenising 1,900+ assets, with a tokenised value of $16 million. One of their biggest deployment includes Google (GOOGL), MicroStrategy Option Income Strategy ETF (MSTY), Bitmine (BNMR), Microsoft (MSFT), and Meta (META).
Additionally, it is important for Arbitrum to position itself well in alternative asset classes, such as stocks and commodities, which have broader audiences and represent much larger markets.
While having a fund tokenised is great at one end of the spectrum, having liquid onchain assets from traditional markets adds another layer of value. As these assets grow onchain and are traded and transferred at a high rate, they automatically drive the chain towards more economic activity.
DeFi Renaissance Incentive Program (DRIP)
Another key strategy to expand activity across the chain was the launch of DRIP, one of Arbitrum's largest incentive programs designed to stimulate economic activity. Contrary to previous spray and pray incentive programs, the goal of DRIP was targeted to key assets and winning protocols. This section outlines how the program has performed to date, its mechanics, the protocols and assets being rewarded, and its role in supporting the ecosystem.
The program started in September 2025 and allocated 80 million ARB tokens across four seasons. The first season of the program is currently running, and it started on September 3rd 2025, and will end on February 17th 2026, with a budget of 24 million ARB (including 8 million ARB discretionary budget) to incentivise lending and borrowing of yield-bearing ETH and stable assets across blue-chip lending protocols such as @aave, @Morpho, @0xfluid, @eulerfinance, @Dolomite_io, and @SiloFinance.
The program started with different epochs (1 epoch = 2 weeks) where:
2 Discovery epochs: Market Exploration phase to determine which protocols perform best with the incentives
6 Performance epochs: Optimised incentives distribution based on the analysis of the previous epochs.
4 Taper epochs: Gradual reduction in incentives to ensure TVL/activity retention.
The impact of the DRIP campaign?
DRIP is a clear example of how a targeted campaign focused on key areas and assets can drive economic growth. If we look at the market size of incentivised lending protocols, it was $2.55 billion at the start of the campaign and is now $2.91 billion (+14%), peaking in late October at $3.36 billion.
It is also important to note that the market size held steady, while the ETH price fell by over 30% from the start of the campaign, underscoring the importance of incentivisation during market drawdowns.
Eligible assets during the campaign grew at different rates: some declined in market size, while others grew significantly.
Pointing at the ETH-related assets, two outliers, Kelp (rsETH) and Renzo (ezETH) grew ~950% (from $28 million to $230 million), and ~450% (from $2.6 million to $126 million), respectively. While this is also true, their size on Arbitrum at the start of the campaign wasn’t large relative to other incentivised assets, such as weETH and wstETH, but they ended up with a market size comparable to theirs.
On the other side of the equation, the USDC collateral assets, the majority of them increased in market size and assets like USDai and thBILL started with near-zero market size and grew to $50-$100 million.
The growth of these assets (USDai and thBILL) is not solely the result of the DRIP campaign; it reflects a mix of factors, including protocol-level growth and Arbitrum Treasury deployments, such as thBILL.
The section above focused on DRIP and the growth of the targeted assets and protocols. The next section will examine the broader Arbitrum ecosystem and its expansion.
Inside the Arbitrum Economy
The Arbitrum Ecosystem has seen several notable project launches over the past year, including @USDai_Official (a GPU-backed stablecoin) and @variational_io (an RFQ-based perpetual exchange), which have grown into leading projects on the chain.
In addition, established protocols such as Morpho and Euler were launched on the chain, contributing to the growing lending sector.
In this section, we will cover the top protocols across categories that drove the chain's growth and how they contributed to expanding the feature base for their respective category.
Lending
Lending is the largest category on Arbitrum, accounting for 45% of the chain’s TVL, consistent with the category's dominance on other chains. Aave is the largest lending protocol on the chain by value locked and active loans, followed by newer deployments such as Morpho.
Aave
Aave is the largest lending protocol by size and commands 60% of the total borrowed value in the category.
Aave has been building and refining its protocol for many years, making it well-suited to deposits of all sizes. Its sole goal is to beat banks at their own game, which aligns with its positioning as an “onchain bank.” Aave currently works on a pool-based lending model.
Focusing on their growth on Arbitrum, they are one of the largest deployments on the chain, accounting for ~40% of the chain’s TVL. Moreover, for Aave, Arbitrum is the largest L2 deployment, followed by Base.
Currently, Aave is preparing to launch V4, whose testnet went live in November. V4 is designed to address capital fragmentation introduced in previous versions and to transition the protocol to a modular lending infrastructure through features such as the Liquidity Hub and Spokes.
Another announcement Aave made around the same time was the launch of the Aave App. This app is designed to provide DeFi lending exposure to a broader retail audience and will serve as a new tool for onboarding net-new crypto users.
Morpho
Morpho runs on the curator model, where depositors deposit into managed vaults that help lenders earn yield passively while curators optimise for better returns.
Morpho launched on Arbitrum last year and has since become the second-largest lending protocol by TVL, currently accounting for ~8% of the value locked on the chain.
Morpho partnerships are the major contributor to their success. For example, their partnership with Coinbase generated $2 billion in locked collateral for over $1 billion in onchain USDC loans.
On the product side, Morpho is working on its V2 and has launched its Vault V2 on Ethereum, with Markets V2 deployment coming soon. V2 introduces fixed-rate, fixed-duration lending and aims to become an intent-based protocol that enables lenders and borrowers to generate and consume loans on fixed terms.
Fluid
Fluid takes a different approach to building lending protocols, prioritising capital efficiency. On Fluid, liquidity is unified in its “Liquidity Layer,” which connects to different offerings, including Lending and Trading. Features like “Smart Collateral” and “Smart Debt” enable users to gain exposure to both lending and trading fees.
On Arbitrum, Fluid has performed well, and incentives such as DRIP have helped drive growth on the chain. Since the start of 2025, its TVL on Arbitrum has grown by over 500%, reflecting its increasing dominance in lending on the chain.
Like others, Fluid is also working on its next product phase: Fluid DEX v2, which will introduce new types of DEXs and position Fluid as a programmable product.
Dolomite
Dolomite is a money market that has carved out a niche by supporting a wide range of yield-bearing assets as collateral on its platform, including GLV and GM tokens from GMX.
The platform has seen a 58% decline in borrowed capital on Arbitrum since peaking in September 2025, but activity has since remained sustained. Their recent partnership with World Liberty Financial has driven active loan metrics on Ethereum, with USD1 as the most borrowed token.
Euler
Euler positioned itself as a programmable, permissionless DeFi credit layer, enabling anyone to create custom lending vaults. They debuted on Arbitrum last year and quickly surged in TVL, but then declined after the October Liquidation Event, with current active loans being over $22 million.
Similar to Fluid, Euler has also built a trading application on top of its credit layer, EulerSwap. It utilises Uniswap v4’s hook architecture and allows supplied assets to serve as trading liquidity, improving capital efficiency. Additionally, products like EulerEarn make it easier for users to earn yields.
Silo Finance
Silo Finance focuses on risk-isolated lending, utilising independent “Silos” for each asset to prevent shared risk. This ensures that if there is a problem with one market, others aren’t affected. In their current version, i.e., V2, they also provide managed vaults in which curators continuously rebalance to maximise returns for depositors, similar to Morpho.
Silo Finance has experienced sustained growth on Arbitrum since 2025, with spikes around September 2025. Arbitrum is its second-largest deployment after Avalanche, accounting for ~30% of the product's net borrowing activity across all chains.
They are working to get Silo V3 out this quarter (Q1 2026). V3 will feature lending markets with bad-debt protection, money markets for net-new assets, greater capital efficiency, risk scoring and market-specific disclosure, and a cleaner UX.
DEXs
The DEX sector serves as the liquidity anchor for any ecosystem. Arbitrum DEX volume is skewed towards a few key players, including Uniswap, Fluid, PancakeSwap, and others.
Compared on 30-day DEX volumes, @Uniswap leads with a 59% share, followed by @PancakeSwap (13.8%) and Fluid (12.5%), indicating that Uniswap has become the go-to protocol for swaps on the chain.
Moreover, Arbitrum DEX TVL increased at the start of 2025, reached its 2-year high in early October, and later declined, and is currently down ~22% from January 2025. This is again due to the October market crash.
Uniswap
Uniswap remains the prominent DEX on Arbitrum, accounting for the majority of the chain's DEX TVL. Its V4 launch in January last year introduced a singleton setup that consolidates all pools into a single contract, significantly reducing gas costs for multi-hop swaps. The V4 “hooks” allow for advanced features such as dynamic fees, integrated limit orders, and MEV revenue sharing, effectively narrowing the gap between DEX and CEX experiences.
It is also important to note that on Arbitrum, V4's share of liquidity is about 15% at the time of writing and continues to grow. Moreover, over the last 30 days, Uniswap accounted for over $8.5 billion in volume, making it the largest contributor to the chain’s DEX volume and one of the deepest liquidity venues.
Yield
The yield category on Arbitrum is dominated by protocols like @pendle_fi, which account for 75% of the category’s TVL.
This category grew by over 250% on Arbitrum since the start of 2025. The Arbitrum yield category moved differently when compared to other chains and wasn’t much affected by the October Liquidation Event. This is because the majority of the TVL of prominent yield protocols like Pendle consists of Ethena-related assets, which don’t have any dominance on Arbitrum.
Pendle
Pendle is the definitive leader in yield tokenisation, having carved out a niche by splitting yield-bearing assets into Principal Tokens (PT) and Yield Tokens (YT) and creating a secondary market for the “yield curve” of DeFi.
The protocol grew on Arbitrum, reaching a peak TVL of over $830 million in early Q2 2024, and hasn’t since approached similar levels. But in late Q3 2025, things started to change: their TVL on Arbitrum began climbing again due to a partnership with USDai, which currently represents over 8% of the protocol’s TVL.
Additionally, the capital efficiency of the Pendle model is reinforced by its ability to use PT assets as collateral across major lending protocols, including Aave, Fluid, and Euler.
Derivatives
Derivatives on Arbitrum are shifting from vanilla AMM-based perpetual protocols to Request-for-Quote (RFQ) models, which aggregate liquidity more efficiently and support a wider array of asset classes beyond crypto.
While incumbents like GMX still lead in value locked, protocols like Ostium and Variational aim to win market share with their asset offerings and improved UX, which drives higher volume.
In the last 30 days, Variational has generated the majority of the chain’s derivative volume (75%), followed by GMX (7.5%) and Ostium (6.3%).
Ostium
@OstiumLabs is focusing on providing synthetic exposure to real-world assets, including gold, oil, forex, and stocks. It uses an RFQ model to achieve narrow spreads and deep liquidity on its exchange. It targets non-U.S. investors seeking access to U.S. markets by providing a self-custodial alternative to offshore brokers.
The protocol serves as the primary bridge between the blockchain and the $30 trillion monthly-volume CFD market.
Variational
Variational has been built solely on Arbitrum and accounts for most of the volume generated by derivatives on the chain. It supports applications like Omni (retail perpetuals) and Pro (institutional OTC derivatives). It distinguishes itself by offering zero trading fees across its 500+ markets, which include volatility indices and interest rate swaps.
The protocol utilises an RFQ model and aggregates liquidity through the Omni Liquidity Provider (OLP) vault, which captures yield from market-making.
GMX
@GMX_IO remains the heavyweight perpetual exchange on Arbitrum with its V2 implementation introducing isolated pools and support for a wider array of assets. GMX V2 utilises a multi-asset liquidity pool model in which liquidity providers (GM pool) earn fees from trader losses and trading activity.
It consistently leads the Arbitrum perpetuals market in value locked and revenue generated.
RWAs
The RWA sector on Arbitrum reached a breakout phase in 2025 and has been an up-only chart in terms of value tokenised. Major institutions, including Robinhood, Franklin Templeton, and Blackrock utilised Arbitrum for RWA tokenisation.
On the protocol level, major contributors are @Spiko_finance, @PleasingGolden, @MidasRWA, and @Theo_Network.
Arbitrum DAO also pushed for RWA growth last year, further increasing the category's TVL on the chain.
Spiko
Spiko is a prominent RWA issuer that achieved over $200 million in Assets Under Management (AUM) on Arbitrum within 12 months of its launch. Its primary products are the Spiko US T-Bill (USTBL) and Eurozone T-bills (EUTBL) money market funds.
The protocol tokens are designed for broad DeFi integration, functioning as a reliable collateral in lending markets and a stable store of value. Spiko’s rapid growth underscores the demand for “low-risk” onchain yield.
Pleasing Gold
Pleasing Gold (PGOLD) is an RWA platform that transforms precious metals (PMs) into liquid, yield-bearing tokens. Each PGOLD represents one troy ounce of LBMA-certified physical gold stored in institutional vaults in Hong Kong and Dubai. PGOLD’s current market cap is approximately $96 million and is deployed solely on Arbitrum.
Stablecoins
The Arbitrum Stablecoin ecosystem has expanded, with protocols like USDai, which launched last year and scaled quickly to become the 3rd-largest stablecoin on the chain, now having a market capitalisation of over $500 million.
In terms of stablecoin market capitalisation, the chain hasn’t seen much growth and is currently at $4 billion, similar to the value at the start of 2025. Moreover, the top 3 players (USDC, USDT, and USDai) account for 90.4% market share, mirroring the stablecoin dominance pattern across the ecosystem where the top 2-3 players dominate the category.
USDai
USDai is an Arbitrum-native synthetic dollar protocol that introduces “Infrastructure Finance” (InfraFi) onchain. It is backed by overcollateralised compute loans, private credit to AI and infrastructure operators, and T-Bills, delivering a consistent yield to its depositors.
Currently, T-Bills account for most of its market-cap backing, but it recently approved Sharon AI's $500 million GPU financing and similar approvals totalling over $1.2 billion in loans, which will help grow InfraFi's backing of the token in the near future.
Other Notable Mentions
Nerite
@NeriteOrg is a CDP (Collateralised Debt Protocol) on Arbitrum (a friendly fork of Liquity V2) that issues the stablecoin USND, which has a market cap of ~$1.5 million. Nerite was launched on Arbitrum in July 2025, grew in the initial months, and has now reached a sustained TVL.
USND is a first-streamable, redeemable stablecoin, making it ideal for subscriptions, grants, salaries, and more through its Superfluid integration. Moreover, users can set their own interest rates when borrowing, as Liquity does.
Arbitrum beyond Arbitrum
Arbitrum Stack makes it easier to deploy an L2 or L3 and, to date, has supported larger deployments, such as @plumenetwork and @use_corn, but both currently represent a small portion of the ecosystem's Total Value Secured (TVS).
There are currently 40 chains live on the mainnet across DeFi, RWAs, Gaming, AI, and DePIN, with a total TVS of $18.44 billion, of which Arbitrum’s share is 98.5%.
Additionally, the introduction of Arbitrum Stylus enables developers to build in languages that compile to WASM, such as Rust, C, and C++, thereby expanding the potential use cases and easing development on Arbitrum. This means protocols running on non-EVM-compatible chains, such as Solana, can also launch on Arbitrum without rewriting their entire codebase.
Oracle providers like Redstone have used Stylus to overcome the limitations of the Ethereum Virtual Machine (EVM), achieving better computational performance, higher memory and gas efficiency, and near-native performance. It has also been used by teams such as Superposition and Fairblock, resulting in gas cost reductions and other performance improvements, similar to Redstone.
Closing Thoughts
During the last year, Arbitrum has focused on key improvement areas by launching different initiatives, which were reflected across the report:
Boosting the chain Revenue Sources
Solidifying Arbitrum as a Credible Neutral Network
Ecosystem Development in underrepresented areas
Launching Targeted Incentives
Starting with categories, the success of Lending protocols such as Morpho and Fluid highlighted demand for alternative products with distinct features.
In derivatives, Perpetual trading has seen an uptick in volume and the number of tradable asset classes on the chain, driven by protocols such as Variational and Ostium. On the RWA side, the chain saw positive growth, driven by institutional participation, growth in native protocol adoption, and strategic treasury deployment.
Stablecoins, such as USDai, were launched and grew to a market cap of over $500 million on the chain in less than a year, focusing on InfraFi token backing.
Arbitrum DAO introduced transaction-ordering policies, such as Timeboost, which significantly increased the chain’s revenue after its launch. While maintaining a focus on revenue generation, DAO also supplied assets across multiple protocols and helped the ecosystem grow.
Additionally, with the growth of developer tooling such as Stylus and a focus on grants, Arbitrum opens its ecosystem to new protocols and experimentation, contributing to the chain’s long-term growth.
Arbitrum has pursued numerous growth initiatives over the year, with the primary focus on increasing chain-wide economic activity and achieving sustainable revenue to drive the ecosystem forward.
This brings us back to our initial point: A blockchain network is as good as the economic activity happening on it.
In the case of Arbitrum, it didn’t just sit back and wait for the activity to occur, but actively pushed it through the means of incentives and strategic deployments.
Arbitrum Everywhere.
written by @noveleader and @francescoweb3✍️
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