Did you know that the Arbitrum protocol witnessed growth despite the challenging climate in the crypto world? The answer lies in the strategic actions taken by its ecosystem, spearheaded by GMX. When the crypto market started to regain momentum, Arbitrum, also known as ARB, experienced expansion in several sectors. This growth was particularly noticeable following the ARB airdrop event in March.
Period of Silence and Challenges
After the initial excitement around the ARB airdrop, the ecosystem entered a quiet phase. Being a protocol primarily focusing on DeFi, Arbitrum faced difficulties during the summer. Many protocols were struggling to generate fees due to low trading volumes. However, the recent rise in NFTs and increased trading activity brought about a resurgence in the Arbitrum ecosystem, primarily due to new token rewards.
Short Term Incentive Program: A Game Changer
In September, a ‘Short Term Incentive Program’ (STIP) was introduced to spur growth and usage. This program distributed 50 million ARB tokens to various protocols. Interestingly, the Perpetuals sector received the lion’s share of the grant tokens, around 43%. This influx of tokens had a positive impact on the products of the recipients, directly enhancing their usage.
Previously, an increase in supply might have caused concerns, but in the current broader market recovery, it is seen as a positive sign. GMX, the largest Arbitrum protocol and the primary recipient of the grant, received 12 million tokens. Despite a slow start for GMX’s v2 product, the entire ARB grant was directed towards incentivising v2 liquidity providers, which proved to be an effective strategy.
GMX’s Contribution to Arbitrum’s Growth
GMX’s strategy paid off, resulting in almost double the total liquidity in v2. This subsequently led to an increase in trading volume and higher fee collections. The revival of the network is a promising sign. The increased user base and liquidity indicate that the network is becoming more active and attractive. However, it remains to be seen whether this trend will continue after the incentives conclude.
At the time of writing, ARB was trading at $1.141482, a 2.1% decrease in the last 24 hours. Despite the dip in price, the trading volume remained high.
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