Arbitrum has the strongest user and transaction momentum among the leading blockchains, Bernstein said in a research report Wednesday.
Rollups such as Arbitrum and rival layer 2 blockchain Optimism scale the Ethereum network by processing transactions and executing smart contracts – computer programs that run on some blockchains – on their own chains.
Bernstein said it expects a host of trading, gaming and non-fungible-token (NFT) projects to be released on the blockchain. NFTs are digital assets on a blockchain that represent ownership of virtual or physical items and that can be sold or traded.
The broker also noted speculation of a potential Arbitrum token launch in the near term, which could be used to reward early users.
Ethereum’s large user and developer base “will continue to act as a feeder to rollups,” analysts Gautam Chhugani and Manas Agrawal wrote, adding that they “expect a new growth cycle to emerge in crypto as rollups drive mainstream application building on Ethereum.”
Layer 2 blockchains are “providing the first proof of concept that rollups work while relying on the security and settlement network of Ethereum,” the note said. “This retains the relevance of Ethereum and makes it competitive versus peers."
Arbitrum recently paid about 400 ether, worth about $530,000 at the time, to a hacker who flagged a vulnerability in the upgrade. Developers behind the scaling tool had missed a change that would have allowed attackers to steal all funds sent to the network.
CORRECTION (Sept. 22, 15:47 UTC): Corrects dollar value of ether in last paragraph. Original was a factor of 10 too small.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.