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L2 vs Mainnet : Better Slippage

Over the last few posts we have been looking at trading venues on Arbitrum to see how whales are doing large trades.

In part one, we looked at overall volume and the type of tokens being traded. Sushi started with a lead in terms of volume, but Uniswap v3 concentrated liquidity took over larger volume trades.

In part two, we compared slippage on Arbitrum between Uniswap and Sushi. We found a surprising number of large trades on Uniswap v3, especially for native tokens like GMX and MAGIC.

Now we can compare trades between Arbitrum and mainnet. Are traders getting more slippage on average? Are whales taking advantage of the available liquidity on Arbitrum to make large trades? We will take a look at these questions in this piece for the WETH-USDC pair.

The WETH-USDC pair is one of the largest and most heavily traded pairs on both Arbitrum and Ethereum mainnet. This makes it a good proxy for whale activity and size.

Starting with Uniswap on Arbitrum where we have seen more large volume trades from whales. From all of our Arbitrum trade data, there were 553,048 trades from WETH to USDC and 493,149 trades from USDC to WETH. The average amounts traded for were $8,255 and $9,317 respectively. In total Uniswap processed over $9b in volume on the WETH-USDC pair since launch.

Meanwhile on Mainnet, $9b in volume can pass through the .05% Uniswap v3 WETH-USDC pool in a week. Over $200b in volume has traded in the mainnet pool since September 2021 when Uniswap on Arbitrum picked up initial volume.

Source: Dune Analytics

The enormous difference could come down down to the liquidity available. The WETH-UDSC pair on mainnet has sometimes contained more capital than the entire Arbitrum chain.

What about slippage? The 0x team published a great blog that showed slippage increased during times with volatile token prices.

While this is an expected result, we can also compare slippage on Arbitrum during volatile price action. Here we can see a similar chart for the largest positive slippage trades on Arbitrum. We’ve also pulled just trades from April until the end of June:

We can see that as volatility picked up in May, with many more high slippage trades during the heavy volatility days surrounding the UST collapse.

We are still left then to speculate about why whales are not moving to L2 networks like Arbitrum. Some are sure to be used to the security and familiarity of mainnet. But even mainnet liquidity and volumes don’t keep some traders from experiencing high slippage.

We think that the more innovative and unique projects live on L2 networks, the more reason whales will have to migrate.

That is part of the reason we’re bringing Integral SIZE to Arbitrum. SIZE will provide a toolset for whales and others navigating the Arbitrum ecosystem. SIZE offers…

  • TWAP execution and 0 price impact trading for any order size
  • MEV protection
  • Mean-zero impermanent loss for liquidity providers

This comes alongside the lightning-fast and inexpensive transactions already a staple of Arbitrum. We’re excited to see how the Arbitrum ecosystem takes advantage of SIZE to improve their trading experience.

If you would like to discuss the above topic more in depth or want to suggest a new topic, please connect with our team and community in Discord.