The supply of bridged or wrapped stablecoins on Layer 2 (L2) chains has exceeded $10 billion, indicating a shift in liquidity from Ethereum. This gradual process has been driven by both large and small holders bridging stablecoins to L2 chains, with USDT and USDC being the most prominent bridged stablecoins. The inflow of stablecoins to L2 chains has coincided with increased economic activity in the form of DeFi and DEX trading. L2 protocols such as Arbitrum and Optimism have seen significant inflows of stablecoins, with Arbitrum leading the way with $4.62 billion. However, liquidity fragmentation remains a challenge as value tends to stay within L2 apps without much interoperability. Despite the outflow of users from Ethereum to L2, it still benefits from fees generated by the native version of USDT. In contrast, L2 chains do not share profits or provide value to Ethereum. The Base protocol has experienced the largest inflow of stablecoins, surpassing other L2 chains and potentially flipping Arbitrum in terms of USDC supply. Additionally, Base is actively driving adoption of Euro-based stablecoins. Ethereum still maintains a first-mover advantage with over 26 billion tokens held.



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