Layer-2 Tokens Leave Ethereum Behind in Price Rally
The price of Ethereum (CRYPTO:ETH) rose by just 6.8% on September 18, but two smaller tokens built on its network, Arbitrum (CRYPTO:ARB) and Starknet (CRYPTO:STRK), surged ahead.
Arbitrum jumped by about 17% that day and a whopping 26% over the next 24 hours to $0.2212, while Starknet gained 18%, reaching its highest price since June 19.
The reason for this disparity lies in how these tokens operate. They handle transactions off the main Ethereum chain and then submit a summary of those transactions back to Ethereum for final verification.
This process allows users to pay lower fees, while Ethereum benefits by collecting a small fee to process the batch. However, the market size of Ethereum, which is over 200 times larger than Arbitrum's, affects how order books function.