Ark's latest report! Base and Solana are the biggest winners, DEX trading volume soars, and the L2 battle begins

Lorenzo Valente, director of digital asset research at ARK Invest, pointed out in his latest analysis report "Big Ideas" on July 28 that the entire on-chain ecosystem has made major breakthroughs in the past year. From the surge in Ethereum L2 transaction volume, the popularity of Base, to Solana's return to the mainstream, there has been a structural shift in overall users and developers, and the DEX platform has also grown rapidly, indicating that the on-chain infrastructure is entering a new stage of efficient and large-scale application.

Ethereum expansion has greatly reduced transaction costs, with 85% of transactions shifting to L2

Valente pointed out that over the past year, Ethereum has undergone a series of technical upgrades, which have reduced L2 transaction costs by 10 to 20 times, prompting a large number of users to shift from the Ethereum mainnet to L2. More than 85% of transactions are conducted on L2.

He emphasized that this trend is still continuing and that Ethereum is expected to have more upgrades in the future, including raising the Gas limit of the Ethereum mainnet, allowing specific users to freely choose to trade on the mainnet or L2.

Base becomes the L2 overlord, exchanges and technology companies also want to grab the L2 BTC

Speaking of the hottest L2 projects, Valente said that the biggest L2 story in the past year was the L2 expansion chain "Base" of the US exchange Coinbase. He said that whether it is the number of active users, transaction volume, revenue and other indicators, Base occupies more than half of the market, and even described Base as "sweeping the entire L2 ecosystem."

However, he also mentioned that the situation is changing, and more and more exchanges and technology companies are beginning to join the L2 battle.

Kraken, Robinhood, Securitize, and Worldcoin all rush into L2

Valente said that since mid-2024, many players have been rushing to advance L2. Among them, Kraken’s L2 project “Ink” directly competes with Base.

Robinhood plans to tokenize its assets and products and use the Arbitrum architecture to build the "Robinhood Chain". Securitize also worked with Ethena Labs to launch the public chain Converge, which is compatible with the Ethereum Virtual Machine (EVM). Worldcoin is also building its own L2 chain "World Chain" on the Optimism architecture.

Valente believes that the addition of these waves of new players will drive quantitative competition among L2s, and will make users turn to L2 not just because of the cheap transaction fees, but because the applications and functions of these platforms are becoming more and more abundant.

DEX transaction volume surges, accounting for 25-30% of the total

Valente further pointed out that the usage and market share of DEX have grown rapidly in the past year. At the beginning of 2024, the spot and derivative trading volumes of DEX accounted for about 8% and 3% of the overall market, respectively. But by the beginning of 2025, the proportion of spot trading has approached 20%, and recently it has even reached 25% to 30%, indicating that DEX trading volume is rapidly occupying the market share of traditional CEX.

He specifically mentioned that DEXs such as Uniswap, Raydium, Orca, and Aerodrome are much more efficient than CEXs. Many DEX teams have less than 100 employees, but can achieve the same trading volume as companies with thousands of employees such as Coinbase and Binance, showing that the potential of DeFi is quite huge.

Coinbase takes the lead in DeFi and CeFi dual-track parallel model, Hyperliquid has great potential

Valente also specifically mentioned that there is now a dual-track hybrid model of CEX and its own L2 project. For example, Coinbase itself not only operates a centralized exchange, but also supports DApps on Base. This strategy allows traditional exchanges to control both the DeFi and CeFi markets at the same time.

He expects that the proportion of DeFi transactions will increase further in the future, especially new DEXs such as Hyperliquid, which may continue to seize market share.

Solana TPS surpasses Ethereum as a whole, developers flock in

Finally, Valente mentioned that Solana would be the most noteworthy of attention this year. He said that Solana had fallen to only $8 per coin during the bear market, but now its transaction volume per second (TPS) has reached 800, far exceeding the sum of the Ethereum mainnet and all L2s.

Whether in terms of transaction volume, revenue, active users or number of developers, Solana has officially ranked among the top three in the industry. According to developer data, the number of new developers in Solana in 2024 has surpassed Ethereum, making it the preferred platform for new startups on the chain, and Base has also squeezed into the top five on the chain in terms of developer activity.

Solana’s new execution layers Fire Dancer and Alpenlow are about to go live

Valente pointed out that Solana’s next upgrade will further consolidate its own base layer. The Solana team is currently actively developing two new technologies.

First, Fire Dancer, developed by Jump Crypto, is Solana's first independent validator client. Written in C++, it has been tested to process more than 1 million transactions per second (TPS), greatly improving network performance and stability, and reducing dependence on a single software. Although Firedancer is already running on the mainnet, it has not yet participated in the consensus process and has not been fully launched.

On the other hand, Solana's core development team Anza proposed a new consensus protocol Alpenglow in 2025 to replace the current TowerBFT and Proof-of-History mechanisms. This upgrade introduces two modules, "Votor" and "Rotor", which greatly speeds up block consensus and data transmission efficiency, allowing the network to reach transaction confirmation within 100-150 milliseconds. For application scenarios that rely heavily on low latency, such as instant payments, on-chain games, and DePIN, Alpenglow is regarded as a disruptive technological breakthrough and is expected to be launched on the mainnet between 2025 and 2026.

He emphasized that these two technologies will be the core of Solana’s greatest technological belief.

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According to a US military research report, 2027 will be the centenary of the founding of the Chinese People's Liberation Army. By then, the PLA may launch an attack on Taiwan and unify Taiwan by force. Experts point out that the CCP may regard this time point as a golden opportunity to demonstrate its military strength and seize the opportunity to seize Taiwan's political power.

With only a year and a half to go until 2027, China's military expansion in the South China Sea has attracted global attention, and Japan, which is adjacent to Taiwan, is particularly concerned about this issue. PIVOT Official Forum invited military research experts Obara Fanji (Note 1), Yamashita Yuki (Note 2) and Minemura Kenji (Note 3) to analyze China's military expansion in the sea through satellite images, existing data and simulation research on Chinese military operations, and to discuss in depth the impact of China's military power on Japan, Taiwan and other regions, as well as the possibility of the CCP unifying Taiwan in 2027. This forum not only discussed China's maritime strategic layout, but also proposed strategies to deal with China's military threats. The forum video is divided into two episodes, and the full content can be watched on PIVOT Official's Youtube channel. (Note 4) The following is a compilation of key points, and the author's views on the "Great Recall" are at the end of the article.

The Current State of China’s Maritime Expansion

Since Xi Jinping took office in 2012, China has regarded its maritime layout as the most important national strategy and has actively carried out military expansion in the South China Sea and the East China Sea. Yamashita Yuki believes that the South China Sea is China's lifeline, and China's military goal is to control the waters from the first island chain to the second island chain, and further achieve control over the Pacific Ocean and the South China Sea.

Kenji Minemura pointed out that this strategy is not only related to China's energy import routes, but also to its global military and economic power map. China's competition for the South China Sea and the East China Sea shows that military actions are closely linked to economic interests and that it is trying to break through the blockade of foreign forces.

Defensive weaknesses of artificial islands in the South China Sea

China has built military facilities on artificial islands in the South China Sea and used them as defense bases, but this strategy also has its vulnerabilities. Yamashita Yuki analyzed that although China has established bases in the South China Sea through artificial islands, the geographical location of these islands is extremely vulnerable and vulnerable to attacks from the air and sea, especially when the supply lines are unstable, and they may quickly lose their defense effectiveness.

In addition, since the South China Sea is one of China's most important energy transportation routes, controlling this region is of vital importance to China. China's continuous expansion of military facilities on artificial islands has also increased the outside world's concern about the security of the South China Sea region.

China is facing economic difficulties, which is just the right time to limit its military expansion

Although China's military strength is gradually increasing in quantity and technology, Obara mentioned that China is currently facing serious economic challenges. This makes the sustainability of military expansion an important question. China's economic growth is slowing down and foreign trade is facing pressure, which may limit the CCP's investment in national defense and military expansion. Obara believes that if China cannot stabilize its economic foundation, even if its military strength is strong, it will not be able to support long-term war preparations and military operations.

Japan's Strategy for Dealing with China

China's military operations in the South China Sea and the East China Sea are becoming increasingly frequent, and Japan is actively adjusting its military strategy. Yamashita Yuki pointed out that the Japanese Navy has shifted its training from pure defense to comprehensive combat capabilities in recent years, and has introduced aircraft carriers and other advanced weapons in its armaments. The Navy's combat power is gradually being strengthened, and more joint exercises will be conducted in the Pacific region.

In order to cope with China's military challenges in the South China Sea and the East China Sea, Japan has strengthened its cooperation with the United States, Australia and other countries in the Asia-Pacific region. In particular, as China's naval power gradually increases, Japan's military deployment becomes more important.

China's maritime layout will undoubtedly have an impact on the Asia-Pacific region and even the global situation. How relevant countries respond to China's strong expansion in the maritime field and make strategic adjustments will be the key to the future. How the parties cooperate and confront will determine the future direction of the Asia-Pacific region.

Unification of Taiwan in 2027?

2027 is widely seen as a "critical year" in which major changes are likely to occur. Chinese President Xi Jinping's third term will end in that year, and this will be the climax of his promise to unify Taiwan.

Kenji Minemura pointed out that Xi Jinping was able to successfully extend his term to three terms because he persuaded the party with the reason that "I can unify Taiwan." He believes that this arrangement means that the top leaders of the Chinese Communist Party have reached an internal consensus to complete the historical mission of "unifying Taiwan" before the end of the third term. If Xi Jinping does not take action in 2027, he will face questions from within the party, such as "What are you doing?" Experts at the meeting also pointed out that in addition to time pressure, China's economic slowdown is also an inducement for Beijing to choose to accelerate its actions against Taiwan. The impact of the new crown epidemic has not yet dissipated, and the withdrawal of foreign capital and weak domestic demand have led to tight funds, which may accelerate Xi Jinping's choice of military action as an option to divert attention. Kenji Minemura said that the Chinese Communist Party may believe that taking action before the economy has completely collapsed is an option. If Xi Jinping himself orders it, the war may start at any time.

Two temporary extras in the recall became pawns of the pro-unification camp

When I watched these two videos, the " big recall " had just ended. From the perspective of data analysis, the threshold for recall of the Green Camp was not reached at all, but the threshold of the Blue Camp was reached. However, many people (Blue Camp supporters) came out to vote against it and finally kept their seats in the Legislative Yuan. What does this mean? It means that supporters of both sides want to maintain the status quo, so no matter whether the threshold is reached or not, they do not agree to "change people". This once again verifies the argument that most Taiwanese people want to maintain the status quo.

It is worth noting that in this recall incident, there were acts such as "forgery of documents", "military unification with Chinese forces", attacks on volunteers and witnesses, and the museum director and Zhong Mingxuan expressed their views on China in the form of "recording travel experiences". Although the news discussion was loud, it did not affect the base. From the author's observation, the Zhong Mingxuan incident was just a counterattack by the "unification faction". Maybe he was just sightseeing and really didn't know the association, but the Straits Peace Association followed this move, pretending to cooperate, and creating many subsequent news. Zhong Mingxuan was scolded by the news media anchor and said that he was Chinese and asked him to get out (but he didn't say it at all). As for the museum director, a rehabilitated person, he spent most of his life in prison. Why should we expect him to have any real insights? The most powerful trick of the "unification faction" is to incite division and disguise, which successfully makes people who are already more pro-China and neutral people hate the green camp even more.

Two sides of the Taiwan Strait are one family? A happy ending in 2027?

The author believes that this recall has made many people see a fact clearly. There are many people in Taiwan who support China and want unification in their hearts, but they just don't say it. Even if the United States and Japan have clearly stated that they will help Taiwan in the sea and military to maintain order, if there is already a lot of public opinion in Taiwan that is inclined to unification, then when Taiwan is unified with China, no allies will intervene. If Taiwan is really "peacefully unified" in 2027, are you ready? There is a line in the song OGS by MJ116 that says "gangster wives don't leave food for them." Orisan thought he had found a young and beautiful woman to take care of him, but in the end, all the food for the whole family might be taken away. Is this also the happy ending that Taiwanese people hope for?

Note 1: Obara joined the Japan Maritime Self-Defense Force in 1985 as a rotorcraft pilot. From 2003 to 2006, he served as a military attaché in China. In 2006, he served as the head of the Intelligence Group of the Maritime Staff of the Ministry of Defense; in 2009, he served as the commander of the 21st Air Wing. He is currently the representative director of the non-profit civilian intelligence organization DEEP DIVE.

Note 2: Yamashita Yuki served as the Regional Commander of the Ground Self-Defense Force and the Chief of the Regional Cooperation Headquarters of the Okinawa Self-Defense Force. His military experience has given him a high level of professionalism in strategic deployment and military analysis in the Asia-Pacific region. Yamashita Yuki's book "Complete Simulation of the War of Invasion of Taiwan" (全シミュレーション台湾侵攻戦争) deeply explores various scenarios in which China may launch military actions against Taiwan, and conducts a comprehensive simulation and analysis of the situation in the Taiwan Strait.

Note 3: Kenji Minemura was a member of the Asahi Shimbun's editorial committee on foreign policy and Sino-US relations. He is currently a visiting professor at Aoyama Gakuin University, a senior researcher at the Canon Institute for Global Strategic Studies, and a member of the Japan Institute for Defense Studies.

Note 4:

A thorough analysis of China's military power from satellite images

Xia Xi Jinping made a mistake? Is there anything going on in Taiwan in 2027?

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