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A little more than a year ago, a highly anticipated Shiba Inu project was officially launched: we are talking about Shibarium. The L2 was hailed as a new stage in the evolution of the broader Shiba Inu token ecosystem and a stepping stone towards an ambitious vision. Were the anticipations worth it? Learn what Shibarium is and what it means for Shiba Inu tokens in this guide from the ChangeHero team.
Key Takeaways
- To keep the Shiba Inu ecosystem growing and help it reach the ambitious vision of its anonymous creator, the team created a Layer 2 solution Shibarium;
- As an L2, Shibarium takes transaction processing off the Ethereum network but submits transactions to it in batches for verification. This allows for increased transaction speeds and greatly reduces costs in gas fees.
- The Shibarium ecosystem at the moment hosts multiple dApps and cryptocurrency tokens. Moreover, it means increased token utility for BONE, which is a reward token for validating transactions on Shibairum.
Crash Course on Shiba Inu Ecosystem
From the very start, Shiba Inu (SHIB) was envisioned as more than a simple meme coin. It was supposed to become an entire ecosystem of apps and protocols in the hands of the community. With the SHIB token as the center, it quickly started expanding to more protocols and coins:
- ShibaSwap, a fork (spinoff) of SushiSwap, made specifically for the Shiba Inu ecosystem;
- DOGE-pegged LEASH tokens, initially created as rebase tokens for SHIB. Today, they are used for staking and liquid staking (xLEASH tokens);
- BONE token, initially launched as a governance token;
- NFT incubator, which eventually helped launch unique NFT collections;
- Shiba Eternity game, a flagship Web3 game of the Shiba Inu ecosystem.
A SHIB metaverse and the TREAT token have also been long in the planning stage, promising to transform Shiba Inu into a robust ecosystem like no other.
What is Shibarium L2?
The ambitious plans of the Shiba Inu team were thwarted by the reality of Ethereum’s workings. They were not the only ones trying to build a project of a similar scale on the Ethereum blockchain. It implies sharing all resources in the network with others, including busier products with way more load even at the current stage of blockchain adoption. The Shiba Inu developers came up with a great solution to build a custom side chain, or layer 2, to exclusively power the Shiba Inu ecosystem.
A Layer 2 solution or L2 for short is a blockchain protocol that takes off some load from the main chain. They are connected to the underlying blockchain through a smart-contract-powered bridge. Popular L2s on the Ethereum blockchain include Optimism, Arbitrum, and Polygon.
Shibarium was a very anticipated project, first teased in 2021. Due to the high standards of the Shibarium developers, it was initially slated for release in 2022 but kept being delayed for months. The actual Shibarium release date is August 17, 2023, although it took another week to iron out the initial issues and reopen it to the public.
How Does Shibarium Work?
In principle, as a scaling Layer 2 solution, Shibarium processes transactions off the Ethereum chain, batches them and submits proof of validity to the main chain. This method combines the security of the underlying chain with transaction processing speeds and costs of the side chain.
The architecture of Shibarium L2 has three main components. Firstly and naturally, it is the Ethereum blockchain, which houses smart contracts for BONE staking management. Secondly, the validation layer Heimdall, built on a customized Cosmos SDK version with the Tendermint fork Peppermint as a consensus engine. Thirdly, the block production layer Bor, responsible for processing transactions.
As a result, Shibarium achieves security close to Ethereum’s, while keeping it transparent, efficient, cost-effective, and decentralized. Transacting over Shibarium is cheaper, faster and better adjusted for the ecosystem of Shiba Inu’s ambitions.
What is Shibarium used for?
By deploying on L2s, decentralized applications (dApps) can achieve a smoother user experience and cut back on operating costs. Which kinds of dApps are already a part of the Shibarium ecosystem?
The most common type is, of course, decentralized finance protocols. In addition to the semi-official ShibaSwap DEX, built and launched by the same core team, there are also ChewySwap, WoofSwap, and MARSWAP. Mantra Protocol’s implementation on Shibarium offers lending and yield aggregation.
There are a few exclusive NFT collections in the Shibarium ecosystem. A few examples are Shib Club and ShibaPunkz, as well as more original LumiBots and Shups collections. NFT enthusiasts can mint, trade, and even stake their digital collectibles on the Shibarium chain.
The gist is, Shibarium is good for all things other L2s can do: improved transaction speeds and costs without compromising the security provided by Ethereum. What is special about Shibarium is the role it plays in the Shiba Inu universe: most projects in the ambitious roadmap are to be built on this Layer 2 blockchain, from new NFT collections to the metaverse.
Another utility of Shibarium relative to the original project is its part in burning SHIB tokens: it applies changes introduced by EIP-1559 to its own L2. Translating from technicalese: in every Ethereum transaction, the base fee is burned or sent to a dead address. Base fees in Shibarium, paid in BONE, accumulate until a certain threshold is met, which is when it gets converted into SHIB to be burned.
Shibarium in Numbers
After fourteen months in production, what is Shibarium achieving? Some stats can show whether the hype for the project goes beyond the Shiba Inu community.
Shibarium has shown decent network activity: there are over 18 thousand contracts deployed and over 416 million transactions completed in over 7 million blocks. The number of active accounts daily, though, has not exceeded one thousand for ten days at the time of writing.
In terms of total value locked, according to DefiLlama, today Shibarium ranks 121st among L1s and L2s with an estimated $3.42M in TVL. The undisputed champion app is ShibaSwap which accounts for $2.25M (65,79%) of it. The runner-up, WoofSwap, has $714K in TVL (a 20,88% dominance). Both of these facts can be seen as contributing to each other: an L2 with just two apps (both DEXes) is not likely to attract users or devs.
Conclusion
The Shiba Inu devs and community have high hopes for and give a great degree of importance to the Shibarium network. To everyone else, it may not mean as much but even over one year after the launch, the SHIB army has big plans for Shibarium.
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Frequently Asked Questions
What is the purpose of Shibarium?
The Shibarium blockchain network is a Layer 2 solution for Ethereum with extra utility for the Shiba Inu ecosystem. It makes handling transactions on the Ethereum network cheaper and quicker without sacrificing security. Moreover, using Shibarium contributes to SHIB coin burning and the BONE token utility.
How will Shibarium affect SHIB’s price?
Although the utility token of Shibarium is BONE and not SHIB, the Shib Torch mechanism for coin burn is supposed to gradually take SHIB tokens out of circulation. Reducing the available supply can theoretically increase the price of an asset.
Is Shibarium a new coin?
No, Shibarium is a Layer 2 solution for the Ethereum blockchain. It uses the BONE token as a native coin, which existed before Shibarium.
