Arbitrum launches $40M DeFi incentive amid intensifying L2 race

Arbitrum, the largest Ethereum layer-2 protocol, has launched a new initiative designed to channel liquidity into decentralized finance.

The DeFi Renaissance Incentive Program (DRIP), announced on Sept. 3, will allocate up to $40 million in rewards to users performing targeted on-chain actions rather than simply generating attention.

The program, structured by Entropy and powered by Merkl, will be managed by Entropy Advisors under the direction of ArbitrumDAO. According to the blockchain network, roughly 80 million ARB tokens have been earmarked for incentives across four distinct “seasons,” each focusing on a different corner of DeFi.

The first season, which runs from Sept. 3, 2025, through Jan. 20, 2026, prioritizes looping leverage on lending markets.

During this phase, users can earn up to 24 million ARB in rewards by borrowing against yield-bearing ETH and stablecoin assets on approved platforms.

According to Arbitrum, the structure is performance-based and protocol-agnostic, meaning it will reward borrowing demand across multiple markets rather than concentrate liquidity in a single venue. Participating platforms include Aave, Morpho, Fluid, Euler, Dolomite, and Silo, with collateral options such as wstETH, eUSDC, and USDe.

Ethereum L2 ecosystem

The incentive scheme arrives at a time when competition among Ethereum scaling solutions is accelerating.

Data from analytics platform Growthepie shows that nearly 13% of Ethereum’s application revenue now originates on layer-2 networks.

In this space, Arbitrum retains a commanding lead within the ecosystem. Data from L2beat places its total value secured at more than $19.1 billion, outpacing Coinbase’s Base at $14.7 billion and OP Mainnet at $3.6 billion.

These numbers reflect how Ethereum’s broader layer-2 ecosystem is maturing quickly, with networks competing to attract developers, users, and liquidity at scale.

Considering this, the Ethereum Foundation has moved to reduce fragmentation across these networks.

In an Aug. 29 update, it announced the Ethereum Interoperability Layer (EIL) as a trustless framework that enables transactions across different layer-2s.

The Foundation described EIL as a way to give users the experience of “one Ethereum” while preserving its core principles, including censorship resistance, privacy, and open-source development.

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