What Is Shibarium? The Layer-2 Blockchain Solution Explained

It’s been a year since Shiba Inu (SHIB), the second-largest meme coin in the market, launched its own network and ecosystem, Shibarium.

So what is Shibarium? Well it’s a blockchain layer-2 solution built on the Ethereum network, designed to enhance the scalability and performance of the Shiba Inu ecosystem. 

It offloads transactions from Ethereum's main blockchain, leading to faster transaction speeds and reduced fees. Before Shibarium, Shiba Inu was just another meme coin. However, with this layer-2 blockchain, Shiba Inu has become a full-fledged crypto ecosystem that allows developers to create decentralized applications (dApps), NFT projects, and decentralized finance (DeFi) solutions specifically for the SHIB community. 

Shibarium relies on Bone ShibaSwap (BONE) as its governance token, allowing users to vote on various proposals. It also uses LEASH and SHIB, two key tokens in the Shiba Inu ecosystem, for various transaction purposes.

After extensive development and testing, the project officially launched on 16 August 2023. Despite some initial congestion issues following its launch, the network later stabilized. This platform is essential for the Shiba Inu project's expansion beyond being just a meme token into a broader blockchain ecosystem capable of supporting real-world use cases.

Key takeaways

• Shibarium is a layer-2 blockchain built on Ethereum to enhance the Shiba Inu ecosystem, offering faster and cheaper transactions.
• It works by processing most transactions off-chain and using BONE for gas fees, while maintaining security through Ethereum’s layer-1​.
• Launched on 16 August 2023, after extensive testing, it faced initial congestion issues, later resolved.
• Shibarium significantly improved Shiba Inu’s scalability, reduced transaction costs, and broadened its utility for decentralized apps, DeFi, and NFTs​.

What is Shiba Inu (SHIB)?

Launched in August 2020 by an anonymous developer known as Ryoshi, SHIB was initially introduced as a 'meme coin' modeled after Dogecoin, but it has evolved into a more complex ecosystem with multiple projects and utilities.

Tokenomics

SHIB is an ERC-20 token, meaning it operates on the Ethereum network, leveraging its blockchain for security and smart contract functionality. The total supply of SHIB was set at one quadrillion tokens, making it highly divisible and accessible. A large portion of SHIB’s initial supply was burned, or permanently removed from circulation, by sending it to Ethereum co-founder Vitalik Buterin’s wallet, who later burned a majority of those tokens to reduce the circulating supply.

How Shiba Inu works

SHIB is primarily used as a digital asset that can be traded, staked, or used within DeFi applications. The ecosystem includes additional tokens, such as LEASH and BONE, which serve unique purposes within Shiba Inu’s decentralized projects.

ShibaSwap

Shiba Inu’s decentralized exchange, ShibaSwap, allows users to trade tokens, provide liquidity, and stake their SHIB, LEASH, and BONE tokens. This exchange plays a central role in Shiba Inu’s transition from a simple meme coin to a functional DeFi platform. Users can also earn rewards in BONE for participating in the platform's liquidity pools and governance.

SHIB burn mechanism

A portion of transaction fees and token redistributions are used to burn SHIB tokens, reducing the circulating supply over time. This aims to increase scarcity and, potentially, the value of SHIB in the long term. The burn mechanism is integrated into platforms like ShibaSwap and continues to play a role in community-driven events​.
 

How does Shibarium change Shiba Inu?

Scalability and lower transaction cost

• Before: Shiba Inu, as an ERC-20 token, relied entirely on the Ethereum network. High gas fees and slow transaction speeds hindered its scalability. During peak usage, the costs of transferring or interacting with SHIB were expensive, limiting its effectiveness for smaller transactions and DeFi activities.
• After: Shibarium, a layer-2 solution, shifted many transactions off Ethereum's main chain, significantly reducing gas fees and improving transaction speeds. This increased scalability made SHIB more viable for broader DeFi usage, including microtransactions and dApp integration, without the bottlenecks or high costs that plagued it previously.

Enhanced utility and ecosystem growth

• Before: SHIB's utility was largely speculative, with limited real-world applications. The ecosystem was centered around the SHIB token, with only ShibaSwap offering decentralized finance options. Expansion into areas like dApps or other blockchain use cases was limited by Ethereum’s constraints.
• After: Shibarium expanded the ecosystem by enabling the development of dApps, NFTs, and other decentralized services. This transformed SHIB from a speculative meme coin into a platform with tangible utilities. Projects like ShibaSwap, Shiba Hub, and other DeFi applications flourished due to Shibarium’s improved performance​.

Burn mechanism

• Before: SHIB burning was sporadic, often relying on community-organized burns or the initial massive burn by Vitalik Buterin. There was no systematic, automated process for reducing the SHIB supply, making the impact on its long-term scarcity uncertain.
• After: With Shibarium, token burns became integrated into the transaction fees and processes within the ecosystem. Every transaction on Shibarium contributes to SHIB burning, ensuring a continuous and automated reduction of supply. This increased deflationary pressure aims to boost SHIB’s long-term value.

Staking and governance

• Before: Governance was limited to ShibaSwap, where users could stake SHIB and BONE tokens to earn rewards. The scope of participation in decision-making was small, and staking was only available through this single platform, limiting broader engagement in governance.
• After: Shibarium enhanced governance by integrating more robust staking options across the ecosystem. BONE became the primary governance token, allowing stakers to vote on critical proposals. This democratized decision-making and encouraged more community members to participate in the network's future​.

Developer and community engagement

• Before: Shiba Inu's developer community was relatively small, focused mainly on maintaining ShibaSwap and growing the SHIB token’s popularity. The lack of a dedicated development platform limited third-party integrations or projects.
• After: Shibarium provided a framework for developers to create decentralized applications and projects within the Shiba Inu ecosystem. This attracted more developers and enterprises, leading to greater innovation. Community-driven initiatives also became more frequent, boosting engagement.

Long term vision

• Before: Shiba Inu was primarily known as a meme coin, with a focus on growing its community and increasing token value through speculation. Its long-term vision was not clear, and it faced challenges in evolving into a serious DeFi platform.
• After: Shibarium solidified Shiba Inu’s long-term vision as a full-fledged blockchain platform, focusing on DeFi, NFTs, and cross-chain interoperability. This pivot from meme coin to a decentralized platform gave the project more sustainability and credibility, with a roadmap aimed at continuous development.​

Shibarium timeline – when was it launched?

1. Pre-launch (testing phase)

• Early 2023: Shibarium began its development and testing phase. Several million wallets were created, and testnet activities gained attention as the community eagerly awaited its launch.
• March 2023: The public beta of Shibarium, called Puppynet, went live, allowing developers and users to interact with the layer-2 network to test features and functionality.

2. Official launch

• 16 August 2023: Shiba Inu’s Shibarium officially launched on the mainnet. This event marked a significant shift for the Shiba Inu ecosystem, introducing an Ethereum layer-2 scaling solution aimed at improving scalability and reducing transaction fees.

3. Post-launch issues

• August 2023: Shortly after the launch, the network faced significant issues due to overwhelming demand. The Shibarium bridge, which transfers assets between Ethereum and Shibarium, experienced a major bottleneck, resulting in millions of dollars being temporarily stuck. This caused a temporary shutdown for repairs. There were unconfirmed reports about nearly $1.7million worth of Ethereum tokens stuck in the Shibarium cross-chain bridge. 

4. Issues addressed

• 22 August 2023: The Shiba Inu team swiftly addressed the post-launch issues by enhancing server capacity and resolving the stuck transactions on the bridge. The network came back online, with improvements to ensure better handling of future traffic surges.

5. Key milestones

• 28 August 2023: The Shibarium bridge became fully operational again, allowing smooth transfers between Ethereum and Shibarium.
• September 2023: Shibarium surpassed six million blocks and continued to grow, reaching key milestones in wallet numbers and transaction volume.

6. Current state (September 2024)

• 2024: Shibarium has achieved remarkable growth. It now handles over 420 million transactions, with 1.8 million wallets created on the network. The project has evolved into one of the most active layer-2 blockchains, with a wide range of dApps, NFT projects, and DeFi solutions being built. Further infrastructure upgrades and a successful hard fork have enhanced security and scalability.

Shibarium coins explained

1. SHIB (Shiba Inu)

SHIB is the foundational token of the Shiba Inu ecosystem and was originally created as a meme coin on the Ethereum network. It’s an ERC-20 token with a massive initial supply of one quadrillion tokens. Over time, large portions of SHIB have been burned to reduce supply, with some incorporated into Shibarium's transaction fees and burning mechanisms.
Use cases:

• Payment: SHIB is used in a variety of platforms as a payment method.
• Staking: On platforms like ShibaSwap, users can stake SHIB to earn rewards in other tokens like BONE and TREAT.
• Token burns: A portion of SHIB is periodically burned to decrease supply, which is intended to increase scarcity and potential value.

2. BONE

BONE is the governance token within Shibarium. It allows holders to participate in decentralized governance decisions by voting on proposals. BONE is also integral to Shibarium’s operation, as it is used to pay for gas fees on the Shibarium layer-2 blockchain.
Use cases:

• Governance: BONE holders can vote on proposals within the Shiba Inu decentralized autonomous organization (DAO).
• Gas fees: All transactions on Shibarium require BONE for gas fees.
• Staking rewards: Users can stake BONE on ShibaSwap and earn passive rewards.

3. TREAT

TREAT is a relatively new token in the Shiba Inu ecosystem, designed to serve as a reward token in the ShibaSwap platform. It complements SHIB, BONE, and LEASH by acting as an additional incentive for users engaged in staking and liquidity provision.
Use cases:

• Rewards: Users receive TREAT as a reward for participating in activities like staking and providing liquidity on ShibaSwap.
• Future utility: It may have other roles in the ecosystem, particularly in gaming, as part of Shiba Inu's metaverse and other decentralized projects.

4. LEASH

LEASH started as a rebase token but later transitioned to being a store of value in the Shiba Inu ecosystem. LEASH is more scarce compared to SHIB and BONE, with a total supply of only 107,646 tokens, making it a high-value asset.
Use cases:

• Store of value: LEASH is primarily used as a store of value due to its limited supply.
• Exclusive perks: LEASH holders often get early access to various projects and exclusive rewards in the Shiba Inu metaverse.
• Staking rewards: Similar to SHIB and BONE, LEASH can be staked for rewards in other tokens.

5. SHI

SHI is an upcoming stablecoin in the Shiba Inu ecosystem. Unlike SHIB, BONE, and LEASH, SHI aims to maintain a consistent value, pegged to $0.01, and will function as a stable medium of exchange within the Shiba Inu ecosystem.
Use cases:

• Stablecoin: SHI will provide price stability for users, serving as a reliable currency for transactions.
• DeFi transactions: SHI can be used for DeFi activities like lending, borrowing, and trading without the volatility associated with other tokens.

How does Shibarium work as a layer-2?

Shibarium operates as an L2 scaling solution built on top of the Ethereum network, aimed at addressing Ethereum's limitations like high gas fees and slower transaction speeds. It leverages the security and decentralization of Ethereum while offering improved scalability and efficiency. Here's a technical breakdown of how Shibarium functions:

1. Layer-2 architecture

Shibarium is an L2 network that builds on Ethereum, but operates independently from the main Ethereum layer-1 chain for most transactions. It handles off-chain transactions to reduce the load on Ethereum’s main chain, which is responsible for maintaining decentralization and security.

• Transaction execution: Most of Shibarium's transactions are processed off-chain, with only periodic updates submitted to Ethereum's layer-1. This ensures that gas fees remain low, and the main chain remains uncongested.
• Consensus mechanism: Shibarium uses a modified proof-of-stake (PoS) mechanism called proof-of-participation (PoP), where validators are selected based on their holdings of the BONE token. This differs from Ethereum’s PoS in how participation and validation power are distributed.

2. Ethereum Virtual Machine (EVM) compatibility

Shibarium is fully compatible with the Ethereum Virtual Machine (EVM). This compatibility ensures that existing Ethereum-based dApps can easily migrate or interact with Shibarium without significant modifications.

• Smart contracts: Developers can write and deploy smart contracts on Shibarium using the same tools and languages (e.g., Solidity) used on Ethereum. This facilitates easy adoption and integration of existing Ethereum applications.

3. Security and decentralization

While Shibarium handles most transactions off-chain, it relies on Ethereum for finality and security. Periodic checkpoints or transaction batches are sent to Ethereum layer-1, ensuring that the data remains secure and auditable.

• Heimdall and Bor: Shibarium’s architecture includes two key layers borrowed from the Polygon framework:
• Heimdall layer: Responsible for validator management and the consensus process using Tendermint, a Byzantine Fault Tolerant (BFT) consensus algorithm.
• Bor layer: Handles block production and ensures the network’s fast and efficient execution of transactions.

4. Gas fees and transaction costs

Shibarium significantly reduces transaction costs by keeping most interactions off the Ethereum layer-1 chain. Instead of using ETH for gas fees, Shibarium uses BONE as the primary gas token, making transactions cheaper and more accessible.

• Optimized transaction fees: Since gas fees are handled by BONE and the L2 executes most transactions off-chain, gas fees on Shibarium are significantly lower than on Ethereum.

5. Interoperability and bridges

Shibarium integrates with the Ethereum network via a bridge that allows for the transfer of assets (such as SHIB, BONE, and LEASH) between Ethereum and Shibarium. The bridge is crucial for maintaining asset liquidity across both networks.

• Cross-chain interoperability: The bridge enables seamless asset transfers, allowing users to move tokens between Ethereum and Shibarium, while also interacting with dApps across both networks.

6. Scalability

As a layer-2, Shibarium can handle a higher volume of transactions compared to Ethereum’s layer-1, making it more scalable. By processing most transactions off-chain and only submitting checkpoints to Ethereum periodically, Shibarium alleviates the transaction load on Ethereum, resulting in faster and cheaper operations.

• Transaction throughput: Shibarium can process transactions in a fraction of the time compared to Ethereum Layer-1, increasing throughput and lowering latency.

 

Feature	Shibarium (new)	Ethereum (old)
Network type	Shibarium is a layer-2 scaling solution built on Ethereum. It processes transactions off-chain, reducing congestion and increasing speed. It periodically syncs with Ethereum for security and finality.	Ethereum is a layer-1 blockchain that handles all transactions on-chain. It provides strong decentralization but can become congested during high activity, leading to slower transaction times.
Consensus mechanism	Shibarium uses proof-of-participation (PoP), where validators are selected based on their BONE holdings. This is more energy-efficient compared to Ethereum’s old PoW mechanism.	Ethereum uses PoS following the Ethereum 2.0 upgrade. Validators are chosen based on their ETH stake, reducing energy consumption and increasing scalability.
Transaction speed	Shibarium processes transactions off-chain, offering faster speeds than Ethereum's layer-1, with the ability to handle a higher transaction throughput.	Ethereum’s transaction speed ranges from 14 to 30 TPS, which can slow down during periods of congestion. It is generally slower compared to layer-2 solutions.
Transaction costs	Shibarium significantly lowers transaction fees, with gas fees paid in BONE, making transactions much cheaper, often costing fractions of a cent.	Ethereum’s gas fees are much higher, with costs ranging from $10 to $50 or more during times of network congestion.
Scalability	Shibarium is highly scalable due to off-chain processing and can handle a larger volume of transactions without affecting speed or cost.	Ethereum, while more scalable after Ethereum 2.0, still faces limitations in handling high volumes of transactions on-chain. Scalability improvements come primarily from layer-2 solutions like Shibarium.
Utility	Shibarium enhances the Shiba Inu ecosystem, supporting DeFi, NFTs, and dApp development, with faster and cheaper transactions. It uses multiple tokens, including BONE for gas and SHIB for transactions.	Ethereum supports a wide range of applications, including DeFi, NFTs, dApps, and DAOs. It is the most used blockchain for smart contract development and decentralized platforms.
Native token	Shibarium’s native token is BONE, used for paying gas fees and participating in governance within the Shiba Inu ecosystem.	Ethereum’s native token is ETH, used for transaction fees, staking, and as a primary currency within the Ethereum ecosystem.
Burn mechanism	Shibarium has an automated SHIB burn mechanism, where a portion of every transaction’s gas fee is burned, reducing supply and supporting deflation.	Ethereum introduced a burn mechanism with the EIP-1559 upgrade, where a portion of the transaction fees (base fee) is burned to reduce the overall ETH supply.
Governance	Governance on Shibarium is driven by BONE holders, who can vote on key proposals, contributing to the ecosystem's future direction.	Ethereum’s governance is primarily managed through the Ethereum Improvement Proposal (EIP) process, where developers and the community influence decisions indirectly.
Security	Shibarium benefits from Ethereum’s layer-1 security, using a hybrid approach with off-chain processing and periodic syncing for finality and integrity.	Ethereum is highly secure due to its decentralized PoS mechanism and large validator network, ensuring strong protection against attacks.
Developer ecosystem	Shibarium is EVM-compatible, allowing developers to easily migrate dApps from Ethereum. Its ecosystem is growing but smaller than Ethereum’s.	Ethereum has the largest developer ecosystem in the blockchain space, with extensive tools, libraries, and resources for smart contract and dApp development.
Use cases	Shibarium focuses on the Shiba Inu ecosystem, enhancing DeFi, NFTs, and dApps, particularly with the use of SHIB, BONE, and LEASH tokens.	Ethereum supports a wide variety of use cases, including DeFi, NFTs, decentralized applications, and smart contracts, across diverse industries.
Launch date	Shibarium launched on 16 August 2023, after extensive testing and preparation phases.	Ethereum launched in July 2015 and has undergone multiple significant upgrades, including the transition to Ethereum 2.0 with PoS.
Adoption	Shibarium has seen rapid adoption within the Shiba Inu community, with over 416 million transactions and 1.8 million wallets created to date.	Ethereum is one of the most widely adopted blockchains, used globally for decentralized applications, smart contracts, and financial services.

 

Conclusion

To sum it up, Shibarium is a layer-2 blockchain solution built on top of Ethereum to enhance the scalability and efficiency of the Shiba Inu ecosystem.

By enabling faster transaction speeds and significantly lowering gas fees, Shibarium transforms Shiba Inu from a speculative meme token into a platform capable of supporting dApps, DeFi, NFTs, and more.

The introduction of Shibarium has broadened the utility of SHIB and its ecosystem tokens (BONE, LEASH, etc.), contributing to a more sustainable, functional, and scalable blockchain infrastructure.