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What is Arbitrum?

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Arbitrum is a layer 2 scaling solution made for Ethereum to help the blockchain giant unload a big chunk of its transactions off-chain, allowing higher tps and decongesting the main network. 

There are a number Ethereum scaling solutions available in the market right now, and most of them take advantage of off-chain protocols. But one scaling platform wants to step up to the competition by offering real performance that can provide tangible benefits for its users. 

Background 

Arbitrum was developed by Offchain Labs, a New York-based firm that creates scaling solutions for the Ethereum blockchain. 

The company’s founders, Ed Felten, Steven Goldfeder, and Harry Kalodner, wanted to create a solution that can seamlessly scale decentralized apps, decrease transaction cost, increase blockchain performance, all while maintaining Ethereum’s legendary security. And Arbitrum perfectly encapsulates this ideal dream.

What is Arbitrum? 

Arbitrum is a layer 2 scaling solution made for Ethereum to help the blockchain giant unload a big chunk of its transactions off-chain, allowing higher tps and decongesting the main network. 

Ethereum is the blockchain of choice for most developers looking to build decentralized products and services thanks to its widespread branding, network effects, and first-mover advantage. But as the volume of users rapidly rises, it creates a significant strain on the entire network, making it slower and more costly for users. 

Arbitrum was created to deal with Ethereum’s clogging problems by increasing the speed and scalability of its smart contracts, which, in turn, makes the network more secure. 

Ethereum Virtual Machine Compatibility 

Arbitrum is designed with the Ethereum Virtual Machine in mind as it is compatible with any computer language that can work with the EVM. With this compatibility, developers don’t need to learn a new language all over again when developing a new service using the Arbitrum platform, which will save them a lot of time. 

No Plugins or Compilers Needed

Developers can use Arbitrum straight out of the box, so to speak, when using it to develop new products or services as it can be used through the existing tool for Ethereum. 

There is no need for them to download specific plugins or compilers just to use Arbitrum, significantly lowering the entry barriers for developers who want to use its platform. 

Low Transaction Fees 

Arbitrum’s ability to increase Ethereum’s transaction throughput is beneficial enough for the blockchain giant, but aside from this capability, it can also decrease transaction fees within the ecosystem. Arbitrum can significantly bring down costs through its advanced rollup technology while maintaining sufficient incentives for validators, which is a win-win solution for every stakeholder in Ethereum. 

Early Adopter Incentive 

Arbitrum has announced that all the development teams that have applied to build on the developer mainnet will have the privilege of at least two weeks of development time before it releases its layer 2 protocol to the public. 

It also serves as an alternative incentive since Arbitrum hasn’t launched a token sale since it does not have a utility token, unlike other layer 2 scaling solutions. 

Optimistic Rollup 

At the heart of Arbitrum is it is a type of technology called Optimistic Rollup that can help smart contracts scale by transferring messages between Ethereum and Arbitrum smart contracts. Arbitrum unloads most of the weight of Ethereum’s transactions and transfers them to its layer to manage all the processing of the transactions. 

The only remaining task that Ethereum must do is record these transactions on-chain, which makes the entire blockchain platform less congested, faster, and more convenient for users. 

This technology is called ”optimistic rollup” for two reasons: First, ”optimistic” was used to describe how any validator can post a rollup block and authenticate the validity of other blocks. Second, the term ”rollup” refers to how public information can be utilized to build a complete chain history from an optimized log of events. 

Transaction Rollups 

Transaction Rollup is a technique being used by Arbitrum to record batches of submitted transactions on one side, which is the Ethereum main chain and execute them on the other side, which is the scalable layer 2 sidechains. This technique is being implemented to avoid the consequences of concentrating both recording and execution of transactions in a single chain. 

ArbGas 

ArbGas serves as a measurement to monitor the cost of execution on the Arbitrum chain, but contrary to initial assumptions, it is quite different from the Ethereum gas. 

The platform does not have a hard ArbGas limit, and the Arbitrum chain can spend more ArbGas units per second of computation compared to the number of gas units in Ethereum’s gas limit. 

To make it clearer, it can be described as much more generous and affordable per unit compared to Ethereum gas. 

Growing Ecosystem 

Arbitrum continuously strengthens its platform, not only through technology but also with the number of partnerships and projects building on top of it, particularly decentralized finance (DeFi) platforms. It has been collaborating with top DApps such as Uniswap, SushiSwap, and many more others in the future to make its ecosystem more efficient. Let’s explore some of the top projects building on Arbitrum.

GMX

GMX is a blockchain-based spot and perpetual exchange that facilitates low swap fees and zero price impact trades. Trading on this platform is supported by a multi-asset pool that enables liquidity providers to earn from swap fees, asset rebalancing, leverage trading, and market-making. 

It provides traders with a bird’s eye-view of reliable price feeds that can inform them when liquidation occurs, protecting their positions from temporary wicks. 

GMX also allows traders to enter and exit positions with minimal spread and zero price impact, saving them from high costs, and as a plus, allowing them to get an optimal price for their trades.

Its platform is designed to have a user-friendly swap interface that enables traders to swap from any supported asset into their selected position easily. 

Tracer Finance

Tracer is a peer-to-peer financial infrastructure that features censorship-resistant market connectivity, thanks to the power of blockchain technology. By leveraging open-source code, oracle architecture, and its decentralized nature, Tracer is more than capable of providing a high level of security for its users. 

It provides financial services such as lending, spot exchanges, derivatives, and even borrowing tools, giving users a wide variety of financial services to choose from. For an additional income stream, platform users may also earn TRC tokens by staking right inside Tracer. 

Amy Finance

Amy Finance is a layer 2-based lending protocol that aims to provide users with a platform that allows them to earn high yields free from any significant risks. To start earning, platform users have to stake assets into the assembly pool, and each liquidity provider/staker will earn the interest generated from lending and leverage trading. 

And since Amy Finance sits on a layer 2 design, it only charges very low fees on its users, allowing stakers to earn from the platform without suffering from high charges. It also offers a multi-usage pool, where lenders can take advantage of diversified benefits with minimal arbitrage risk, providing them with flexible and almost risk-free perks.

Arbidoge

Arbidoge is the first Dogecoin fork and native token to be launched on the Arbitrum network. Arbidoge is designed to fully leverage the scalability and speed of the platform’s layer 2 network. While a layer 1 network can offer a robust technology, its high transaction fees prevent many dApps from developing and reaching their potential.

With this risk, Arbidoge picked Arbitrum because of its layer 2 network that provides the advantage of low fees, which would be beneficial for both developers and users. It is currently listing its token, which has a 10 trillion supply limit, on Coingecko and Coinmarket cap, and interested buyers can purchase Arbidoge on Sushiswap. 

Conclusion 

Arbitrum is a straightforward Ethereum scaling solution that provides developers with what they really need instead of fancy and unnecessary features. Its low transaction fees, efficient scaling solution, growing ecosystem, wide compatibility, and low entry barrier for developers certainly separate it from the rest of the competition. 

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