If you are interested in scaling Ethereum, you have probably heard of Arbitrum, the Layer 2 Optimistic Rollup that promises faster speeds, lower costs, and the same level of security as Ethereum. But what is Arbitrum exactly, and why is it so popular among developers and users? Those are the questions in every crypto enthusiast’s mind.
Ethereum is a leading platform for creating decentralized applications (DApps) that run on smart contracts. However, as more users and developers flock to Ethereum, the network faces scalability challenges that affect its performance and cost. To address these issues, some developers are working on second-layer solutions that operate on top of Ethereum and leverage its security and decentralization.
What is Arbitrum?
Arbitrum was created by a company located in New York called Offchain Labs, founded by Ed Felten, Steven Goldfeder, and Harry Kalodner. They are all blockchain experts with academic backgrounds from Princeton University. Ed is a professor, Steven has a Ph.D., and Harry is a Ph.D. candidate. They have been researching roll-up technology since 2014 before Ethereum was launched. They also worked on a suite of scaling solutions, including Nitro, Stylus, and Prysm.
It is a platform that enhances the performance and privacy of Ethereum smart contracts by running them on a second layer. It uses optimistic rollups powered by Nitro, a proprietary technology stack that enables 7x more throughput than Ethereum to allow transactions to be executed off-chain and verified on-chain later. Arbitrum allows developers to deploy any Ethereum-compatible contract on its layer 2 network, which benefits from Ethereum’s security and Arbitrum’s efficiency.
The sidechain is secured by a network of validators who stake ETH to participate in the consensus process. This is called the “AnytrustGuarantee,” and it ensures that Arbitrum is as secure as Ethereum. This way, Arbitrum reduces the computational and storage load on Ethereum while enabling new kinds of powerful layer 2-based DApps.
Arbitrum One and Arbitrum Nova
- Arbitrum One is the home of decentralized finance (DeFi) on Arbitrum. It supports a wide range of dapps, wallets, and tools that leverage the benefits of Nitro to offer fast and cheap transactions for users and developers. Some of the most popular dapps on Arbitrum One include Uniswap, Aave, SushiSwap, MakerDAO, Chainlink, and many more.
- Arbitrum Nova is the home of Web3 social and gaming on Arbitrum. It supports innovative dapps that use Nitro to create immersive and interactive experiences for users. Some of the most popular dapps on Arbitrum Nova include Reddit’s community points, Axie Infinity, Gods Unchained, Decentraland, and many more.
What are “Optimistic Rollups”?
A rollup is a way of reducing the amount of data that needs to be stored on the blockchain. It works by combining multiple transactions into one transaction that summarizes them.
An optimistic rollup is a way of running smart contracts on a sidechain that periodically submits proofs to the main chain. The proofs are optimistic, meaning that they assume that the sidechain is valid unless someone challenges it.
If a challenge is successful, the sidechain is rolled back, and the challenger is rewarded. This way, an optimistic rollup can achieve higher throughput and lower fees than the main chain while still inheriting its security and decentralization. However, they also require a mechanism to resolve disputes and penalize malicious actors.
What is the Arbitrum Foundation?
The Arbitrum Foundation is a non-profit organization that supports the development and adoption of Arbitrum. It aims to provide fast, secure, and low-cost transactions for decentralized applications (dApps) and smart contracts without compromising on decentralization or security. The Arbitrum Foundation was founded by the creators of Arbitrum, who are also researchers and professors at Princeton University and Columbia University.
The foundation’s mission is to foster a vibrant and open ecosystem around Arbitrum and to promote research and education on layer-2 scaling technologies.
What is the ARB Token?
The ARB Token is a cryptocurrency that aims to provide a decentralized and transparent platform for arbitrage trading. Arbitrage trading is the practice of buying and selling assets across different markets to take advantage of price differences.
The Token claims to use a smart contract system and an automated trading bot to execute arbitrage trades on behalf of its users, generating passive income for them. The ARB Token also has a governance mechanism that allows its holders to vote on important decisions regarding the platform’s development and future direction.
What is the Arbitrum Governance?
The Arbitrum Governance is the mechanism that allows the Arbitrum community to participate in the decision-making process of the network. It consists of two main components: the Arbitrum Council and the Arbitrum Improvement Proposals (AIPs).
The Arbitrum Council is a set of reputable and trusted entities that are responsible for overseeing the network and ensuring its smooth operation. The members are elected by the Arbitrum token holders through a transparent and fair voting process. The Council has the power to upgrade the network, resolve disputes, manage funds, and perform other administrative tasks.
The Arbitrum Improvement Proposals (AIPs) are the documents that describe the proposed changes or enhancements to the Arbitrum protocol or ecosystem. Anyone can submit an AIP, but it has to follow a specific format and undergo a rigorous review process by the community and the Council. The AIPs that are approved by the Council are implemented by the Arbitrum developers and deployed on the network.
How does Arbitrum Work?
It allows users to run smart contracts on a virtual machine that is compatible with the Ethereum Virtual Machine (EVM). The virtual machine, called Arbitrum Virtual Machine (AVM), is managed by a group of validators who are chosen by the creator of the virtual machine.
The validators are responsible for executing the code of the virtual machine and reporting its state to the Ethereum mainnet. They can do this efficiently by using a technique called bisection, which reduces the amount of data that needs to be verified by other nodes. If all validators agree on the state of the virtual machine, they can submit a batch of transactions to the mainnet with minimal gas costs. If there is a dispute among the validators, they can use fraud proof to challenge the incorrect state and revert it.
Arbitrum also enables interoperability between different virtual machines and the Ethereum mainnet. Users can send messages and tokens across different virtual machines and to and from the mainnet using the Arbitrum bridge.
Bridging in blockchain is a way of solving the problem of interoperability between different blockchain networks. It allows them to communicate and exchange data and assets without relying on a third party. A bridge or a relay is a device that acts as a go-between for the two networks, enabling them to interact smoothly and securely.
The bridge is a smart contract that handles the transfers of assets and verifies the authenticity of messages. The bridge also ensures that users can withdraw their funds from Arbitrum in case of an emergency or a system failure.
How to Get Started with Arbitrum?
If you want to try out Arbitrum as a user, you will need a compatible wallet such as MetaMask, WalletConnect, or Coinbase Wallet. You will also need some ETH or other tokens to deposit into the bridge.
Once you have some funds on Arbitrum, you can start exploring the dapps on either Arbitrum One or Arbitrum Nova. You will notice that transactions are much faster and cheaper than on Ethereum, while still being secure and decentralized. You can also use tools such as DeFi Pulse or DappRadar to track the total value locked (TVL), market share, users, gas saved, and other metrics of Arbitrum.
Arbitrum is one of the most promising Layer 2 solutions for scaling Ethereum. It offers faster speeds, lower costs, and the same level of security as Ethereum for both users and developers. It also supports a rich ecosystem of dapps across various domains such as DeFi, social media, gaming, NFTs, and more.