What is Arbitrum? Everything you need to know about $ARB
Anyone who has spent time on Ethereum knows it has two significant problems: Congestion and outrageous gas fees.
What if I told you that layer 2 solutions fix both of these issues at lighting-fast speeds?
Arbitrum is a blockchain platform that offers users fast, scalable, and secure transactions.
It was created with the goal of becoming a powerful tool for developers to build decentralized applications (dApps) on top of its infrastructure.
The unique architecture allows it to process transactions up to 1,000 times faster than other blockchains while maintaining high security and privacy levels.
The platform also supports smart contracts and provides an array of features such as atomic swaps, cross-chain interoperability, and trustless automated dispute resolution.
With these tools at their disposal, developers can create innovative dApps with unprecedented speed and reliability.
What Does Layer 2 Mean?
Layer 2 solutions are a way of scaling digital asset projects in the world of cryptocurrencies.
They are a software engineering technique that allows developers to increase the number of transactions that can occur on the blockchain-based system by allowing off-chain transactions.
Through the off-chain capabilities offered by Layer 2, developers can significantly increase their networks' throughput and scalability.
Essentially, these solutions act as access points for communicating with the main chain, making them useful for financial applications requiring extensive computational power, such as decentralized exchanges and payment systems.
Users benefit more from traditional blockchains by utilizing second-layer networks while improving efficiency. This helps with cost savings, increasing security, and improving overall user experience.
The TL:DR is Arbitrum, or Arbi, known in the defi world, uses optimistic rollups to maintain blockchain security while making it faster and cheaper to use.
Optimistic Rollups Explained
An optimistic rollup is a way technology improves cryptocurrency transactions' scalability.
It consolidates many small payments or trades into one larger payment, reducing pressure on the blockchain and its limiting factors.
Optimistic rollups provide instant settlement, so the user sending money doesn't have to wait for it to be approved by miners.
Essentially, these rollups assume everyone is a good actor, settle transactions immediately, roll multiple transactions up together, and send them as one to Ethereum Mainnet. Hence the term "roll up".
Arbitrum's security handles all of its fraud-proofing off-chain.
As crypto becomes more mainstream, many companies are now turning to optimistic rollups as an alternative method for quickly and securely processing payments.Â
This technology is paving the way for faster, more efficient crypto transactions and could lead to a new era of developments in the cryptocurrency industry. Layer 2 solutions are likely the future, not a fad.
Arbitrum VS. Optimism
Cryptocurrency technology is constantly evolving and growing as new and improved blockchain protocols are continually being developed. One of the most recent developments in this space is the arrival of two promising new blockchain protocols: Arbitrum and Optimism.
Both these platforms offer scaling solutions that enable users to send data securely and quickly on the blockchain while still ensuring high security and privacy. However, they differ in a couple of key ways, with Arbitrum offering more advanced privacy options than Optimism.
As mentioned above, Arbi does multiple rounds of fraud proofing off-chain, while Optimism does a single round on-chain.
Secondly, Optimism runs on the Ethereum Virtual Machine while Arbitrum uses its own product called the Arbitrum Virtual Machine. However, it's important to note that AVM is EVM-compatible.
Arbitrum VS. Polygon
Technically a side-chain, Polygon also offers users a way to interact with the Ethereum blockchain, though in a much different way.
Polygon is an Ethereum-compatible platform for scaling and building decentralized applications.
It allows companies and developers to implement their own customizable sidechains to achieve levels of scalability, security, user experience, and cost they could not previously achieve in the Ethereum Mainnet.Â
It also provides a range of processing services like a virtual machine, payment gateways, on-chain liquidity pools, staking solutions, and more.
Furthermore, its standardized term for smart contracts is compatible with existing Ethereum ones, making auditing easier.
As Polygon matures, it will allow traditional enterprises to move from centralized models to decentralized governance and operations regardless of skill level or stack used.
One of the most significant advantages Polygon has over its layer 2 competition is that it has a native token: Matic.
How Does Arbitrum Work?
Arbitrum is an innovative blockchain platform that enables users to build and deploy efficient smart contracts without compromising their applications' performance, scalability, and security.
The chain works by leveraging secure multi-party computation protocols that allow multiple parties to agree on the outcome of a transactional contract without necessitating a trusted third party.Â
This process has no single point of failure and is deeply rooted in cryptography, allowing for secure data verification, and resilient security of funds across both public and private blockchains.
What makes Arbitrum unique is its combination of trustless execution with off-chain scalability, developer-friendly API tools, real-time settlement, fast transaction speeds, low gas costs, and seamless upgrades - all baked into one innovative platform.
Is There an Arbitrum Coin?
Yes. Arbitrum does now have its own token. The ARB token is used for governance within the Arbitrum DAO, and token holders can participate in the governance decisions that are processed automatically if they pass the voting process.
Noteworthy Projects on Arbitrum
Arbitrum is the 5th largest blockchain by TVL and is home to nearly 200 projects.
Most of the major Ethereum players are on Arbitrum. This includes Aave, Sushiswap, Uniswap, Curve, Synapse, and Balancer.
But some noteworthy projects aren't available on every chain like the big guys are.
GMX
GMX has been a shining star in the most recent bear market. With a resilient token that managed to gain value while everything else was dumping, it is now the 17th largest protocol in all of Defi, according to Defillama and going by TVL.
It's a decentralized spot and perpetual exchange that supports low swap fees and zero-price impact trades.
It's available on Arbi and Avalanche. As a daily crypto trader, you can long, short, trade, and pretty much whatever you want.
It's supported by its token, GMX, and its own version of Curve's tri-crypto style pool, GLP. GLP (GMX Liquidity Providing) is a blend of ETH, BTC, and a variety of stables, along with a dash of Uni and Link.
Radiant
Radiant is the second largest project on this chain. It's fascinating, not because of what it does, but because it is a fork of a fork.
Geist is a fork of Aave, the grandaddy of lending and borrowing platforms. The difference is that Geist introduced its unique tokenomics scheme and jumped onto the Fantom network right as things took off.
Radiant forked this idea and built on Arbitrum, probably for the same reason.
You can now be paid to lend, borrow, and hold their token. If you're into Aave and want to explore Arbitrum, this project is worth a look.
Conclusion
Arbitrum is a highly innovative blockchain platform that offers users the ability to deploy secure smart contracts while also enjoying fast transaction speeds, low gas costs, and seamless upgrades.
Popular projects such as Aave, Sushiswap, Uniswap, Cruve, Synapse, and Balancer, among others, are available on this chain, along with some unique ones like GMX and Radiant.
If you love DeFi but are tired of excessive gas fees and congestion, look at Arbitrum.
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