Ethereum’s enormous popularity has placed severe strain on the network’s functionality. that Ethereum Blockchain It only supports approximately 20-40 transactions per second (TPS). Like a highway during rush hour, the network becomes congested when more transactions are queued than can be accommodated. This is when fees skyrocket as users struggle to get their transactions processed first. Layer 2 (or L2) network A well-tested solution to blockchain scalability issues, alleviating network traffic by allowing some transactions to run on the main chain. Arbitrum is one of the best L2 solutions to solve Ethereum’s congestion and high fees.
What is Arbitration?
Arbitrum is a cryptocurrency network and layer 2 scaling solution for Ethereum that enables larger transaction volumes and lower fees. L2 solutions, such as Arbitrum, exist as sub-modules within a blockchain network, processing transactions away from the mainnet to reduce congestion and promote growth. Arbitrum achieves this by using a technique called optimistic rollup (more on this later), which bundles off-chain transactions and then verifies them on the main chain.
Ethereum’s scalability issues are a result of its design, which limits the number of transactions per second it can process in order to maintain decentralization. If too many transactions can be processed on the main chain, running nodes to verify them will become inaccessible to all but those with the most powerful computing hardware. This is why L2 solutions like Arbitrum are preferred over modifying the architecture of the Ethereum mainchain. It provides users with all the benefits of Ethereum without the drawbacks.
How Arbitrum Works
Arbitrum uses Optimistic Rollup and the Arbitrum Virtual Machine (AVM) to improve Ethereum’s scalability and efficiency.
Optimistic Rollup
Arbitrum achieves efficient and low-cost transaction processing through Optimistic Rollups, which bundles and processes off-chain transactions, reducing network congestion and fees. These rollups essentially assume transactions are valid and receive confirmation on the mainnet only if disputed. In case of invalid transactions, malicious actors will be subject to financial penalties. This mechanism allows Ethereum to process larger amounts of transactions more efficiently.
Transactions in Arbitrum are submitted to L1 in large single batches, typically containing hundreds of L2 transactions. This allows Ethereum to supercharge transaction volume by approving many transactions simultaneously while effectively performing only the amount of work required to verify and record a single transaction.
Arbitrary Virtual Machine (AVM)
The Arbitrum Virtual Machine (AVM) runs smart contracts that are fully compatible with the Ethereum Virtual Machine (EVM), enabling a smooth migration for developers. The network design ensures high throughput and low latency, making it an attractive solution for decentralized applications (DApps) and DeFi projects. Governance is facilitated by ARB tokens. ARB tokens are not used as transactional utility tokens, but allow holders to participate in network decisions.
Benefits of Arbitration
Improved scalability
Ethereum is limited to processing 20-40 transactions per second, which may sound like a lot, but if you consider that this is the limit of the entire Ethereum ecosystem, the network congestion problem is easy to understand. Arbitrum allows the Ethereum network to process exponentially more transactions.
Cost-effective (lower gas bills)
This is not uncommon. Ethereum gas fees It reaches triple digits during peak hours. Arbitrum offloads many transaction processing tasks from the main chain, reducing network traffic on the main chain and keeping costs low.
Improved transaction speed
If you need to complete an Ethereum transaction during a time of high network traffic and don’t want to pay a lot for gas, you may have to wait a while. By performing complex calculations in Arbitrum, less transaction data needs to be stored on the mainchain, resulting in much faster transaction processing times.
security benefits
L2 solutions like Arbitrum inherit all security features from the parent chain. Arbitrum’s optimistic rollups additionally leverage stringent anti-fraud measures to ensure the security of your transactions.
Comparison with other scaling solutions/L2
Arbitrum is one of the most popular solutions, but it is not the only layer 2 scaling solution for Ethereum. Optimism and Polygon are two well-known L2s with their own technologies and advantages.
optimism (OP)Like Arbitrum, it leverages optimistic rollups to process transactions off-chain before batching and settling them on Ethereum. However, Optimism uses a “bridge” to connect L2 to the Ethereum blockchain, while Arbitrum uses a sequencer.
polygon (POL) It uses a sidechain architecture where transactions are processed on a completely separate blockchain connected to Ethereum via a “bridge”. Arbitrum is primarily designed for use cases that require high transaction volumes (e.g. DeFi applications and some gaming platforms), while Polygon is better suited for situations where speed and cost are the primary concerns.
Start using Arbitrum
To start using Arbitrum, follow these essential steps to set up your wallet, connect your assets, explore dApps, and use cryptocurrency IRL.
Get a wallet that supports Arbitrum
As with getting started with any blockchain, the first step is using a compatible wallet. BitPay Wallet supports Arbitrum along with other top L2 and existing blockchains. The Arbitrum One network is Ethereum L2, so all gas or network fees are paid in ETH. For this reason, your wallet should contain at least some ether. that self custody BitPay Wallet You can manage your assets and conveniently track all transactions, allowing you to handle your cryptocurrency finances efficiently.
Arbitrum is the best self-custodial wallet to store and connect your assets.
Download the app
Link your ETH or ERC-20 assets to Arbitrum
To start using Arbitrum, you need to connect your assets from the Ethereum mainnet to the Arbitrum Layer 2 network. Start by visiting one of the following connectivity services: crystal bridge. Connect your Ethereum wallet to the bridge interface. Select the asset you want to transfer (ETH or ERC-20 tokens) and specify the amount. Check your transactions in your wallet. The bridge will process the transfer and your assets will be available on Arbitrum within minutes, resulting in cheaper and faster transactions.
Explore and use dApps on Arbitrum
Once your assets are on the Arbitrum network, you can start exploring various decentralized applications (dApps) that offer enhanced features with lower fees and faster transactions. Popular dApps such as Uniswap, Sushiswap, and Aave are fully integrated with Arbitrum, allowing users to trade tokens, provide liquidity, and engage in lending and borrowing activities seamlessly. Simply connect your Ethereum wallet to the Arbitrum version of the platform and experience the same powerful services with the added benefit of layer 2 scaling.
The Future of Arbitration
Arbitrum is governed by its own Decentralized Autonomous Organization (DAO), which allows ARB holders to vote on proposed changes to the Arbitrum ecosystem. Cross-chain interoperability is also expected to become a trend, expanding the scope of Arbitrum by allowing it to seamlessly interact with tokens or coins from other blockchains. As developer tools and infrastructure evolve, the process of building and deploying on Arbitrum is expected to become easier, which will dramatically improve scope.
Regarding the potential impact on the Ethereum ecosystem, Arbitrum’s scalability and low gas costs could open the door to creating more complex and decentralized applications on the network, which could lead to broader use cases and adoption. Entering the market will have the effect of encouraging more innovation and competition among other L2s, thereby improving service delivery.
Arbitrum finishing
For many, layer 2 solutions like Arbitrum represent the future of large-scale blockchain networks like Ethereum, where transactions are completed quickly, securely, and at low cost. The Ethereum blockchain, home to the DeFi ecosystem, is congested during peak hours, leading to higher gas fees and slower transaction speeds. Arbitrum’s optimistic rollup technology offloads much of the processing from Ethereum, keeping the mainnet free of data clutter while enhancing its ability to quickly and securely verify and record transactions.
FAQs About Arbitration
Are the decisions layer 2?
yes. Arbitrum, like its competitor Optimism, are both layer 2 rollups.
Does Arbitrum have tokens?
Arbitrum’s native token is ARB, which is traded on many centralized cryptocurrency exchanges.
What is Arbitrum used for?
ARB is the governance token of the Arbitrum ecosystem, giving holders voting rights on network changes and other community proposals. It is an L2 network of the same name.
Who created Arbitrum?
Offchain Labs created Arbitrum and launched the Arbitrum One mainnet on August 31, 2021.
Additional resources for a deeper dive into Arbitrum