Arbitrum Scaling Solution Explained: An Ethereum Scaling Solutions

What is Arbitrum and how does it work?

Arbitrum is a layer-2 (L2) scaling solution for the Ethereum blockchain to enhance network throughput and facilitate fast transactions at cheap costs. 

Ethereum is among the very first blockchain to introduce smart contracts, and it has become home to thousands of protocols, tokens, and decentralized finance applications- thanks to its decentralized and secure architecture. But the pain point where Ethereum suffers blockchain trilemma (Security, Scalability, and Decentralization) is its scalability- lower throughput and high gas costs. Arbitrum is one of the layer-2 solutions – trying to address these shortcomings of Ethereum so more participants can seamlessly access and flourish within its dynamic ecosystem at significantly lower costs.

The scaling technology at the core of Arbitrum- is optimistic roll-ups. A blockchain roll-up is a comprehension technique that processes transactions and data off-chain and relays it back to the mainnet in a batch or rolls of many transactions. This way, mainnet- Ethereum has to process only a batch of transactions rather than each transaction, ultimately reducing congestion and cost from the main network. Arbitrum’s optimistic roll-ups further speed up this process by optimistically assuming all transactions in a batch as valid. The transactions are only verified if some raise questions on the transaction’s validity through dispute resolution mechanisms. When users submit transactions on Arbitrum, the protocol batches them into a single transaction, processes and settles them on its Sidechains, and then sends them back to Ethereum mainnet to be recorded.

Arbitrum was created and launched in August 2022 by Offchain Labs, a development company based in New York. Steven Goldfeder (current CEO), Harry Kalodner (CTO), and  Ed Felten, former researchers from Princeton University, co-founded Off-chains Labs in 2018, and all members carry vast experience in computer science, cryptography, and blockchain technology.

Arbitrum L2 is powered by the native crypto token ARB, which went live earlier this year through a hyped airdrop. ARB token is mainly used for staking and to participate in governance- Arbitrum DAO, where token holders can vote on proposals and changes for the development of the protocol.

What problem does Arbitrum solve?

In its earlier days, the Ethereum network worked absolutely fine when there were a limited number of transactions and users, but as the popularity of decentralized applications and DeFi projects has grown- its gas fee has also surged. These high gas prices and slow performance can lead to poor user experience and make it costly to perform even simple actions like sending tokens or interacting with smart contracts. While the Ethereum development is coming up with new upgrades and a scalable version of Ethereum 2.0, methods like layer-2 scaling solutions temporarily handle these issues. 

Layer-2 scaling solutions like Arbitrum are built on top of Ethereum and offer users with improved transaction throughput, speed, and, most notably, affordable transaction costs. It boosts the performance of Ethereum smart contracts by computing and processing transactions off of the mainnet.

Pros & Cons of Arbitrum

Here are a few Pros of the Arbitrum network:

• Trustless security: Arbitrum L2 inherits its security from the Ethereum itself, with one validator verifying the correctness of Layer 2 results 
• Compatibility with Ethereum: It is compatible with Ethereum Virtual Machine, so developers can run EVM smart contracts and applications without the need to modify them.
• Scalability: It boosts the transaction throughput of Ethereum from 14 TPS (transactions per second) to 4000+ TPS by moving computation and storage off of the main Ethereum chain. 
• Low cost: It is specifically designed to minimize the Ethereum L1 gas fees, offering users affordable and fast transactions.

Cons of Arbitrum network:

• Security: While Arbitrum benefits from the security of Ethereum- it also means that any fault in layer1 will become a vulnerability in layer2.
• Time Delay: Arbitrum’s optimistic roll-up dispute resolution mechanism takes around 7 days for verification of the transaction. 

Read On: Polygon vs Arbitrum vs Optimism 

How to Use Arbitrum Applications

Follow the below assets to connect Arbitrum network and use its dApps:

Step 1: Connect with Arbitrum Network to your Metamask wallet

Login to your Metamask wallet browser extension, then click “Ethereum Mainnet” in the network and click the “Add Network” option. Next, enter the details of the desired Arbitrum chain (Arbitrum One or Arbitrum Nova).

Step 2: Bridge your assets to Arbitrum

Login to Arbitrum bridge with your Metamask wallet (Network as Ethereum mainnet), next choose the network and token to bridge (Arbitrum One or Arbitrum Nova). Enter the number of tokens, click the deposit option, and confirm the transaction in Metamask. You can expect the transfer to execute in 10 minutes to an hour, depending on the network traffic.

Step 3: Browse dApps

You can explore the Arbitrum ecosystem and use dApps, wallet, and other applications as desired.

To withdraw assets from Arbitrum:

• Go to the Arbitrum Bridge page, and connect your Metamask wallet.
• Then select the network you wish to withdraw from and the recipient network to receive assets.
• Next, Select the token, enter the amount of withdrawal, and click on the withdrawal option.
• Follow with the Metamask prompt and make sure you have sufficient ETH to pay for the transaction.

Note that withdrawal transactions on Abitrum take 7-8 days until you receive them on the mainnet.

What is the difference between arbitrum and other Layer 2 scaling solutions?

With new layer-2 projects coming every now and then- all competing for user base and total value locked. Most of these projects are based on Zk roll-up and optimistic roll-up technologies. Zk-rollups (zero knowledge) use cryptographic proofs to guarantee the validity of transactions instead of assuming they are valid, which offers a better privacy guarantee but also means more computational requirements. This is why optimistic roll-ups like Arbitrum and Optimism are preferred by developers and projects. 

The main difference between the optimistic technology of Arbitrum and Optimism are as follows:

• Optimism entirely depends on Ethereum for security, while Arbitrum implements some additional measures.
• Arbitrum has its own Arbitrum Virtual Machine (AVM), whereas Optimism does not and is partially dependent on Ethereum Virtual Machine (EVM).
• Optimism uses single-round fraud proofs- which are faster but easier to be fake, on the other side Arbitrum employs multi-round fraud proofs.
• Optimism is limited to Solidity, while Arbitrum allows developers to write code in several EVM programming languages like Vyper, Flint, Solidity, YUL+, etc.

Top Arbitrum Projects

Arbitrum is currently top in layer-2 scaling solutions with a total value locked of over $2.1 billion and an ecosystem of 550+ projects. Here are the top 5 Arbitrum projects:

• GMX: is an Automated Market Maker-based decentralized exchange that lets users trade perpetual crypto futures and take long and short positions, with leverage of 50X on assets like BTC and ETH.
• Gnosis: GNS is another decentralized trading protocol that offers users a seamless and secure trading experience.
• Magic: is an NFT ecosystem connecting communities and metaverse projects through a gaming platform.
• Kyber Network Crystal: is a decentralized exchange aggregator that offers users secure and instant swaps at the best rates from multiple DEXs.  
• Synapse: is an interoperable protocol for securely transferring data and assets across the ecosystem of layer 1, layer 2, and side chain.

Additional Read: Arbitrum Price Prediction

How to Buy Arbitrum (ARB)?

Well, you can now invest in any crypto tokens and projects of your interest easily, quickly, and safely with the CoinDCX app. To invest in cryptos, you just need to download the CoinDCX app and follow the below-mentioned steps to register: 

• Downloaded the CoinDCX app 
• Enter your details to register 
• Complete KYC, verify mobile and email 
• Once your profile is verified, add funds to your wallet
• Now, you can securely buy ARB and other cryptos.