Ethereum has been plagued by slow transactions, network congestion, and high gas fees. The solution? Layer 2 solutions like Arbitrum.
In this article, we’re going to review the Arbitrum ecosystem.
Rollups vs Sidechains
To fully understand Arbitrum, we need to understand the problem it is trying to solve. Along with other Layer 2 solutions in the market, Arbitrum is trying to reduce the time and cost of transactions.
There are two ways to do that. You can either use sidechains or rollups.
Sidechains are separate blockchains that scale Ethereum by running independently, but parallelly to the mainnet. A good example of this would be Polygon. Since they’re independent, security is an issue as they aren’t actually connected to Ethereum and its consensus in any way.
Rollups, on the other hand, are strengthened by security from the mainnet itself.
A good analogy for a rollup would be an open bar tab. Rather than the bartender having to swipe your card after every drink, they batch the transactions and then commit them to the system when you close out.
With true layer 2 solutions like Arbitrum and Optimism, this batching of transactions and then commitment to the actual main chain of Ethereum happens as well.
What is Arbitrum?
Arbitrum is an optimistic rollup framework. It has its own operating system, ArbOS, which handles transactions. The Ethereum network takes care of the finalized safety and security of the transactions. Ethereum also lends its Remote Procedure Call (or RPC) interface to Arbitrum.
By using the best of Layer 1 and Layer 2 scaling solutions, the transactions on Arbitrum are scalable and secure with a lower fee. This provides developers with a faster, more cost-efficient way of making decentralized applications (DApps).
Related Reading: Aptos Blockchain Launch Overview
How does Arbitrum work?
As an optimistic rollup framework, Arbitrum bundles (or rolls up) transactions together before reverting back to the mainnet with the updated transaction data. Unless proven fraudulent, these transactions are regarded as being valid and true. Hence the term “optimistic” – the roll up is optimistic that the roll up is created and submitted in good faith. Though don’t worry, there are still people incentivized to monitor that the roll-ups are indeed correct.
Any node on the blockchain can challenge or invalidate rolled-up transactions within seven days.
If the challenge is legit, the block’s bond is slashed from the Ethereum mainnet, so that it can be reverted on Layer 2. If the challenger is proved wrong, and the roll up was correct, the challenger node’s bond is the one that ends up being slashed.
And if there’s no challenge within seven days, the rolled-up blocks become a part of the mainnet.
This Multi-Round Interactive Optimistic Rollup along with on-chain smart contract referees reduces the number of rounds Arbitrum needs to resolve challenges and disputes.
Related Reading: $ATOM – Cosmos Token Set For Revamp
Who owns Arbitrum?
Arbitrum was launched by Offchain Labs in 2021. The company is famous for highly scalable enterprise-grade apps.
Offchain Labs itself was founded in 2018 by Harry Kalodner, Steven Goldfeder, and Ed Felten.
Does Arbitrum have a native token?
Not yet. However, there are rumors floating around that there could soon be a native token.
All of this is speculative, but with the official team launching quests like Arbitrum Odyssey, there are reasons to believe a token is coming.
Here we’ll cover some specific things you can do to increase your chances of receiving the Arbitrum Token Airdrop.
Arbitrum Token Airdrop – Increase Your Chances
As of now, the most popular ideas on how to increase your chances of receiving the arbitrum airdrop are by participating in the arbitrum odyssey, joining the arbitrum guild on guild.xyz, and simply using arbitrum and its growing ecosystem of DApps.
All of the above involve moving some funds over to Arbitrum. So let’s start there.
How to get on Arbitrum?
We won’t go into full detail, but here are the basic steps:
1. Buy some Ethereum using something like Coinbase
2. Send the Ethereum to a non-custodial wallet like Metamask
3. Add the Arbitrum RPC point to your wallet
4. Use a bridge solution like across.to or Stargate to move funds from Ethereum to Arbitrum
5. Wait for the needed number of confirmations and you’re good to go.
What is the Arbitrum Odyssey?
Arbitrum collaborated with Ratwell, Sugoi, and Project Galaxy to create 17 Arbitrum-exclusive NFTs.
The NFTs themselves do/may hold value. But the real thinking is that if your wallet holds some or all of these NFTs you will receive more of the Arbitrum token airdrop.
Arbitrum Odyssey was meant to be a 2-month long initiative starting June 21, 2022, it was paused within the first week since the high traffic caused network congestion which led to an increase in the gas price.
The team announced that Odyssey would resume once Nitro goes live on August 31, 2022. Nitro did go live, however, the Odyssey hasn’t resumed yet.
Keep an eye on their Twitter account for any information on when Odyssey will resume.
What is the Arbitrum Guild?
The Arbitrum Guild is basically a membership system for you to get special roles in the official Discord server.
There are quite a few tasks out there that you could do to familiarize yourself better with the ecosystem. And these tasks are pretty easy.
With a fast network and cheap gas, there really aren’t many reasons to not complete some of the tasks.
They claim these guild badges are only for discord roles, but who knows, they could up your chances of winning any upcoming arbitrum airdrops.
Simply Use Arbitrum to Increase Chance of Airdrop
While the Arbitrum Odyssey and Arbitrum Guild give you prescribed activities to do on Arbitrum, you may also win out with the airdrop by simply enjoying all the DApps that the Arbitrum ecosystem has to offer.
What services does Arbitrum offer?
There is no shortage of services available in the Arbitrum ecosystem. From wallets to bridges and NFT marketplaces, everything is available for the users within the ecosystem. So let’s discuss these services!
Some of the biggest names in the digital wallet industry support Arbitrum. Metamask, Trust, and Coinbase Wallet, for example, are on the platform. And so are some of the lesser-known wallets like Argent, and Sequence. These wallets help transfer tokens from Layer 1 to Layer 2 using the Arbitrum token bridge.
Arbitrum Token Bridge
This is perhaps one of the most important services that Arbitrum has to offer. Since there’s no native token, most transactions on the platform happen with ETH. And you’re probably going to buy your ETH from the Layer 1 Ethereum network and then transfer them to Layer 2.
And that’s where the token bridge comes in. It helps transfer not just ETH from Layer 1 to Layer 2 and vice-versa, but it also helps transfer ERC tokens.
Not trying to namedrop but Aave, Uniswap, and Curve can be found on Arbitrum. And so can some of the niche DApps like GMX, Beefy Finance, and Cream Finance. Even non-DeFi DApps like Kaki and IdeaMarket have a place here.
When it comes to tools for developers, the names pretty much remain the same as their Ethereum counterparts. Smart contracts on arbitrum are coded in solidity, so most developer tools work just as well for making DApps on Arbitrum as they do for Ethereum.
Much like everything else, when it comes to bridges, Arbitrum has some really good cards to play. You can expect to see AnySwap, Binance, and AnySwap, amongst many others.
Opensea recently opened up support for Arbitrum. There are NFT marketplaces like Stratos, TofuNFT, and Treasure if you want to trade in NFTs. There’s also an interesting “credentials” protocol called Galxe that is helping to run the Odyssey.
The ecosystem is still growing. It won’t be long before bigger listings find themselves on Arbitrum.
Other ways to grow with Arbitrum
While Arbitrum doesn’t have a native token, you can still grow with the network using two of the top protocols in the ecosystem: GMX and Dopex.
GMX is a decentralized perpetual futures exchange. It enables users to carry out permissionless trading with at max 30x leverage. The platform already averages around $400,000 in fees on a daily basis.
It has two tokens, GMX and GLP, with GMX being the governance token and GLP its liquidity provision token. While GMX accrues 30 percent of the fee generated, GLP accrues 70 percent.
Dopex is a decentralized options exchange. It uses liquidity pools for enabling traders to permissionlessly trade options contracts for digital assets. Much like GMX, it has two tokens: DPX and rDPX, with DPX being the governance token and rDPX being a multi-purpose token for boosting fee-generated rewards.
They’ve both grown a lot and still hold much potential for growth.
And they aren’t the only ones out there. If you hold tokens of the protocol of your choice in the ecosystem, you actually stand to gain a lot as the network grows.
Further Reading: Trading Binance Futures in 2022
Arbitrum Pros and Cons
- Lower transaction costs (90-95% compared with mainnet)
- Provides trustless security
- Great scalability
- Ethereum developers can seamlessly switch to Arbitrum to develop their DApps quickly and securely
- EVM compatibility allows developers to access products in one ecosystem while being able to launch them in both ecosystems
- Makes DeFi more accessible for those making a switch from traditional finance
- Lower gas fee
- The challenge period could be a long time to wait for someone who wants to withdraw tokens
- Mistakes in AVM implementation might end up leading to a loss of funds
- Due to the centralized structure, funds can be frozen if the validator goes down since a new block needs to be produced to exit the system and that can’t happen without the validator
- There are chances of malicious code slipping in during code upgrades since there are no delays
- Less decentralized because of the lack of a native token
Arbitrum review conclusion
With $929.52 million in total value locked (TVL), Arbitrum is one of the most promising Layer 2 frameworks in the Ethereum network.
And the lower gas fee and transaction time make it an even better deal.
But it comes with its own set of problems that might be deal-breakers for some.
With this article, we’ve reviewed the Arbitrum ecosystem. Happy trading!