Arbitrum project overview

by Deep Trade

The Ethereum platform is popular among developers of DApps (decentralized applications). But a significant increase in the number of new deployments has stretched the network to its maximum capacity. And this trend has led to a significant increase in transaction fees.

Scaling Ethereum is seen in many circles as the best way to solve this problem. But there are also a growing number of advocates among those who prefer layer-2 solutions. This includes the Arbitrum project, which is gaining momentum thanks to 1) its novelty and 2) a technology that is truly capable of solving the problems that keep popping up.

In a statement issued by Off-chain Labs on August 31 of this year, it says that the Arbitrum One network that many have been eagerly waiting for has now been officially launched. Arbitrum has already enabled higher bandwidth and lower fees for DeFi users.

Among them:

  • Uniswap;
  • Sushiswap;
  • Curve;
  • Band Protocol;
  • Balancer;
  • Aave.

In addition, the company announced that it’s Series B funding round raised approximately $120 million. This brought the company's total valuation to $1.2 billion. Notable investors include:

  • Blocknation;
  • Compound;
  • Pantera Capital;
  • Coinbase Ventures.
  • The idea behind Arbitrum

In order to maintain Ethereum's status as the world leader among decentralized smart contract platforms, the platform needs to become more scalable to accommodate a large number of users. But the basic level of this platform is capable of speeds of no more than 15 transactions per second in today's reality. Arbitrum was developed with the goal of improving the capabilities of Ethereum smart contracts (by increasing their scalability), by deploying a layer-2 solution.

Arbitrum's dependence on Ethereum for security strongly bonds the two networks. And Arbitrum itself is also a fairly complex protocol that took several years to develop.

The platform is designed to allow developers to easily launch unmodified EVM (Ethereum Virtual Machine) contacts and perform Ethereum transactions at the second layer. It also maintains the superior security of the base first layer platform.

How Arbitrum works

The technology used in Arbitrum is called Optimistic Rollup.

With its help, the following processes are performed:

Scaling of Ethereum smart contracts;

Transferring transactions from the main Ethereum blockchain to the second layer Arbitrum blockchain.

At the same time, the transactions on the second layer are processed with the recording of results in the main blockchain, which can significantly increase efficiency and speed.

The Arbitrum platform stores information and calculations and also perform their transfers, which decongests the main Ethereum chain. For processing transactions in a separate environment, Arbitrum uses ArbOS (Arbitrum Operating System), which allows faster transactions regardless of Ethereum network congestion. According to preliminary forecasts, the cost of transactions in Arbitrum will be 1/10 compared to Ethereum.

The "optimism" of this algorithm is due to the fact that each validator has the following options:

  • Publishing a block;
  • Unification and validation of other blocks.

At the same time, the Arbitrum protocol ensures the proper functionality of the code, which helps prevent collusion between validators and other types of attacks.

A user who wants to take advantage of Arbitrum's accelerated transactions and low commission fees must send ETH or ERC20 tokens to a special smart contract. To access the money in the Arbitrum ecosystem, the deposit transaction must be confirmed.

It is important to note that projects currently running on Ethereum do not automatically connect to the Arbitrum ecosystem. Developers who want their application to work on a second-layer network must first embed it there.

Initially, only a tiny fraction of Ethereum's decentralized applications will exist in Arbitrum. As more and more people use the second-layer platform, developers will have an incentive to promote their projects. The result will be an improved ecosystem and, a higher value for Ethereum scaling.

Why Arbitrum is unique

Before Arbitrum, other platforms attempted to solve the speed of Ethereum's transaction problem. At least 12 platforms offered similar features. But the Arbitrum project has a number of differences that make it stand out.

High EVM compatibility

According to experts, Arbitrum has the highest bytecode compatibility with EVM. If a language (e.g. Vyper, Solidity) compiles to EVM, it will also work in Arbitrum.

This simplifies the development of the application. There is no need for developers to learn a new language before working with Arbitrum.

Reliable developer toolkit

The Arbitrum team goes out of its way to minimize the hurdles in building second-layer solutions. They have prepared a comprehensive documentation package for working with their platform and syncing it with Ethereum. There is no need to download anything specific for Arbitrum.

Low commission fees

Using Arbitrum as a second layer scaling solution not only increases Ethereum transaction output but also reduces transaction fees. Since it is a very effective data accumulation technology, it is possible to significantly reduce the commission fees compared to the amounts charged on Ethereum. This provides enough incentives to validators for their work.

Successful launch

In the initial phase of Arbitrum, several test networks were launched and today developers have access to the main network. A key difference between Arbitrum and most other second-layer solutions for scaling is, there is no project’s token. Accordingly, the token was neither sold nor distributed at the beginning of the project.

In addition, all interested developers will be given time to get started before the massive launch of the platform. Applications have been received from two hundred and fifty teams of developers, who will be given two full weeks to apply.

Procedure for withdrawing funds from Arbitrum.

Sometimes Arbitrum users will need to transfer assets to Ethereum's base level. And this is the main goal of the protocol, to protect against fraudulent transactions.

To receive the virtual currency, the user must fill out a withdrawal request, that is, a withdrawal from the second layer network. In most cases, this process will take up to two weeks. The time frame largely depends directly on the project.

Such a delay is justified because during this time the Arbitrum nodes have time to check the validity of the transactions, to ensure the user does not try to leave the protocol by making an invalid transaction. After the specified period has elapsed, the cryptocurrency is withdrawn from the deposit and credited to the user's Ethereum wallet.

Projects that have switched to Arbitrum

One of the key benefits of Arbitrum is its use of the Ethereum Virtual Machine (EVM) architecture. EVM compatibility allows Ethereum developers to seamlessly translate their decentralized applications. Almost all projects are launched with the code used in Ethereum in a week or two.

The most popular project moving to Arbitrum is Uniswap, whose community voted unanimously to make the switch. The developers have already transferred the exchange.

In addition, projects such as MCDEX, Arbiswap, Bancor are being launched at Arbitrum. If the user base continues to grow, the protocol will soon be the basis for the launch of dozens of new projects. In the long term, the diversity of the Arbitrum ecosystem is expected to reach the level of Ethereum.

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