According to DefiLlama data, Arbitrum’s total locked-up value has reached the top 5, making it a potential new star that cannot be ignored in the market.
What is Arbitrum
Arbitrum is a Layer 2 scaling solution created by Offchain Labs. It aims to solve the congestion and high fee problems on Ethereum and improve the scalability and efficiency of the blockchain. It contains two independent mainnets based on different technologies. They are Arbitrum One and Arbitrum Nova respectively. This article will focus on Arbitrum One.
Layer 2 means that the "project" is still built on "Ethereum" and does not change the existing structure of the Ethereum blockchain. So Arbitrum aims to reduce transaction fees and congestion by offloading computation and data storage as much as possible from Ethereum’s main blockchain (Layer 1). And retains the security of Ethereum.
The network allows developers to easily execute unmodified Ethereum Virtual Machine (EVM) contracts and Ethereum transactions in Layer 2, while still benefiting from Ethereum’s excellent Layer 1 security. Basically, Arbitrum’s main advantages are as follows:
Trustless Security: Security rooted in Ethereum enables any party to ensure correct Layer 2 results
Compatibility with Ethereum: Ability to run unmodified EVM contracts and Ethereum transactions
Scalability: Move contract computation and storage off the Ethereum main chain, allowing for higher throughput
Lowest Cost: Reduced transaction costs compared to Ethereum.
Developed Ecosystem: Arbitrum is already working with various Ethereum DApps and infrastructure projects, including Uniswap, DODO, Sushi, and dozens more.
How Arbitrum works
Arbitrum uses a technique called Optimistic rollup. Optimistic rollups enable blockchain-based smart contracts to “roll up” off-chain transactions into collective bundles. By moving many transaction data off-chain, the processing speed is significantly improved, and the results are recorded on the main chain.
The same thing as zkRollup is that it transfers the calculation projects originally performed on Ethereum to Layer 2, and then packages the results and transmits them back to Ethereum, similar to outsourcing.
The difference is that it is more "optimistic" about human nature. When a transaction is executed and processed on Layer 2, it assumes that the result is correct without any verification and publishes the data to the main chain. In contrast, zkRollup technology needs to be verified through Zero-Knowledge Proof technology. And avoid it through the "fraud proof" mechanism.
In addition, there are four key elements in Arbitrum's technical architecture. These four refer to important roles such as verifiers, keys, virtual machines, and managers. If you want to understand the working principle behind it, you can refer to the official documents released.
How to add an Arbitrum network
Metamask is used as an operation demonstration here. If you don’t have a wallet yet, you can refer to the [2022 latest] Metamask little fox wallet tutorial, and use Chainlist to quickly set up the wallet’s blockchain network:
First enter Chainlist to search for Arbitrum One and click Add to Metamask
Click Approve
Click Switch Network
Once you're done, you can switch to the Arbitrum One network from within your wallet!
Decision
As of now (January 2023), Arbitrum still has not issued its own token, and considering that its competitor Optimism launched its OP token in an airdrop, Arbitrum may launch an Arbitrum native token in the future. If you want to have the opportunity to get Arbitrum’s token airdrop, you can use DApps on the Arbitrum ecosystem.
If you want to trade in the Arbitrum ecosystem, users need to use the ETH on the Arbitrum chain as a handling fee. There are currently two main ways to obtain it.
1. Bridge the ETH on the Layer 1 Ethereum chain to the Arbitrum chain 2. When withdrawing ETH from the exchange, select the Arbitrum One network (support is required)
How to bridge
Connect to Arbitrum Bridge using your wallet
Choose the bridge network: Arbitrum One or Arbitrum Nova (the current ecosystem is mainly built on Arbitrum One)
Choose an Ethereum network token to bridge with.
After entering the desired transfer amount, click "Transfer Funds to Arbitrum One."
Click "Confirm". Arbitrum Bridge will send you tokens on the Arbitrum One network in less than an hour.
Arbitrum Ecology
According to DefiLlama data, Arbitrum’s total locked-up value has reached the top 5 position, and it is a potential new star that cannot be ignored in the market. The number of ecological protocols has even reached 161. Therefore, we specially selected a few well-known projects in the Arbitrum ecosystem to add them. Brief description,
GMX
GMX is a decentralized spot and perpetual exchange with low fees and zero slippage, where users can place market, limit, or trigger orders with up to 30x leverage. It is currently one of the most popular protocols in the Arbitrum ecosystem, with the lock-in value reaching US$397 million at the time of publication.
Uniswap
Uniswap is a decentralized exchange (DEX) protocol where users can exchange assets and provide liquidity.
UniswapV3 introduces pooled liquidity, where users can pool all liquidity within a specified price range instead of going from 0 to infinity. This allows for greater liquidity when the token price trades within a price range.
Dopex
Dopex is an options protocol designed to provide options traders with maximum liquidity and minimum risk exposure.
Treasure DAO
Treasure is a decentralized NFT ecosystem on the Arbitrum ecosystem, specially built for the Metaverse project. The Beacon, which became popular a while ago, is one of the games on its platform.
A new decision
In addition to the Arbitrum One mentioned above, the Offchain Labs team also launched Arbitrum Nova based on AnyTrust technology in August 2022. It features low fees, fast speed, and strong security, and it focuses on blockchain dApps, games, and social applications.
If you want to experience this new network or increase your chances of airdrops, you can try it out.