Layer 2 attacks on ecosystems, especially Ethereum, are more severe than ever. Arbitrum is the top Layer 2 solution to Ethereum’s problems since its inception.
The project was created to offer investors an inexpensive, fast, and scalable network. This is what Ethereum is currently experiencing despite its Merge update in Sept 2022.
DeFi Llama rates Arbitrum as sixth in total value (TVL) and developers rush to use it to create decentralized apps (dApps).
It is possible that the ARBI token will be issued, but users still need confirmation from the network.
Let’s look at Coincu and learn why it’s currently a Layer 2 stronghold that even Optimism can’t beat.
What is Arbitrum?
Offchain Labs, a New York-based company that created the Arbitrum network layer-2 to ease congestion on Ethereum’s network by improving the verification of smart contracts, has launched the Arbitrum network.
The platform uses the Ethereum mainnet’s security but allows smart contracts to execute on a separate layer to alleviate network congestion.
This method is known as ‘transaction rollups,’ and it consists of batches of transactions and records that are validated on the lower layer before being sent to the mainnet of layer-1, in this case, the Ethereum mainnet.
Arbitrum offers three types of scaling solutions: rollup, channels, and sidechains.
- State Channels: Users need to send an Ethereum Snapshot into Multi-sign contracts. This state will contain critical information such as the address’s balance. This system allows off-chain transactions to be completed instantly and with greater privacy.
- Sidechains are independent blockchains that can route transactions to and monitor the Ethereum mainnet.
- Rollups: like sophisticated non-custodial sidechains, can significantly increase the Ethereum mainnet’s throughput capacity. There are four main types of rollups that have been identified in aggregation: Optimistic Rollups (zkRollups), Plasma and Validium.
The Ethereum community is now focused on Arbitrum’s Rollup (OPU).
Arbitrum pays ETH to nodes who actively validate the chain’s smart contracts (known as aggregators), and they are in charge of adding blocks to the first tier – the Ethereum mainnet.
How does it all work?
Arbtrium makes use of Optimistic Rollups technology.
Rollups are a form of off-chain transaction processing that involves taking transactions produced on the main blockchain outside and processing them on a separate Rollups layer, after which the data and transactions are bundled or “rolled up” into a single block to transmit to Layer 2 for certification.
This solution allows Ethereum smart contract to scale by exchanging messages among layer 2 Arbitrum smart contract and Ethereum smart contracts. Transaction processing is mainly performed on layer 2. However, the main chain records the results which greatly improves speed and efficiency.
Arbitrum, just like other blockchains allows independent nodes the ability to participate. Validator nodes monitor the chain’s status, whereas full nodes aid in the aggregation of layer 1 transactions. When the rest of the user’s transaction fees are dispersed to other network participants, such as validators, aggregators that transmit transactions to layer 1 will get incentives paid in ETH.
Arbitrum creates a difficult stage for rollup block validation. It allows other validators to assess the accuracy of each block and issue challenges if necessary. If the block is proved to be erroneous or a challenge is proven to be unjustified, the dishonest validator’s stake will be taken, ensuring validators always play fairly or face the penalties.
The Arbitrum virtual machine (AVM) is the platform’s own unique virtual machine. This environment is used to execute Arbitrum smart contract executions. It is built on top EthBridge which is a collection smart contracts that connect with Arbitrum. The AVM automatically interprets smart contracts written in Ethereum.
Highlights from the project
Arbitrum’s “multi-round rollup” technique dramatically reduces the cost of Fraud Proofs. This project aims to provide a low-cost solution that can be applied to complex txns.
Fully compatible with the Ethereum Virtual Machine (EVM), expert with smart contracts on Level 1, and compatibility to ETH tools. Arbitrum may run EVM code directly without the need to recompile smart contract codes.
Arbitrum is also faster than other Rollups in terms of asset withdrawal times.
Arbitrum’s development team has created a layer 2 solution to reduce entry barriers. They have created extensive documentation to assist developers in utilizing the existing Ethereum tool.
Many tools, many of which are available on Arbitrum, that are useful to Ethereum developers have been integrated with featured platforms projects.
Arbitrum now ranks 1st among Ethereum’s layer-2s, with a total value of TVL keys in the protocol at roughly $3.6 billion. TVL on Arbitrum is significantly higher than Optimism which is in the second position.
Retroactive might be the main reason why there is a large gap between these two projects. After the token’s introduction by Optimism was made, an avalanche of DeFi money returned from Arbitrum to seek the next chance.
In addition to the reasons mentioned above, the ecosystem is highly stable and takes a longer time to get in operation. Arbitrum also has a wide variety of pieces and items, which helps this layer-2 to attract cash flow quickly.
There are other exceptional Layer-2s scaling options for Ethereum, but at the time, Polygon is the only platform officially mainnet, and Ethereum’s severe congestion has placed Polygon in a stronger position than ever, which Polygon has also taken use of. Everything has changed.
Cash flow statistics between Ethereum & layer-2 show that Polygon currently has 52.7% of the market, followed by Arbitrum (21.2%) Optimist (16.9%). As can be seen, Arbitrum still has a higher cash flow than the new Layer-2s.
Arbitrum’s backers include two industry leaders in venture capital: Coinbase Ventures and Pantera Capital. The Ecosystem is composed of a number of essential components. These are the driving factors for its development.
Arbitrum looks promising and could be realized soon. The project is also working with industry partners to integrate these projects into layer 2.
This project is still in its infancy. While the ecosystem does have a number fundamental components, these are just folk versions. There is little investment in developing products and consumers. Arbitrum has yet to have its own token. So it’s still new and has a lot of room to expand.