Highlighting the advantages of Arbitrum: Supporting Ethereum's Layer2.

23-04-03 21:54

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Source: Ebunker Chinese Blog

The development momentum of Ethereum Layer2 solutions is still strong, and Ethereum 2.0 has promised scalability guarantees. This indicates that the importance of Layer2 solutions is widely recognized in the future of Ethereum. In the cryptocurrency industry, "faster speed" is always popular, and Layer2 solutions will provide more speed. This article will introduce one of the highly anticipated Layer2 scaling solutions: Arbitrum.

Arbitrum 是什么？

translates to

What is Arbitrum?

in English.

Arbitrum is an L2 blockchain based on Optimistic Rollups. It was developed by Offchain Labs in 2021. Offchain Labs was founded by a team of world-class blockchain researchers and software engineers, including Steven Goldfeder (CEO), Harry Kalodne (CTO), and Ed Felten (Chief Scientist).

Arbitrum Chains

Arbitrum runs two parallel chains: one Roll-up chain called "Arbitrum Nitro" and another AnyTrust chain called "Nova". Arbitrum Nitro follows the characteristics of Optimistic Rollup, which bundles transaction data and stores it on the Ethereum chain.

While Nova relies on a third-party external data availability committee to store transaction data and generate it as needed, thus significantly reducing transaction fees by avoiding bundling transaction data on the Ethereum chain. Nova is best suited for gaming projects, DApps, and social projects. A notable feature of the Arbitrum chain is its incredible speed, with processing speeds of up to 40,000 transactions per second.

Arbitrum Virtual Machine（AVM）

Arbitrum runs a virtual machine (Arbitrum Virtual Machine) that is compatible with programming languages on the Ethereum Virtual Machine (EVM), such as Solidity and Vyper. This is very attractive for Ethereum developers because they can deploy their applications on the Arbitrum chain without rewriting their code. This makes Arbitrum more advantageous than other Optimistic Rollup solutions such as Optimism.

Compared to Optimism Virtual Machine (OVM), Arbitrum has broader compatibility with Ethereum Virtual Machine due to OVM's limitation in supporting only Solidity programming language. As a result, some EVM-compatible transactions may not be compiled correctly on OVM. This makes Arbitrum the preferred choice for most developers seeking to deploy their Ethereum DApps on a more scalable platform.

Multi-round Fraud Proof

On the Ethereum network, Layer2 scaling technology has become a hot topic. Arbitrum is one of the highly anticipated technologies, which uses multi-round fraud proofs (or interactive proofs) to solve challenges raised by validators. Compared to other optimistic rollups technologies such as Optimism, Arbitrum uses multi-round proofs instead of single-round proofs.

In a single-round proof, the entire assertion or transaction block will be recalculated to verify its validity. In a multi-round fraud proof, only disputed transactions will be recalculated, which requires less work and therefore consumes less gas fees, making it the most popular technology of the two.

Decentralized Governance

In addition, Arbitrum also involves decentralized governance. Recently on March 23, 2023, Arbitrum conducted an airdrop and established the Arbitrum DAO (decentralized autonomous organization). DAO members holding ARB Tokens will be able to participate in the governance of the Arbitrum chain, meaning they can use ARB Tokens to vote and make decisions that directly affect the policies of the Arbitrum chain. It should be noted that these tokens are only used for governance purposes, and Ethereum remains the default currency for transactions.

Arbitrum has launched AIP to establish a decentralized governance system that encourages community members to participate in policy-making. By giving token holders a voice in the platform's development, AIP-1 aims to enhance participation and interaction within the Arbitrum community.

However, like other new initiatives, the Arbitrum community has encountered some issues in the approval process of AIP-1. Nevertheless, the Arbitrum Foundation has provided a detailed explanation. Additionally, the Foundation has addressed two important issues raised by the community: first, they confirmed that they did not sell 50 million ARB Tokens; second, they provided detailed reasons for the initial distribution of 7.5 million ARB Tokens.

We all know that there are many obstacles to establishing a DAO at present, and one of the difficulties is the dilemma of "which came first, the chicken or the egg". To solve this problem, AIP-1 hopes to involve the community in the initial selection and architecture, to demonstrate the support of token holders and guide the development direction of the platform.

ARB Token

Arbitrum's native token ARB is used for governance. The developers of Arbitrum, Offchain Labs, have announced a transition to a decentralized autonomous organization (DAO) structure - the Arbitrum DAO. ARB holders have the ability to decide on ideas that affect functionality, protocol upgrades, fund allocation, and security committee elections.

Arbitrum has ambitious plans for 2023, including launching its own Layer3 solution, Orbit; allowing developers to deploy programs written in popular programming languages such as Rust and C++ using Stylus; introducing a new Layer4 solution, Orbit; increasing the number of independent validator institutions verifying its validator set; and migrating its protocol to Layer2 with Arbitrum One.

As of the time of writing, the trading price of ARB is 1.3 US dollars, with a global market value of 1.57 billion US dollars, a global trading volume of 2.78 billion US dollars, a circulating supply of 1.275 billion ARB, and a total supply of 10 billion ARB.

Currently, Arbitrum is the largest Layer2 chain in the Ethereum network, with a total locked value (TVL) exceeding the sum of Optimism and Polygon, as well as larger L1 players such as Avalanche and Solana. Many well-known Ethereum projects have already been deployed on Arbitrum, including Uniswap, Sushi, and Aave.

The social media giant Reddit announced in July 2021 that it will use Arbitrum technology to expand its community points reward program. In the future, we may see more mainstream institutions adopting Arbitrum technology.

Arbitrum ecosystem projects

There are many interesting projects in the Arbitrum ecosystem, including Uniswap and AAVE, which migrated from Ethereum, as well as GMX, Treasure DAO, Radiant, and Camelot. This article will introduce four representative projects.

GMX is a decentralized perpetual protocol that allows users to obtain 30x leverage and become a truly decentralized derivatives trading platform. The protocol relies on GLP as a funding pool and provides very low trading slippage, making it an important component of the Arb DeFi ecosystem.

Treasure DAO is a decentralized gaming platform that allows builders to use $MAGIC as a reserve currency to launch games on the platform. Treasure DAO aims to solve the Token economics problem in GameFi games by allowing multiple games to incorporate $MAGIC as a base currency, providing more utility for Tokens.

Radiant and Camelot are native lending and DEX modules born on Arbitrum, respectively targeting AAVE and Uniswap. The difference between them is that Radiant hopes to allow more convenient borrowing and lending through better "cross-chain compatibility", while Camelot helps more new projects gain exposure through investment in the IEO module.

Arbitrum fully leverages the security and compatibility of Ethereum, while also having higher throughput and lower transaction fees, thanks to the transfer of most of the computational and storage loads. The above four projects are representative projects in the Arbitrum ecosystem.

The founder of Ebunker, a non-custodial staking platform for Ethereum, Allen, commented on Arbitrum, saying: "Arbitrum provides the same level of security as Ethereum, and offers performance comparable to other competing L1s, which is actually a breakthrough of the impossible triangle. This will definitely bring a 'big return' of projects that overflowed to other L1s due to the insufficient performance of Ethereum L1 in the past."

It is worth mentioning that the TVL of Arbitrum is still increasing. DeFi projects on Arb have the potential to become the new gold standard of DeFi in the future. Let us wait and see the development of Arbitrum's future ecosystem.