Arbitrum is a Layer 2 scaling solution for Ethereum, designed to solve the blockchain trilemma of speed, efficiency, and affordability thanks to its use of optimistic rollups.
Ethereum, the second largest cryptocurrency by market cap, has faced several scaling challenges as it attempts to onboard new users. During periods of high activity, the blockchain tends to slow down and the fees tend to rise dramatically.
Arbitrum was created to tackle these challenges by processing transactions off-chain before settling them in batches on the main network, which significantly reduces congestion and high gas fees.
By doing so, it attempts to expand Ethereum’s capabilities by creating an environment for the creation of more complex and user-friendly decentralized applications (dApps). Arbitrum achieves this through its use of optimistic rollups, a technology that processes data away from Ethereum before submitting cryptographic proof of the data back to the main chain. Optimistic rollups, more specifically, assume submitted transactions are valid until proven otherwise.
Arbitrum is fully compatible with the Ethereum Virtual Machine (EVM), allowing developers to migrate their Ethereum-based dapps to Arbitrum.
Arbitrum’s native token, ARB, can be used to pay for these transactions on the L2 and as a governance token, allowing holders to vote on the direction of the blockchain.
Who Created Arbitrum?
Arbitrum was created in 2018 by Offchain Labs, a company founded by Ed Felten, Steven Goldfeder, and Harry Kalodner. The co-foudners met at Princeton University, which is where the Arbitrum development started.
Felten is a professor of Computer Science and Public Affairs at Princeton and was the former deputy U.S. CTO at the White House. Goldfeder holds a Ph. D. from Princeton University, where he worked at the intersection of cryptography and cryptocurrencies. Kalodner is a computer scientist who also earned a Ph.D. in Computer Science at Princeton.
Arbitrum launched its native token, ARB, in March 2023 through an airdrop to early users and liquidity providers.
How Does Arbitrum Work?
Optimistic Rollups
Optimistic Rollups are a mechanism where Arbitrum bundles hundreds of transactions together and processes them off-chain. It then submits compressed proof of these transactions back to Ethereum.
There are several nodes that enable Arbitrum to run smoothly:
- Sequencers: Off-chain node that receives transactions, batches them, and submits the batch to Ethereum.
- Validator: On-chain node that verifies the validity of transaction batches submitted by the Sequencers.
- Client: The user or application that initiates transactions on the Arbitrum network.
The process is “optimistic” because Arbitrum assumes these bundles are valid by default. However, there is a challenge period of about 7 days where anyone can dispute a transaction if they believe it to be fraudulent.
Arbitrum One vs. Arbitrum Nova
Arbitrum offers two distinct chains for its operations:
- Arbitrum One: The general-purpose chain that hosts most Arbitrum dapps, from decentralized finance (DeFi) protocols to NFT marketplaces.
- Arbitrum Nova: Designed to prioritize lower fees and higher transaction throughput, making it ideal for projects that require a seamless user experience, like gaming and social applications.
Nitro
In 2022, Arbitrum rolled out its Nitro upgrade, a major technical upgrade that aimed to improve the platform's performance even further.
Arbitrum Nitro improves smart contract execution, while also improving data compression techniques. This translates to lower fees for users and increased throughput, allowing the network to handle a higher volume of transactions per second.
Further, Nitro strengthens Arbitrum's compatibility with Ethereum to ensure a better developer and user experience.
How Does ARB Work?
ARB has a maximum supply of 10 billion tokens. ARB is gradually being released into circulation through a schedule that includes vesting periods for various groups, including the core team, investors, the DAO treasury, and airdrop recipients.
The ARB cryptocurrency is mainly used for:
- Governance: ARB token holders can participate in the future of the network by voting on proposals related to the network's development, upgrades, and overall direction.
- Transaction Fees: While ETH is the current token used to pay for transaction fees, the Arbitrum team plans to use ARB in the future.
Arbitrum Essentials
- Arbitrum is a Layer 2 scaling solution for Ethereum designed to improve transaction speed and reduce fees by processing transactions off-chain.
- Arbitrum uses optimistic rollup technology, which processes the transactions on the Arbitrum L2, batches them, and sends them to Ethereum for processing.
- The native token ARB empowers holders to vote on proposals and shape the network's future.
How to buy ARB?
You can buy the ARB coin on Bitstamp. Sign up for a Bitstamp account and start trading Arbitrum today!
- Buy Arbitrum (ARB) with Euro EUR
- Buy Arbitrum (ARB) with USD Dollar
- Buy Arbitrum (ARB) with USDT
- Buy Arbitrum (ARB) with Ethereum ETH
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