Arbitrum is one of Ethereum’s most promising layer 2 blockchains, designed to help improve the platform’s scalability. Learn about the history of Arbitrum and its native cryptocurrency ARB, and what makes the network stand out from its competitors.
How does Arbitrum (ARB) work?
Arbitrum is a cryptocurrency network, designed as a scalability solution for the Ethereum blockchain. It is a layer 2 protocol that aims to make Ethereum (ETH) transactions faster and more affordable, thus increasing the network’s scalability.
Arbitrum utilises a technology called “optimistic rollups,” a blockchain solution that executes Ethereum transactions off-chain, thereby reducing congestion on the Ethereum mainnet. As a result, Arbitrum is able to offer much lower fees and a higher throughput than Ethereum, while taking advantage of the latter’s security and ecosystem.
Arbitrum looks to address some of the challenges and limitations of previous blockchain networks. It has attracted considerable attention and support from developers, users and investors who understand its potential as a smart contract platform for building and deploying decentralised applications (dApps). So, what exactly is Arbitrum, how does it work, and what does the future look like for ARB?
What makes Arbitrum different?
Arbitrum provides secure scaling for Ethereum, without compromising on decentralisation or compatibility. It utilises the security of the Ethereum mainnet while offering faster speeds and lower costs on a secondary layer.
Arbitrum supports the existing Ethereum ecosystem and its tools, which makes it straightforward for developers and users to migrate to or integrate with. The platform aims to provide a user-friendly, scalable and interoperable platform for Web3 applications.
Arbitrum uses optimistic rollups to benefit the Ethereum network. Optimistic rollups are a technology used to bundle multiple transactions together and execute them on a sidechain, such as Arbitrum, while only storing a small amount of data on the main chain, Ethereum. This reduces the congestion and cost of using the network.
Optimistic rollups rely on fraud proofs, a method of detecting instances of transactions being calculated incorrectly, to ensure the validity of transactions on the Arbitrum network.
Arbitrum can handle a considerable number of transactions per second, especially compared to Ethereum. It can also significantly reduce transaction fees, making it more affordable and accessible for users and developers.
Finally, Arbitrum will be governed by a decentralised autonomous organisation (DAO). Holders of ARB, Arbitrum’s native token, will be able to vote on changes to the Arbitrum ecosystem, ensuring long-term decentralisation.
“The DAO’s votes about on-chain actions will directly have the power to effect and execute its on-chain decisions, without relying on an intermediary to carry out those decisions.”
The Arbitrum Foundation
What is the ARB price and forecast for the future?
On March 23, 2023, Arbitrum launched its native token, ARB. Arbitrum users who met certain criteria were eligible to claim a share of 1,162,000,000 airdropped ARB tokens. The airdrop was designed to reward early adopters and supporters of the network, while helping to ensure decentralisation.
Tip: ARB was distributed to the initial holders of the token via an airdrop rather than an initial coin offering (ICO).
ARB was launched in the midst of a wider cryptocurrency bear market, which means that its price did not see significant appreciation at launch.
Layer 2 networks, such as Arbitrum, are designed to help with Ethereum’s scalability, but must also attempt to protect the value of their own tokens. However, Arbitrum has already seen substantial adoption compared to other, competing layer 2 systems. If Arbitrum can continue to position itself at the forefront of Ethereum scalability, this could bode well for the future price of ARB.
Who created Arbitrum?
Arbitrum was developed by Offchain Labs, a 2018 start-up founded by three computer scientists from Princeton University. The Arbitrum mainnet was launched in August 2021 with a whitelist of over 400 dApps. This included some of the most popular Ethereum-based decentralised finance (DeFi) protocols, such as:
- Uniswap — a decentralised exchange (DEX)
- Sushiswap — a decentralised exchange
- MakerDAO — a decentralised organisation focused on developing technology to facilitate savings, borrowing and lending
- Aave — a liquidity protocol that enables users to lend or borrow money
Arbitrum has experienced significant momentum since its launch. For example, in February 2023, Arbitrum surpassed Ethereum in daily transactions, solidifying itself as the network’s leading layer 2 scaling system. The ecosystem has also witnessed the emergence of numerous financial applications, such as Camelot and Vela Exchange, two decentralised exchanges, and Radiant Capital, a lending protocol.
Final thoughts on investing in Arbitrum (ARB)
As the cryptocurrency market continues to evolve, Arbitrum stands out as a promising solution for scaling decentralised applications on Ethereum. Through the use of optimistic rollups, Arbitrum aims to make dApps faster, cheaper and more scalable, while maintaining security and compatibility with the Ethereum blockchain.
Since its launch, the Arbitrum platform has seen impressive growth, with an increasing number of daily transactions and unique addresses. It has positioned itself well to take advantage of Ethereum’s popularity, but investors should do their own research before deciding to invest in ARB.
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FAQ
- What is ARB Used For?
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ARB allows its holders to participate in the governance of the protocol. ARB holders can propose and vote on changes to the Arbitrum ecosystem, such as network upgrades. The ARB token also enables the election of a Security Council, a group of trusted entities that can intervene in case of emergencies.
- What is the Arbitrum Security Council?
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The Arbitrum Security Council is a group of 12 elected members who have the authority to take emergency actions to protect the Arbitrum protocol, and its ecosystem, from critical risks. The Security Council members are chosen by ARB token holders.
- What is the Arbitrum Bridge?
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A bridge is a tool that allows users to transfer their cryptoassets between two blockchain networks. In the case of the Arbitrum Bridge, users can transfer their assets between Ethereum and Arbitrum in a decentralised and trustless manner.
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