Itroduction
I'm covering everything you need to know about the arbitrim project and why it's so important. Ethereum is arguably the most important innovation in crypto since Bitcoin was invented but if it wants to succeed in the long term it needs to fix a lot of problems, particularly around scalability. Over the last few years, we've seen a wide range of projects develop new technology to combat these issues. One of the leading projects is Arboretum.Alright, let's get into Arbitrim and why I expect this project to play a massive role in Ethereum's long-term success before you.
What Are Layer 2s?
Can understand the significance of Arbitrim, it's important to understand what layer twos are. For those who are new, layer twos are sister blockchains that are designed to help the layer 1 run smoother. They do this by diverting some traffic from the layer 1 to the layer 2, which by design can process more transactions at a cheaper cost.
With the way things are today, all transactions that happen directly on Ethereum have to compete with each other to get included in a block. This large competition for the minimal block space is the main reason transaction fees are so high. If your transaction doesn't make it in, you're stuck waiting for it to go through.
Up to 2021, most transactions were only happening on the Ethereum layer 1 network. So, regardless of what you were doing on the network, your transaction had to compete with everyone else at all times. This meant that when major transactions were happening, such as a big NFT release, thousands of people would compete at the same time to send their transaction within the same block.
However, a typical Ethereum block can only hold around 50 NFT minting transactions, which means everyone will be raising their transaction fees in an attempt to be processed first. That's like a traffic jam in New York City causing the entire world to be congested. This is obviously a problem, as unusually busy areas should not affect the overall network. This is why layer twos were invented. They dedicate the layer 2 network for specific low-cost purposes and thus can process thousands of transactions per...
Arbitrum History
Now that you know about layer 2s, let's look at how Arbitrim comes into play. Arbitrim is a layer 2 scaling solution for Ethereum, and it was developed by New York City-based Off-Chain Labs in 2021. Off-Chain Labs is made up of a team of world-class blockchain researchers and software engineers. The team is led by CEO Stephen Goldfeder, who holds a PhD from Princeton and also co-authored the leading blockchain textbook 'Bitcoin and Cryptocurrency Technologies.' They also have Chief Scientist Ed Felten, who is an expert in cryptography and security and at one point served as a senior technology advisor at the White House. Lastly, there's CTO Henry Klodner, who also comes from Princeton and is well-versed in economics, anonymity, and incentive capabilities of cryptocurrencies.
This strong team is a large reason that Off-Chain Labs were able to raise a total of $120 million from investors over multiple funding rounds from 2019 to 2021. They have received all sorts of praise from top experts in the crypto space, most notably from Ethereum founder Vitalik Buterin.
With such a strong team leading the Arbitrim project, it should come as no surprise that their technology generated a lot of.
Arbitrum Technology
It all started in August of 2021 when Off-Chain Labs launched Arbitrim 1, which is a layer 2 optimistic roll-up built on top of Ethereum. Optimistic rollups essentially work just like a traditional blockchain, but instead of having a full network of validators for security, they rely on Ethereum as the settlement layer. This allows Arbitrim 1 to batch thousands of transactions into one and periodically sync them with Ethereum, hence the word 'roll-up.'
Amid the Raging Bull Market of 2021, Arbitrum was an instant success because the Ethereum community was fed up with the insane gas fees and wanted a reliable solution that also didn't sacrifice security. With Arbitrum, users were completing transactions for fractions of a cent and at blazing fast speeds. This is why Arbitrum was such a big instant hit within the Ethereum community.
When it comes to speed and user experience, Arbitrum outperforms Ethereum by a wide margin. Its gas fees are 500 times cheaper compared to Ethereum, and the user interaction is much more similar to a traditional website than a decentralized application. In my personal experience, even using Uniswap on top of Arbitrum is completely different from using it on Ethereum. Transactions go through within two seconds, whereas on Ethereum, you often have to deal with pending transactions and refresh the page multiple times.
Arbitrum's roll-up technology provides much more block space, so transactions don't compete with each other, which helps keep gas fees low. Another bonus is that Arbitrum uses Ether (ETH) as its native asset. This is why many people in the Ethereum community saw Arbitrum as an Ethereum add-on rather than a self-serving project. All of these reasons combined are why Arbitrum has widespread support from the Ethereum community, especially among Ethereum enthusiasts.
While Arbitrum does ultimately rely on the Ethereum network for security, it uses a small set of 13 white-listed validators to achieve consensus. This design is more centralized than most proof-of-stake blockchains, which usually have 30 to 40 validators. However, due to the layer 2 model and constant synchronization with Ethereum, Arbitrum only requires a single honest validator to send the correct transactions to Ethereum.
There is one major drawback to this design, and that's the seven-day waiting period when you want to withdraw assets from Arbitrum back to Ethereum. This waiting period is necessary for validators to cross-check each other and confirm that the layer 2 transaction results are truthful and accurate.
Another reason for Arbitrum's success has been its ability to create the perfect environment for existing Ethereum developers. All Ethereum programming languages, such as Solidity and Vyper, are natively supported on Arbitrum. Arbitrum also runs the Ethereum Virtual Machine (EVM), making it an identical experience to building on Ethereum. This allows developers to take their existing Ethereum applications or wallets and integrate them on Arbitrum with only a few days of work.
Arbitrum Ecosystem
leads me to my next topic, which is Arbitrum's expanding ecosystem. Thanks to its blazing fast speeds and low costs, Arbitrum has been the ideal environment for decentralized finance, or DeFi, applications. Currently, Arbitrum leads all layer 2 scaling solutions by total value locked and secures a whopping $1.2 billion on the network. This puts Arbitrum in the fourth-largest rank in terms of all blockchain projects, surpassing popular layer ones such as Avalanche, Phantom, and Solana.
Arbitrum also has the highest number of transactions among Ethereum scaling solutions, as it processed around two-thirds as many transactions as Ethereum itself in December of 2022. In the next couple of years, it wouldn't be surprising if we saw more transactions happening on Arbitrum than on Ethereum. The low cost of entry makes DeFi applications much more appealing on Arbitrum.
Now, let's dissect what kind of applications the Arbitrum ecosystem has to offer. Some of the leading Arbitrum projects are GMX, the largest decentralized perpetual exchange, Radiant Capital, TreasureDAO, and Vesta Finance. However, most of the popular Ethereum dApps, like OpenSea, Uniswap, SushiSwap, Aave, and Curve, have also integrated with Arbitrum. As the Ethereum community continues to endorse Ethereum, I wouldn't be surprised if newcomers start their DeFi journey with Arbitrum instead of Ethereum.
While Arbitrum already has many exciting projects, its long-term vision is much bigger than a single layer 2 solution. Let's look at what lies ahead for Arbitrum's future in.
Arbitrum Roadmap
2023 and beyond. In a recent interview, CEO Stephen Goldfeder spoke at length about what Arbitrum has to offer and accomplish in the coming years. The first thing Stephen addressed was the potential plans for any DK roll-up or DK EVM products that could be in the works. With ZK Sync and Polygon developing their own DK scaling solutions, many people have wondered which type of roll-up technology will win out in the end.
While Stephen didn't confirm or deny a possible DK solution coming to Arbitrum, he had a surprising yet very honest answer. He believes that all scalability solutions today will be obsolete in five years. Therefore, Arbitrum will continue to develop the most usable scaling solution that involves some form of off-chain computation. This aligns with their name, Off-Chain Labs. At the end of the day, nobody really knows whether the winner will be an optimistic roll-up, CK roll-up, or some other new technology that comes along in the future. As of now, Stephen believes that CK scaling solutions are not at the same level of cost competitiveness as optimistic roll-ups, so Arbitrum will continue focusing on the optimistic approach until something else changes.
Speaking of different technologies, another upcoming milestone for Arbitrum is to advance its other product, Arbitrum Nova. The main difference between Arbitrum Nova and the current Arbitrum 1 is how they settle the batched transactions. Instead of storing the rolled-up transactions on Ethereum, Arbitrum Nova will store transactions in one of 20 data availability providers in the network. These providers include Off-Chain Labs themselves, Reddit, Google Cloud, QuickNode, and ConsenSys, just to name a few.
This network has already been put into production with Reddit, as their Community Point system runs on Arbitrum Nova. To the regular Reddit user, this integration is indistinguishable from a centralized app, and most people don't even know they're using blockchain technology. If a user wants, they can transfer their Reddit points to their wallet and use them through Arbitrum Nova. With all the consensus and storage handled by big tech cloud providers, this solution has practically zero cost.
With this design, Arbitrum Nova sacrifices a bit of decentralization, but with low cost and near-instant transactions, it's ideal for small cost and high-frequency applications, such as gaming and social projects like Reddit.
Moving on from the technology, another big milestone for Arbitrum in 2023 is their upcoming airdrop and the release of their native token. Currently, all Arbitrum transactions are done using Ethereum or ETH, so there hasn't been a need for an Arbitrum token just yet. However, thanks to a bunch of not-so-subtle hints by Off-Chain Labs, we know for sure that a token is coming, and the release date is likely in the first half of 2023.