Curious about making your Ethereum transactions faster and cheaper? Meet Arbitrum, the Layer 2 solution transforming the Ethereum ecosystem. Whether you’re a developer or a user, understanding Arbitrum is essential. Dive in to see what Arbitrum has to offer for the crypto world!
What is Arbitrum (Arbitrum One)?
As you likely know, Ethereum is the OG chain for developing decentralized applications (dApps). However, in recent years, a huge surge in adoption has caused the network to be pushed to its limits, leading to congestion and soaring gas fees. While some believe that the best way to scale Ethereum is via on-chain upgrades, others are pursuing different ways to address the problem — Layer 2 solutions.
Launched in 2021, Arbitrum is one such Layer 2 solution, designed to improve the capabilities of Ethereum smart contracts by boosting their speed and scalability, all while adding more privacy features. Arbitrum is designed to let developers easily run unmodified Ethereum Virtual Machine (EVM) contracts and Ethereum transactions on a second layer, while still benefiting from Ethereum’s Layer 1 security.
How Does Arbitrum Work?
Arbitrum uses a process known as optimistic rollups. Read on below for a quick breakdown of the process.
- Transactions are executed off-chain, bundled in large batches
- These batches submitted on the Ethereum mainnet as calldata
- Each batch incurs a fixed transaction cost on Ethereum, spread across each transaction on Arbitrum, lowering the cost for users
- Most of the transaction is processed on the second layer, drastically improving transaction speeds and efficiency.
Arbitrum was designed to provide an easy-to-use platform that developers can use to launch highly efficient and scalable Ethereum-compatible smart contracts. Pretty cool, right?
What is Arbitrum Nova?
Arbitrum Nova, on the other hand, is another Layer 2 network tailored for high-throughput dApps, particularly in gaming and social applications. Launched on August 10th, 2022 as the flagship AnyTrust chain, it employs a Data Availability Committee (DAC) to enhance scalability securely. This unique approach ensures ultra-low transaction costs and high-speed performance, settling transactions on Ethereum with the requirement of only two honest parties, regardless of the committee’s size.
If you’re keen to learn more, you can read in-depth about AnyTrust and the DAC here!
Arbitrum’s Pros and Cons
Let’s take a deeper look into some of the advantages and disadvantages of Arbitrum.
Pros
- Scalability: Arbitrum processes a higher volume of transactions per minute compared to Ethereum, which means it provides faster, cheaper (less than US$1 per transaction), and more sustainable smart contract executions for users
- Interoperability: Abritrum seamlessly integrates with Ethereum’s mainnet to create a cohesive ecosystem that leverages the Layer 1’s security
- Optimistic Rollups: Most transactions are processed off-chain while keeping up a high level of security, resulting in quicker processing times and lower gas fees
Cons
- Role of Validators: Arbitrum’s operation relies on trusted validators who process transactions, introducing a level of centralization that users must place trust in
- Time Delay: The nature of optimistic rollups means a time delay in transaction settlement and dispute resolution; for example, withdrawals back to the mainnet can take up to one week to complete
- Potential Security Risks: Optimistic rollups rely on fraud proofs to guarantee security; if a fraudulent transaction goes undetected for a challenge period, it may be irreversible
Arbitrum’s Future Outlook
Arbitrum is one of the key players in terms of optimistic rollup solutions designed to address Ethereum’s scalability challenges. It’s able to increase transaction throughput and reduce transaction costs, providing a path to overcoming Ethereum’s limitations. Meanwhile, the scalability and interoperability continuously attract more developers to build new projects and improve existing ones.
Only time can tell whether or not Arbitrum continues its upward rise and promise! What do you think?
Arbitrum vs. Other L2 blockchains
Let’s take a look at the state of Layer 2 blockchains and how Arbitrum measures up to them across multiple factors, according to L2Beat.
Comparative Analysis of L2 Blockchains: Arbitrum vs. Others
(Source: L2BEAT on 2024.08.27 )
As you can see, Arbitrum One currently ranks first overall, with a total value locked of US$14.64 billion and a 40.96% market share. That’s nearly half of the market and more than twice the share of its closest competitor, Base. This performance blows all other Layer 2 solutions out of the water!
| Feature | Arbitrum | OP Mainnet | Mantle | Base | Linea |
| Rollup Type | Optimistic rollup | Optimium | Optimistic rollup | Optimistic rollup | ZK rollup |
| TVL | $14.64 B | $6.1 B | $1.16 B | $6.1 B | $814.8 M |
| Daily TPS | 9.75 | 10.8 | 3.24 | 3.24 | 1.68 |
| 30 Day Tx Amount | 28 M | 10.8 M | 14.85 M | 9.35 M | 6.88 M |
Ecosystem on Arbitrum
Arbitrum stands out with its vast DeFi landscape, complemented by a variety of projects spanning bridges, tools, and NFTs. Here’s an overview of key projects driving innovation within the Arbitrum ecosystem:
DEX – Camelot
Camelot is an “innovative and highly flexible DEX built to support the Arbitrum ecosystem” that’s being billed as both community-driven and capital-efficient.
Lending Protocols – Radiant
On Radiant, users can seamlessly earn interest and borrow assets cross-chain.
Derivatives – GMX
GMX is a “decentralized perpetual exchange” where users can trade BTC, ETH, AVAX and other top cryptocurrencies with up to 50x leverage directly from their wallets.
Yield – Pendle
Pendle offers fixed yield for everyone, offering stability among a wild west of volatile yields. Users can choose between long yield or hedging yield exposure.
Tool – Space ID
Space ID is a name service on Arbitrum where users can get their very own human-readable “.arb” domain name—an interoperable digital identity that helps accelerate Arbitrum and its dApp ecosystem across Web3, SocialFi, GameFi, and beyond..
To explore the ecosystem further, head to the Arbitrum Portal and start and check out the latest and greatest on Arbitrum protocols and dApps!
How to Bridge to Arbitrum?
Because of the limitations of the Arbitrum Official Bridge, exploring third-party cross-chain bridges to facilitate asset transfers to Arbitrum is a better way to go about things. XY Finance provides a user-friendly and efficient way to do just that.
XY Finance is a cross-chain dex and bridge aggregator that operates on 20+ EVM chains, including Arbitrum, Optimism, Ethereum, Base, Linea, and more. XY Finance has a user-focused approach that makes swapping tokens between different chains easier! This provides users with the best option at affordable prices, too.
Check out this step-by-step guide below and discover just how easy it is to execute a cross-chain swap at the most competitive prices on XY Finance!
- Visit XY Finance Transfer Page & Connect Wallet
- Select Chain & Token: Select your source chain & token as well as your desired token on Arbitrum.
- Approve Transfer: Click “Review Route”, double-check the rate and route, then click “Transfer” and sign the message from your wallet.
- Wait for Transaction: Track the process on XY Finance Explorer or Arbitrum Explorer. Your transaction should be completed within 2 minutes.
- Transaction Completed: Receive notification on the transaction status.
In most cases, cross-chain transactions will be completed within minutes. To view your past transaction records, you can click the Settled Transaction button.
You can track the status of your transaction via our Discord Support Bot or XY Finance Explorer.
If your transaction cannot be completed, please raise a ticket in the XY Finance Discord. Our team will be happy to help you resolve the issue as soon as possible.