Blockchain technology has rapidly evolved over the recent years. The most popular blockchain network, Ethereum, introduced smart contracts and decentralized apps (DApps) but ran into scaling problems. Arbitrum is a promising solution that aims to enhance Ethereum’s scalability and usability. In this blog post, we will delve into what Arbitrum is, how it works, and its potential implications for the blockchain ecosystem.
What is Arbitrum?
Arbitrum is a Layer 2 scaling solution for Ethereum, designed to improve the network’s throughput and reduce transaction fees while maintaining its security and decentralization. The platform is intended to enable developers to simply execute unmodified Ethereum Virtual Machine (EVM) contracts and Ethereum transactions on a second layer while maintaining Ethereum’s exceptional layer 1 security. Developed by Offchain Labs, Arbitrum employs a unique approach called Optimistic Rollup to achieve these goals.
How does it work?
Optimistic Rollup is a Layer 2 scaling technique that uses “optimistic execution” to process transactions off-chain, reducing the load on Ethereum’s Layer 1. Users send transactions to an Arbitrum Layer 1 smart contract, similar to Ethereum. Arbitrum validators process these transactions off-chain and provide a “proof of correctness” to Ethereum’s Layer 1, ensuring the transactions’ accuracy. After verification, transactions are declared complete, and state changes are recorded on Ethereum’s Layer 1.
Key advantages of Arbitrum
Scalability: Arbitrum dramatically boosts Ethereum throughput, allowing quicker transaction processing and less congestion. This scalability enhancement improves user experience and allows for new use cases.
Reduced Fees: By moving the bulk of transaction processing off-chain, Arbitrum reduces the gas fees associated with Ethereum transactions, making it more cost-effective for users.
Interoperability: DApps and smart contracts deployed on Ethereum can easily transition to Arbitrum, as it maintains compatibility with the Ethereum Virtual Machine (EVM). This interoperability ensures a smooth migration process for developers and users.
Security: Optimistic Rollup maintains Ethereum’s security guarantees by leveraging Ethereum’s Layer 1 as the ultimate source of truth. Users can trust that their assets and transactions remain secure.
Arbitrum represents a significant milestone in the evolution of Ethereum and blockchain technology as a whole. Its innovative use of Optimistic Rollup to enhance scalability and reduce transaction fees while maintaining security and interoperability positions it as a promising solution to Ethereum’s challenges.
Arbitrum and Fluid3
Arbitrum is one of the supported chains of Fluid3 – a liquidity layer for EVM chains. Fluid3 proposes a solution that integrates multiple liquidity aggregation protocols into a single, accessible liquidity layer. This layer, available through a simple API, streamlines the process and enables developers to harness the best-suited protocol for each transaction, optimizing liquidity and fostering efficiency.
Read more: whitepaper.fluid3.io