Arbitrum Blockchain: Demystifying Ethereum's Layer 2 Solution
Ethereum's meteoric rise as a blockchain powerhouse has been somewhat overshadowed by challenges like surging transaction fees and network congestion. In the quest for solutions, Arbitrum emerges as a promising contender. In this module, we'll explore the world of Arbitrum, breaking down its significance and functionality.
Understanding the Ethereum Fee Dilemma
Before delving into Arbitrum, it's crucial to grasp the fee crisis facing Ethereum. Ethereum network utilizes smart contracts to initiate and successfully complete asset transfers, requiring fees to compensate the network participants whose duty is to process these contracts. Over the years, Ethereum's user base grew, and transaction fees soared. This was exacerbated by Ethereum's design, where every miner replicates each contract's execution, leading to scalability issues. Additionally, Ethereum gives the public full visibility of contract code and data, except when privacy overlays are added, incurring additional costs.
Arbitrum: Making Network Congestion Easier
Arbitrum aims to alleviate network congestion and make transfer fees smaller by offloading a significant portion of ETH mainnet's (layer 1) work and data storage to its own domain. The brainchild of Offchain Labs, founded by Ed Felten, a prominent figure in computer science, Arbitrum is a layer 2 (L2) scaling solution built using the Ethereum network.
In this module, our journey through the Arbitrum landscape will demystify its L2 status, explain its operation, guide you in bridging ETH to Arbitrum, and illustrate its transformative impact on Ethereum.
The Mechanics of Arbitrum
Arbitrum relies on four key players within its ecosystem: a virtual machine (VM), transfer authenticators, a key, and managers. Transfer authenticators (also known as verifiers) ensure the system's integrity, while the VM is a program that executes contracts based on the Arbitrum Virtual Machine (AVM) Architecture.
Managers, designated by the VM's creator, maintain the VM's proper functioning through the Arbitrum protocol. Parties with vested interests in the VM can delegate this responsibility to a trusted entity or act as managers themselves. In the event of disagreements between managers, verifiers step in to resolve disputes efficiently.
Unlike Ethereum, where every validator must process all network apps, Arbitrum allows DApps to select their own set of validators. This localized approach reduces node interactions, leading to faster transaction processing.
L2 and Ethereum
Arbitrum is part of a broader movement to address Ethereum's scaling issues through layer 2 (L2) solutions. These L2 solutions aim to improve scalability and alleviate congestion without compromising decentralization and security.
Key Projects on Arbitrum
Some of the most well-known projects on Arbitrum include Curve, Uniswap, and Sushiswap. However, later, Uniswap also implemented Optimism so that both solutions could serve its users optimally.
Arbitrum Bridge
The Arbitrum has a Token Bridge that is essentially a gateway for transferring to Arbitrum One tokens of Ethereum standard. Bridging assets requires following a few simple steps with compatible wallets such as MetaMask.
The Absence of an Arbitrum Token
Arbitrum does not possess a native cryptocurrency, thus not limiting its users in use of Ethereum-based tokens. Any token created using Ethereum can utilize the Arbitum blockchain. This approach simplifies the ecosystem and avoids the need for additional tokens.
ArbGas: Arbitrum's Fuel
To understand the overall consumption Arbitrum has ArbGas. The blockchain's architecture allows costs to be lower than Ethereum's gas fees. The fee compensates Arbitrum chain validators, although it can be set to zero. Unlike Ethereum, where storage access is costly, Arbitrum's emulation mechanism estimates costs more efficiently.
Token Swaps on Arbitrum
While Arbitrum lacks a native token, users can perform token swaps within the network. The process, facilitated through Uniswap, offers quicker and more cost-effective transfers.
Developing Your DApp on Arbitrum
Anyone can create a DApp on Arbitrum, but there are requirements to be met: users must utilize the network's compiler, EthBridge, and a validator implementation. Then, with the help of internet browsers, they can access their DApp's front-end interface, interacting seamlessly with the running VM.
Closing Thoughts
By embracing Optimistic Rollups, Arbitrum addresses Ethereum's trilemma. In other words, the network offers a promising solution to the blockchain's scalability, security, and decentralization challenges. As Ethereum explores zk-Rollup for the long term, Arbitrum evolution won't stop but rather continue at a rapid pace, swiftly adapting to new technology trends and expanding its influence in the blockchain world.
Arbitrum is another project that expands the horizons of what's possible in Ethereum's ever-evolving landscape, offering practical solutions to enhance the network's performance while preserving its core values.