Arbitrum (ARB) became CoinMarketCap’s most trending cryptocurrency on 26 March 2023. Arbitrum’s ascent is interesting because it is a protocol that solves a problem with Ethereum, the most blockchain.
Arbitrum is an effort to solve the blockchain scalability problem. Ironically, blockchain’s most attractive feature, security, creates this problem. To explain, blockchain’s heavy encryption limits its capacity and fast.
For example, Ethereum was processing just 29.33 transactions per second (TPS) on 26 March 2023. Consequently, Ethereum apps could only process 29 transactions. Hence, an Ethereum e-commerce solution could only serve 29 customers. Therefore, an e-commerce company cannot reach a mass market with current Ethereum technology.
Can Arbitrum (ARB) make Ethereum Faster and Cheaper?
They claim Arbitrum (ARB) can make Ethereum faster and cheaper. For example, they claim Arbitrum’s Nitro proprietary technology stack makes Ethereum seven times faster.
Similarly, the Arbitrum One network can process up to 120 TPS, ETHPS estimates. Arbitrum One is Ethereum solution with the second-highest level of scaling. ETHPS estimates Arbitrum One has processed up to 120 TPS. In contrast, Loopring has processed up to 576 transactions per second. Conversely, Ethereum itself has processed up to 56.88 TPS.
Conversely, Arbitrum was processing 9.6 TPS on 26 March 2023. They claim Arbitrum had processed 162.30 million transactions on 26 March 2023. There were 73.927 million Arbitrum blocks on 26 March 2023.
Arbitrum scales Ethereum with a Layer 2 protocol known as an Optimistic Rollup. Opmistic Rollups limit Ethereum use by processing transactions outside the blockchain.
Theoretically, optimistic rollups can increase processing speeds by going outside the blockchain. However, they claim optimistic rollups use the Ethereum Mainnet’s security which offers more protection than sidechains. To explain, a sidechain is a less secure chain that functions as a shortcut around the blockchain.
Can Arbitrum (ARB) Reduce Costs?
They claim Arbitrum (ARB) had saved users $704 million in Ethereum Gas Fees on 24 March 2023.
To use Ethereum, apps need access to the Ethereum Virtual Machine (EVM). The EVM is the digital computer that operates Ethereum. Without EVM access, an app cannot operate on Ethereum.
Ethereum charges apps gas fees to use the EVM. Decentralized apps (dApps) and protocols can pay a gas fee each time the EVM processes a transaction. Gas fees can be expensive. Etherscan estimates Uniswap’s Universal Router paid $262,553 in gas fees for 24 hours on 26 March 2023.
They claim Aribtrum is the most popular optimistic rollup with 67.1% of the market and over 3.9 million total users on 24 March 2023.
How Arbitrum (ARB) Works
Client software connects with Arbitrum (ARB) by making a remote procedure call (RPC) to a standard Ethereum Application Programming Interface (API). An RPC is a protocol that lets apps request services from a platform. Local systems often use RPCs to request services from centralized systems.
Arbitrum posts transactions on the Ethereum blockchain. This guarantees that users can access all underlying data. They claim users can not replace or reorder Arbitrum transactions.
Conversely, Arbitrum Validators process the transactions off chain. Validators report the transaction’s outcome on the Ethereum blockchain as a rollup-block or assertion. Since Arbitrum uses optimistic rollups, they only post the proof of the transaction on the Ethereum blockchain.
Arbitrum tries to keep Validators honest by paying them to post proof or stakes. If somebody catches a Validator posting false data, the Valdiator does not get paid.
To keep Validators honest, a challenge Window allows any validator to check any other Validator’s assertions. If the assertion is fake, a validator can lose a large deposit.
The Arbitrum DAO
The Arbitrum DAO (decentralized autonomous organization) allows users to launch new Arbitrum chains as Layer 3 applications in the Arbitrum ecosystem. The DAO is the organization that governs the Arbitrum Ecosystem.
Two portals; Arbitrum One and Arbitrum Nova give users access to the Arbitrum One ecosystem. The portals give users access to many decentralized apps (dApps).
Each dApp processes transactions outside the blockchain. Arbitrum allows the apps to record the transactions on Ethereum’s mainnet or central blockchain. Theoretically, this creates a permanent and tamper-resistant record of the transaction in Ethereum.
Arbitrum Orbit is a platform that lets users launch new chains in the Arbitrum Ecosystem. Orbit lets users launch Layer 3 Rollup chains (such as Arbitrum One) on the Ethereum Mainnet. Hence, Arbitrum Orbit connects apps to Ethereum. Layer 3 chains are additional layers of blockchain that increase Ethereum’s capacity.
Arbitrum Orbit can launch Layer 3 Arbitrum AnyTrust chains. AnyTrust can support high volumes of transactions because it requires minimal trusts. This can lower costs. Arbitrum Orbit users can build and customize Layer 3 chains using Arbitrum Nitro. Nitro gives these Layer 3 chains compression and access to the Ethereum Virtual Machine.
The Arbitrum DApps
For example, the AlphaWallet dApp is a wallet for stablecoins. Similarly, the AI Arena is a gaming app. The Ankr and Alchemy dApps support node providers. Alchemy Pay allows users to use fiat currency on the blockchain.
Antimatter Finance provides decentralized financial (DeFi) services for dApps based outside the United States. Arbibots and Arbidudes create nonfungible tokens (NFTs) while Arken.Finance supports DeFi swaps. Auctus creates options and Badger optimizes yield. Babylons functions as an NFT Marketplace and B.Protocol supports lending. Binocs can create crypto taxes or fees for using blockchain applications.
The Arbitrum Ecosystem contains some popular dApps including Tether (USDT), Coinbase, Sushi (Sushi Swap), Crypto.com, WBTC.com, TrueUSD (TUSD, USD Coin (USDC), and Uniswap.
What Value does Arbitrum (ARB) offer?
Arbitrum (ARB) is an Ethereum Request ERC-20 token that serves as Arbitrum’s governance token.
Speculators are interested in ARB because Arbitrum had $6.06 billion total valued locked on 24 March 2023. Similarly, CoinMarketCap estimates Arbitrum had a $1.446 billion Market Capitalization, and a $11.351 billion Fully Diluted Market Cap on 27 March 2023.
In contrast, Arbitrum had a $766.889 million Centralized Exchange (CEX) Volume, a $254.621 million Decentralized Exchange (DEX) Volume, and a $1.029 billion 24-Hour Market Volume on 27 March 2023.
Arbitrum was CoinMarketCap’s 38th ranked cryptocurrency with a $1.14 Coin Price on 27 March 2023. They base those numbers on a Circulating Supply of 1.275 billion ARB and a Total Supply of 10 billion ARB.
I think Aribtrum (ARB) is a cryptocurrency that offers genuine value because many decentralized apps use it. Moreover, Arbitrum’s ecosystem is not theoretical, it is up and running, which can create actual value.
If you are seeking a cryptocurrency that can make actual money from decentralized finance (defi). I think Arbitrum is worth a look.
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