Arbitrum Explained: A Beginner’s Guide to the Ethereum Scaling Solution

Bitrue
3 min readMar 17, 2023

As the popularity of decentralized applications (dApps) continues to grow, so too does the demand for more scalable and efficient blockchain networks. Ethereum, the world’s second-largest blockchain by market capitalization, has long struggled with high transaction fees and slow processing times. This has led to the development of various Ethereum scaling solutions, including one of the most promising ones: Arbitrum.

Arbitrum, a prominent layer 2 scaling solution for Ethereum, aims to address the network’s limitations by increasing its capacity and reducing transaction fees. It is built on top of Ethereum and uses smart contracts to create a trustless, secure, and decentralized platform for running dApps.

Arbitrum is launching its own token called ARB. This token will allow holders to vote on key decisions relating to the Arbitrum One and Arbitrum Nova networks, which enable users to transact on the Ethereum blockchain with greater speed and lower fees. ARB will also mark the official transition of Arbitrum into a decentralized autonomous organization (DAO), giving the community control over key decisions at the core protocol level.

How Does Arbitrum Work?

Arbitrum operates by creating an off-chain environment, also known as a “rollup,” that processes and verifies transactions before committing them to the Ethereum blockchain. This allows for faster transaction times and significantly lower fees than those on the Ethereum mainnet.

When a user initiates a transaction on the Ethereum network, Arbitrum’s rollup takes over, processing the transaction and verifying its authenticity. Once the transaction is validated, it is sent back to the Ethereum mainnet, where it is included in the next block.

Arbitrum uses a unique “optimistic rollup” mechanism to validate transactions. This process involves creating a “proof of validity” that shows the transaction’s correctness without requiring the entire network to validate it. This helps to reduce the time and resources required for transaction verification and enables a higher throughput of transactions on the network.

Benefits of Using Arbitrum

Arbitrum offers several advantages over the Ethereum mainnet, including:

Faster Transaction Processing: Since Arbitrum processes transactions off-chain, it can handle a much higher volume of transactions than the Ethereum mainnet, leading to faster processing times.

Lower Transaction Fees: Arbitrum’s rollup is designed to be more efficient and cost-effective than Ethereum’s mainnet, resulting in lower transaction fees for users.

Interoperability with Ethereum: As a Layer 2 solution, Arbitrum is designed to be fully compatible with the Ethereum network, allowing dApps and other projects to integrate with it easily.

Enhanced Security: Arbitrum uses smart contracts to ensure the integrity and security of transactions, making it a safe and reliable platform for users.

$ARB and the Airdrop: What Do You Need to Know?

Unlike Ether, which is used to pay fees on Ethereum and Arbitrum, the ARB token will only be used for protocol governance. To claim tokens, eligible Arbitrum users can check their eligibility for the airdrop by visiting gov.arbitrum.foundation. The total supply of ARB will be 10 billion, with 56% of those tokens controlled by the Arbitrum community. The airdrop will grant 11.5% of the total supply to eligible Arbitrum users and 1.1% to DAOs operating in the Arbitrum ecosystem. The remaining community tokens will go to a treasury controlled by the new Arbitrum DAO.

The remaining 44% of ARB’s circulation will go to the investors and employees of Offchain Labs, the company behind the development of Arbitrum. ARB’s introduction has been timed to coincide with the launch of Arbitrum Obit, which will allow third-party apps and protocols to build new “layer 3” blockchains based atop Arbitrum’s low-fee infrastructure.

Arbitrum is an advanced layer-2 scaling solution for Ethereum, promising to significantly improve the user experience on the world’s largest smart contract platform. This technology uses Optimistic rollup to bundle up big groups of transactions, reduce fees, and then write those transactions to the Ethereum ledger in bulk.

The introduction of ARB will allow the community to have a greater say in the development of Arbitrum, paving the way for a more decentralized and community-driven approach to protocol governance. The future looks bright for the Arbitrum ecosystem as it continues to make significant strides in improving the scalability and usability of the Ethereum blockchain.

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Bitrue

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