irstly, what is Arbitrum and what makes it so special?
The Arbitrum network is a Layer 2 scaling solution that was launched in 2021 by founder Steven Goldfeder which had a mission to scale Ethereum and all of its values.
The network primarily focuses on improving the speed and scalability of smart contracts, while still maintaining the ultimate security that Ethereum has. But how does it all work?
How does Arbitrum work?
Well, Arbitrum works by using a special technology called Rollups, which records and bundles transactions on the Ethereum mainnet and will then move and facilitate the transactions over to Arbitrum which is a more scalable and cheaper blockchain to finalise transactions.
Other scaling networks/protocols mostly use the zkRollup (zero-knowledge) technology to facilitate transactions. However, Arbitrum uses what’s called, Optimistic Rollups which as stated above will bundle transactions into one, from the Ethereum mainnet.
The optimistic rollups will then be moved over to one of Arbitrum’s side chains and there the transactions will be finalised at a cheaper rate and will then direct the transactional data back to the Ethereum blockchain! How smart, right?
Why do we need Arbitrum?
Since its launch, Ethereum has suffered from congestion and expensive gas fees. Even after the infamous ‘Merge”, ETH gas fees are still considered expensive compared to other competing blockchains. Hence we need Arbitrum to help scale Ethereum to its ultimate form!
Since Arbitrum’s inception, they have initiated a trend in Layer 2 technology. We can now see a variety of Ethereum Layer 2 networks launching and are also incentivising users to use their network in return for a potential token airdrop! (More at the end of the article)
Comparing Arbitrum & Optimism
Arbitrum is similar to the Optimism network which also launched in 2021 and uses the Rollup technology to help scale Ethereum. Arbitrum is able to process 40k transactions per second, whereas Optimism can only handle 2k TPS. The ETH mainnet can only handle 14 TPS…
Optimism and Arbitrum are both EVM-Compatible (Ethereum Virtual Machine). However, there is a difference between them. Optimism runs on the Ethereum Virtual Machine (EVM), whereas Arbitrum utilities its own, called the Arbitrum Virtual Machine (AVM).
They both also use different methods to validate transactions. Optimism uses what’s called single-round fraud proofs which are executed on the Ethereum network (Layer 1), this can be more costly and slightly slower. Arbitrum on the other hand uses multi-round fraud proofing which is executed off-chain! This allows for cheaper and faster transactions!
Arbitrum One Ecosystem
In the last few months, Arbitrum has grown to become the 4th largest network by TVL. Here are some protocols within the ecosystem that stood out most:
- Camelot DEX - Native Arbitrum DEX, Launchpad and more! (Tutorial at the end of the article)
- GMX - Decentralised Spot & Perpetual Exchange
- Radiant - Ultimate Borrowing & Lending protocol
Many more protocols are emerging, don’t forget to follow me on Twitter to keep up to date with the latest Arbitrum protocols (@AltCryptoGems).
Arbitrum ARB Token
Initially, there was never supposed to be an $ARB token. But look at us now. The ARB token is simply used as the governance token of the Arbitrum DAO. This allows $ARB holders to create and vote on proposals.
How to buy $ARB
The $ARB token is available on Ethereum and obviously the Arbitrum network. $ARB is also listed on the majority of centralised exchanges (CEXs).
There are two main ways to buy $ARB, but the best option is to buy and hold the Arbitrum token on a DeFi or Hardware wallet:
Option 1- Centralised Exchange
The $ARB token is available on 99.99% of centralised exchanges.
We recommend getting Ethereum $ETH using one of these centralised exchanges and then sending your $ETH to an Arbitrum DeFi wallet where you can swap $ETH for $ARB, which we will further explain in Option 2.
If you are to choose a Centralised Exchange, here are our recommended options with some bonus rewards for signing up (T&Cs apply):
Option 2 - DeFi Wallet & Decentralised Exchange
To get started you will need a DeFi wallet and make sure to secure your seed phrase with a hardware wallet (Trezor):
If you are buying $ETH through your DeFi wallet, you can use the Ethereum network if you wish to spend more on gas fees. Instead, use the Arbitrum network which requires $ETH tokens for gas fees, but is much cheaper! If you haven’t set up the Ethereum & Arbitrum Metamask networks, follow our Youtube tutorials below. Here are the essential links:
- Uniswap Tutorial - Number 1 most used DEX in the world
- Metamask Tutorial
- Arbitrum Tutorial
- Camelot DEX Tutorial
You will be set up and ready to go in under 10 minutes!
According to DefiLlama, the network has $1.639 billion in TVL (Total Value Locked) which makes it the 4th largest blockchain by TVL.
Decentralised Exchanges make up most of their TVL as it’s clear users want to swap their tokens at the cheapest rate!
At the time of writing, the ARB token is sitting at a price of $0.78 with a market cap which is just under $1 Billion. ARB spiked to a price of $11 when it first airdropped the token and has since been unable to recover. That may not be the case for long. Arbitrum is clearly one of the most popular networks and by far the best Ethereum Layer 2.
Alternative Crypto Airdrops
If you missed out on the Arbitrum airdrop, don’t worry. There are so many opportunities out there right now. Here is a small list of potential airdrops: