As Ethereum continues to grow, so does the need for more efficient and faster solutions to process transactions, Arbitrum is a Layer 2 scaling solution that uses optimistic rollups to enable faster, cheaper and more efficient transactions on the Ethereum network.
In other words, Arbitrum, a project dedicated to solving Ethereum blockchain scalability issues, is a major player in the Layer 2 (L2) space. With an impressive market capitalization of $1.6 billion, it is emerging as a serious contender.
What is Arbitrum and how does it work?
Arbitrum is a Layer 2 scaling solution developed by Offchain Labs, a startup founded by Ed Felten and Steven Goldfeder and Harry Kalodner. The technology uses optimistic rollups, a scaling solution that allows for off-chain computation and data storage, while remaining secured by the Ethereum main chain.
Unlike other scaling solutions that require users to trust a centralized authority, Arbitrum uses a decentralized approach to ensure transaction security. It does this through its unique approach to verification, which allows it to securely validate transactions without requiring nodes to process all of them, thereby reducing the clutter on the Ethereum blockchain.
The transaction is done in two steps. First, all transactions are performed on a secondary layer outside the main blockchain, where they are processed and verified. Then, once all transactions have been processed, a proof is sent to the Ethereum blockchain to finalize the transactions. This method allows multiple off-chain tx to be processed in a single transaction on the main blockchain, which significantly reduces transaction costs and increases transaction processing speed.
Arbitrum’s ARB token
The ARB token was unveiled on March 23, 2023 by the Arbitrum Foundation. Distributed via an airdrop to the most active community members, the ARB token marks Arbitrum’s transition to a decentralized autonomous organization (DAO). As such, ARB token holders can vote for or against key decisions governing the protocol.
Since its release, 89% of airdropped tokens have been claimed by the wallets to which they were sent. At the time of its listing, the Arbitrum’s price experienced high volatility. Since then, the token has shown a stabilizing trend around the $1.20 mark.