What is Arbitrum?6 min read

Ethereum is a blockchain that can only facilitate a certain number of transactions at a time.

That being said, Ethereum has emerged as the dominant level of regulation for the crypto economy in recent years, as DeFi and NFT have exploded in popularity. In this hyperactive environment, users typically clutter the Ethereum blockchain by competing for limited access to network blocks.

These congestion episodes lead to a poor user experience, as users are faced with expensive and often slower transactions during times of high demand. The Ethereum community is seriously embracing both online and off-grid scaling methods to address this issue.

The long-term community-scale strategy is to fragment or chain the Ethereum network into multiple “shards.” To grow now, manufacturers are looking for off-chain solutions, such as layer two (L2) stacking packages built on Ethereum and have started to be the focus of attention in 2022. Developed by Off-chain Labs, Arbitrum is one of these accumulated L2 technologies that is quickly gaining more and more power.

Understanding the “optimistic” style of Arbitrum

So far, two main styles of L2 accumulations have emerged: zero-knowledge accumulations (ZK) and optimistic accumulations.

All rollups packages handle the execution of transactions off-chain, which means they use their infrastructure to facilitate transactions. That way, stacking packages are like a decongestant for Ethereum. They elevated Ethereum by easily supporting Ethereum-based companies that would otherwise have competed for space on the Ethereum “L1” block. Stylistically, what makes rollups different is the way they treat data.

Rollups do transactions off-chain, but these L2s send data to Ethereum’s core network to some extent. How they do it determines if this is a ZK summary or an optimistic summary. The former is based on validity testing, which involves publishing batches of transactions using cryptographic tests called ZK-SNARK. These are based on fraud proofs, which assumes that the published data is valid if not disputed.

Optimistic cumulative model – Image via ethereum.org

Because Arbitrum technology is based on fraud-proof, it has an “optimistic” style, not ZK-based. Growing up, this style offers Arbitrum some key advantages:

  • Optimistic rollups are easily compatible with the Ethereum Virtual Machine (EVM), so L1 daps can easily “port” their designs to Arbitrum’s L2 technology.
  • Optimistic rollups also offer lower fixed gas costs per transaction batch and lower off-chain processing costs than ZK packages, so Arbitrum enjoys these structural advantages.
  • It is worth mentioning that the Arbitrum also benefits from the generalized advantages of rollups. These are fast and cheap transactions and the guarantees of decentralization and security offered by Ethereum as a reliable L1 base.

An Arbitration Glossary

Arbitrum

 Image via offchainlabs.com

  • Arbitrum: brand name; this is a special style of optimistic rollups technology.
  • Arbitrum One: is the first active rollup channel to implement Arbitrum technology; the nickname is that “multiple stacks in parallel” will eventually run on Arbitrum technology.
  • Arbitrum Reddit: The unofficial nickname for the collection as Arbitrum’s creative team, Off-chain Labs, helped build the Reddit social news aggregator.
  • Arbitrum Virtual Machine: AVM is responsible for running EVM compatible code in L2 format.
  • ArbOS: The program acts as “recorder, traffic police and enforcement agent” of Arbitrum smart contracts.

Arbitrum’s Arrival

In May 2021, Off-chain Labs released the beta of Arbitrum One Core Network, but only for developers. The team led this’ soft launch ‘approach to ensure that an ecosystem of dapp projects could fit seamlessly into L2 before it was opened to the public and users’ money ran out is in play.

By early July, Off-chain Labs had already added over 300 daps in the beta, and a month later, that number reached +400. This paved the way for the public launch of Arbitrum One, which took place on August 31 and opened the package for “arbitrary implementation of the contract and all other interactions.”

Since then, the Arbitrum One has quickly become the largest L2 in total locked value. Indeed, two weeks after its launch, the cumulative package reached a TVL value of $2.3 billion; as of this writing, that amount was more than ten times the amount of money stuck in the next biggest group of active optimists rollups.

How to Deposit tokens in Arbitrum

Transfer the required funds from an Ethereum Layer 1 to Arbitrum Layer 2 to trade with reduced fees and near-instant transactions.

Also, you can transfer your tokens from Layer 1 Ethereum to Layer 2 Arbitrum via Arbitrum Bridge. The deposits will arrive in your wallet within 5 minutes, so you can immediately start trading with Uniswap at low rates.

You can withdraw funds for level 1 as long as the Arbitrum network is online, but it takes seven days or more to process withdrawals through the standard bridge.

To deposit funds in the Arbitrum.

Step 1: Open Arbitrum Bridge and click Connect to connect your wallet. If you haven’t installed Metamask yet, install it first.

Deposit

Step 2: You should now be connected to the Ethereum L1 mainnet and see this screen.

Arbitrum

Step 3: Enter the ETH you wish to deposit from Level 1 to Level 2 Arbitrum. If you want to deposit an ERC-20 token, click on the ERC-20 tab and enter the address and amount of the deposit agreement L1. You can find the address of the L1 token by searching popular websites such as coinmarketcap.com. When you’re done, click the Submit button.

ArbitrumETH

Step 4: Confirm the transaction in the wallet. Please note that this is a Level 1 transaction. Therefore normal gas rates will apply. However, after this one-time deposit, you will experience the joy of lower gas prices on Arbitrum.

Arbitrumlast

Step 5: Once the transaction is confirmed, you should be able to see it at the bottom of the screen. That means, your funds should be available in Artbitrum L2.