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- 1 Arbitrum is a Layer 2 scaling solution for the Ethereum blockchain that facilitates fast transactions through smart contracts while lessening transaction costs.
- 2 The Layer2 solution speeds up the blockchain because it assigns complex computational tasks like transaction processing and data storage to the second chain.
In other words, the Layer 2 blockchain processes the smart contract, and the Layer 1 blockchain stores the data. Arbitrum handles the mass transactions and also maintains low gas fees. It reduces the congestion on the blockchain and the cost compared to the main network is also reduced.
How it Works
Arbitrum Layer 2 solution uses blockchain rollups to achieve organized transaction processing. Rollups use a layer 2 architecture to process transactions off-chain before placing them on-chain.
The benefit of this is that blockchain no longer needs to validate separate transactions. It can directly confirm a rolled-up batch of transactions. Most of the work is done off-chain, which reduces the load on the main Ethereum blockchain.
What are the benefits of using Arbitrum?
The benefits of using Arbitrum include Interoperability, scalability, security, decentralization, etc. This scaling solution is compatible with Ethereum. This means that users can operate and integrate with both the blockchains. This will increase the potential use cases for both.
The Layer 2 solution facilitates faster and low-cost transactions. The reason behind this is that most of the work is performed off-chain. One of the other advantages that Arbitrum brings is the security. It uses the zk rollups, which compiles several transactions into one transaction, thus, reducing the amount of data used to store on the chain. This makes the transactions fast, and cheap and also enhances the security.
Decentralization is the other advantage linked with Arbitrum. It means it is not owned by a single entity which makes it stronger to attack and fail.
The key features of Arbitrum include high throughput and improved scalability. It can process many more transactions than the Ethereum network. It is up to 40,000 transactions per second (TPS) while the Ethereum network is at 14 TPS.
It also has a low latency of less than 1 minute. It means the transactions are confirmed quickly and efficiently. This facilitates Ethereum to support more users and applications which leads to more adoption.
The gas fee of layer 2 is also lower than the Ethereum network which makes it affordable for users to make transactions. It is fully compatible with the Ethereum blockchain which means it is compatible with Ethereum smart contract and enjoys easy access to the ETH developer community.
Since it is built on the Ethereum base layer, the network is secure, attack-resistant, and reliable.
How to Use Arbitrum
To use many apps on the Arbitrum ecosystem, the user needs to connect to a third-party wallet like MetaMask. Install MetaMask on the browser and create a new wallet. Connect the physical ledger wallet to the MetaMask account. It will show the option to connect the hardware wallet.
Click on the option and make sure to follow the steps correctly. If the Ledger wallet is exported into MetaMask, the funds will be staked. After this click on Add Network on Ledger wallet on Metamask. Select Arbitrum, approve it and it is ready to interact with the network.
For bridging the assets from one chain to another, from Ethereum to Arbitrum, users need to have a native currency like ETH to initiate the process. The way to obtain the native currency is through centralized exchange from where ETH can be purchased or using an on-ramp service that allows the purchase of ETH.
Log in to the bridge with the wallet, and make sure the user is connected to the source network. Select the destination network. Enter the amount of ETH tokens needed to bridge. After submission of the transaction to the web3 wallet, the funds need to arrive on the destination chain within 15-30 minutes. Also, set the wallet to the destination chain so that funds can be seen when they arrive.
Now, to withdraw the ETH from the child chain to the parent chain, the user needs to be logged into the Arbitrum bridge with the wallet and make sure to remain connected with the network source. Select the token which is needed to be bridged.
The enable and disable of the token list is done by clicking on it. Enter the amount of funds needed to be bridged from the box and press move funds. Follow the prompts on the web3 wallet.
What is ARB?
ARB is the native token for this layer 2 blockchain. It is a governance token that is crafted to increase the scaling solution for Ethereum. The holders of ARB tokens have a right to vote for making governance decisions and participate in the ecosystem.
The initial supply of ARB tokens is 10 Billion. It has a yearly inflation rate of 2% which is the maximum. Even the holders can give rights for the allocation of funds and technical changes. The token holders, along with electing the members for the security council, are also responsible for Arbitrum’s treasury wallet.
Hence, the token acts as a medium of exchange on the network. Holders can receive and send the tokens securely and efficiently. To shape the features of Arbitrum, the holders can vote and participate in making important decisions like allocation of funds, investments, and changes.
Along with voting, they are also responsible for voting on elected members for the security council, a 12-member team responsible for regulating the treasury wallet of the Arbitrum ecosystem. Thus, in this way, they ensure the security and integrity of the network.
Mr. Pratik chadhokar is an Indian Forex, Cryptocurrencies and Financial Market Advisor and analyst with a background in IT and Financial market Strategist. He specialises in market strategies and technical analysis and has spent over a year as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the Financial markets.
