Arbitrum is one of Ethereum’s layer-2 scaling solutions designed to improve smart contracts’ efficiency and transaction execution on the network while reducing fees drastically and adding extra privacy features. L2 networks are software that sit on top of the base layer of a blockchain like Bitcoin or Ethereum to boost the platform’s efficiency and offer inexpensive transactions.
In recent years, Ethereum’s surge in the development and adoption of Web3, nonfungible tokens (NFTs) and decentralized applications (DApps) has resulted in the platform’s excessive congestion leading to skyrocketing fees. Different solutions have been explored to resolve Ethereum’s scalability, including layer-1 dedicated upgrades. However, L2 solutions seem to have picked up momentum, with the Arbitrum network being one of the most promising.
New York-based development company Offchain Labs created Arbitrum. The company raised $120 million in a Series B funding round in September 2021.
Why use Arbitrum?
While relying on Ethereum’s L1 security, Arbitrum can ensure inexpensive gas fees due to the use of Optimistic Rollups. Optimistic Rollups are smart contracts that bundle transactions, using less computation and gas for fast and cheap transactions.
For example, Arbitrum manages 40,000 transactions per second (TPS) against the 14 produced by the Ethereum blockchain. Ethereum’s transactions can be very costly, hitting hundreds of dollars in times of high user traffic, whereas transactions are only a couple of cents on Arbitrum.
Arbitrum is also fit for developers who wish to integrate their Ethereum DApps with the platform since they are perfectly compatible. Indeed, Arbitrum supports the Ethereum Virtual Machine (EVM) contracts and Ethereum transactions on L2 while benefiting from Ethereum’s prime L1 security.
Arbitrum is not the first or only platform built to overcome Ethereum’s limitations since other solutions provide similar features. However, none of them allows for such a unique combination of benefits.
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