Top Arbitrum dapps overview

What is Arbitrum?

Arbitrum is a Layer 2 scaling solution for Ethereum, striving to enhance its transaction speed, scalability, and cost-efficiency while ensuring robust security and trustworthiness. It offloads some of the computational work from Ethereum's primary Layer 1, paving the way for faster and more affordable transactions.

Within the Arbitrum ecosystem, two production chains stand out: Arbitrum One and Arbitrum Nova, both developed by Offchain Labs. While they share the goal of scaling Ethereum, they target different use cases and have distinct operational protocols. Arbitrum One, with its Rollup protocol, leans towards DeFi use cases and NFT projects, valuing trustless operations. In contrast, Arbitrum Nova, using the AnyTrust protocol with a Data Availability Committee, is more cost-effective, catering to high-throughput applications like social platforms and gaming.

Besides these main chains, Arbitrum offers several testnet chains for developers to safely test their smart contracts before deployment on the mainnet. Notable testnets include Arbitrum Sepolia, Arbitrum Goerli, and the Stylus Testnet, each catering to different testing needs and linked to specific Ethereum testnets. These testnets ensure that developers can refine their contracts in a controlled environment, minimizing potential issues on the mainnet.

What are Arbitrum’s Products?

1. Arbitrum Rollup: A Layer 2 scaling method that aggregates multiple transactions into a single batch, resulting in reduced gas fees.
2. Arbitrum AnyTrust: A system designed for dApps that favor low transaction costs, particularly gaming and social platforms.
3. Arbitrum Orbit: A platform solution for developers to initiate their own chains while remaining connected to Arbitrum's ecosystem.
4. Arbitrum Stylus: A tool for deploying applications on Arbitrum chains using various programming languages, while ensuring compatibility with the Ethereum Virtual Machine (EVM).
5. Arbitrum Nitro: The technological foundation of all Arbitrum products, aiming for speedy transactions and efficiency.
6. Portal and Bridge: Interface tools that smooth out interactions between Ethereum and Arbitrum chains.

How does Arbitrum work?

The Arbitrum ecosystem is not only designed to amplify the scalability and efficiency of Ethereum applications but also offers a comprehensive suite of tools to directly address Ethereum's scalability challenges. Arbitrum One, catering to DeFi and NFTs, and Arbitrum Nova, optimized for high-volume apps, use the Rollup and AnyTrust protocols respectively. Alongside these mainnets are the test environments - Arbitrum Sepolia, Arbitrum Goerli, and Stylus Testnet - that mirror mainnet features for safe and efficient developer testing, while the legacy RinkArby testnet has been phased out.

Diving into the suite of tools, Arbitrum Rollup stands out, bundling transactions to reduce gas fees and speed up processing. Arbitrum AnyTrust, on the other hand, is an optimal choice for applications like web3 gaming and social platforms, aiming for reduced transaction costs. With Arbitrum Orbit, developers are given the tools to start their chains, ensuring steady performance and a connection to the mainnets. Arbitrum Stylus introduces multi-language support for deploying apps on Arbitrum chains, ensuring smooth interaction with the EVM. At the heart of these tools is Arbitrum Nitro, the central tech driving better speed, cost savings, and Ethereum compatibility without compromising security. Lastly, Portal and Bridge seamlessly link the Ethereum and Arbitrum platforms together, likely smoothing out the back-and-forth between the two.

How does Arbitrum One work?

Arbitrum One operates using the Rollup protocol. Here are some of its aspects:

1. Batch Processing: Transactions are batched together and processed as a single unit on the Ethereum mainnet. This is done to minimize the gas fees and enhance scalability.
2. Data Availability: All transaction data is stored on the Ethereum blockchain, ensuring trustlessness and security.
3. Validator Nodes: Validators process transactions and submit proofs to the Ethereum mainnet. They play a crucial role in ensuring the accuracy and integrity of transactions.
4. Smart Contracts: Developers can deploy smart contracts on Arbitrum One, with the advantage of reduced gas fees compared to deploying directly on Ethereum.

To learn more about how rollups operate check out DeFi Teller’s video explainer on this essential blockchain technology:

How does Arbitrum Nova work?

Arbitrum Nova employs the AnyTrust protocol. Here are its key features:

1. Data Availability Committee (DAC): A committee manages transaction data instead of storing all data on Ethereum, reducing costs, especially in high-transaction volume scenarios.
2. Committee Selection: The DAC comprises selected nodes that ensure data availability, adding a level of trust assumption compared to Arbitrum One.
3. Use Cases: Suited for social applications, gaming, and other high-transaction volume dApps due to its cost-effectiveness and scalability.

What is Arbitrum Sepolia?

A testnet mimicking Arbitrum One for developers to test their dApps. Arbitrum Sepolia is linked to the Ethereum Sepolia testnet for secure testing of smart contracts before mainnet deployment.

What is Arbitrum Goerli?

Another testnet chain mirroring the functionality of Arbitrum One. Connected to the Ethereum Goerli testnet for risk-free smart contract testing. it's important to note that support for Arbitrum Goerli will cease once Arbitrum Sepolia becomes publicly available, as Ethereum Goerli was deprecated in Q1 2023 but will be supported until Q4 2023​.

What is the Arbitrum Stylus Testnet?

The Stylus testnet is designed for efficient smart contract creation using languages like Rust, C, and C++, leveraging Arbitrum's Nitro technology and EVM equivalence. This testnet facilitates remarkable speed and low gas fees for smart contracts, along with full interoperability between Solidity and Stylus contracts. However, the Stylus testnet will be deprecated once Stylus comes out of beta and is enabled on the Sepolia testnet​​.

Each of the Arbitrum blockchains serves specific purposes within the broad Arbitrum ecosystem, from enabling scalable, cost-effective dApp deployment to providing risk-free testing environments for developers. They exhibit a unique blend of technologies and protocols that contribute to Arbitrum's goal of enhancing Ethereum's scalability and usability.

How to use Arbitrum?

Navigating Arbitrum can be intuitive, thanks to its user-focused design. Let's break down the steps for a clear and smooth experience:

1. Choose the most suitable Arbitrum blockchain: Decide between Arbitrum One for DeFi and NFT activities or Arbitrum Nova for high-transaction apps like games.
2. Arbitrum Wallet Setup: Sync with an Ethereum-friendly wallet, such as Metamask or any other crypto wallet integrating the WalletConnect protocol. Adjust your settings to match your chosen Arbitrum chain.
3. Bridging Assets: Use the Portal and Arbitrum Bridge tools to transfer assets from Ethereum to Arbitrum. Connect your wallet, select assets, and confirm. Once approved, your assets will be on Arbitrum.
4. Exploring dApps: Dive into the vast range of dApps on Arbitrum. Thanks to lower gas fees, you'll enjoy faster and cheaper interactions. Don’t forget to check out DeFi Teller’s Top Arbitrum dApps listed below this review.

What are the Fees on Arbitrum?

Arbitrum transaction fees are determined by the computational resources (often termed "gas") required to process a user's transaction. As of now, token transfers on Arbitrum can cost as little as $0.03. However, it's important to remember that this rate can fluctuate based on network congestion and the intricacies of the specific transaction.

A detailed breakdown of how Arbitrum fees are calculated can be found on the Arbitrum Portal.

Initiating Custom Chains with Arbitrum Orbit: 

For those aiming to launch their own chains but still wish to stay tethered to the Arbitrum ecosystem, Arbitrum Orbit is your go-to. It offers the foundation to initiate personal chains, ensuring steady performance while maintaining a connection to Arbitrum's mainnets.

Arbitrum for Developers:

1. Deployment: Use Arbitrum Stylus to launch smart contracts with compatibility to Ethereum's Virtual Machine.
2. Test First: Use testnets like Arbitrum Sepolia to ensure your contracts work without hitches before the mainnet debut.
3. Boost Performance: Integrate Arbitrum Nitro for faster transactions and optimal dApp performance.

Arbitrum is all about enhancing Ethereum without sacrificing security. It's built to cater to both regular users seeking efficient transactions and developers aiming to build robust dApps.

Arbitrum staking

Staking is a fundamental aspect of the Arbitrum ecosystem, especially for validators. Here’s a breakdown of the concept and how it operates within Arbitrum:

Arbitrum Validators and Staking:

1. Not all validators are stakers. Some might be, while others may not be at any given time.
2. Those who choose to become stakers deposit funds, which are held by the Arbitrum Layer 1 contracts.
3. These funds are at risk of being confiscated if a staker loses a challenge.
4. Notably, Nitro chains in Arbitrum accept stakes in ETH.

Those wishing to earn from staking directly on the Arbitrum blockchain need to set up a node on the network. All types of nodes on Arbitrum are described in detail on the platform’s documentation portal, along with requirements, and detailed instructions on how to set up each of them.

Alternatively, users wishing to earn through staking Arbitrum’s own ARB token can currently do that through third-party platforms such as some centralized exchanges. The potential earnings vary and stakers are advised to do thorough research on the latest requirements including lock-up periods. 

What is The Arbitrum ARB token?

ARB, the governance token of the Arbitrum ecosystem, plays a crucial role in the project's evolution toward decentralization. As upgrades continue to enhance the Arbitrum rollup, ARB facilitates governance and access control shifts from Offchain Labs to the Arbitrum DAO. All voting processes are self-executing and conducted on-chain, with a minimum of 21-37 days for proposals to pass before execution.

ARB launched with a capped supply of 10 billion tokens, with a 2% annual inflation rate thereafter. The token allocation includes ~43% for the Arbitrum DAO treasury, 18% for Offchain Labs investors, 12% airdropped to eligible users, 27% for the Offchain Labs team, and 1% to active DAOs building on Arbitrum. All investor and team tokens are locked for 4 years, with a 1-year vesting cliff followed by monthly unlocks.

The token was launched in what many consider one of the biggest airdrop events in the crypto industry. A snapshot was taken in early February 2023 and in late March users eligible to receive ARB based on a complicated set of criteria were allowed to get their tokens from a dedicated page. 

As expected, the buzz surrounding the anticipated airdrop led to problems. A significant number of phishing links were shared online, and both the platform for claiming the ARB airdrop and the Arbitrum block explorer experienced outages. Some users, however, bypassed these issues by directly interacting with the smart contract, enabling them to trade their assets at substantially higher prices than the majority of holders the next day. Yet, this workaround was not without its challenges. As more users discovered this method to claim their tokens, gas fees surged due to network congestion.

Is Arbitrum Safe?

Arbitrum operates on the concept of optimistic rollups, a mechanism that assumes transactions are valid unless challenged. This optimistically processed data can be reverted if inconsistencies are found, ensuring transaction integrity.

The platform is built on two primary protocols:

1. Arbitrum Rollup Protocol: Focused on L2 operations, it handles transaction execution and validation. Ethereum is used only for data availability, acting as a reliable data store without directly processing the L2 transactions.
2. Arbitrum Anytrust Protocol: A unique feature that stands out in Arbitrum's security landscape. It ensures that as long as there's a single honest verifier, the correct execution of transactions on the L2 is guaranteed.

As of now, there has not been a single fraud-proof submitted on Arbitrum since its mainnet launch in August 2021.

What is Arbitrum’s Governance Model?

Arbitrum employs a DAO structure emphasizing stakeholder inclusivity. Using the Arbitrum Token (ARB) as its governance medium, larger stakeholders naturally have more influence. To balance this, Arbitrum uses quadratic voting. This system allows voters to express preference intensity. Voting costs increase quadratically, letting users weigh their preferences but also discouraging dominance by large stakeholders. It's a balance between giving a voice and ensuring no single entity can easily dominate decisions.

Proposals undergo a "temperature check" stage on the Arbitrum DAO governance forum where community members can discuss, debate, and vote using Snapshot. If a proposal garners enough support, it advances to an "on-chain vote" facilitated by Tally, where specific voting thresholds must be met. Evaluating proposals requires assessing alignment with the Arbitrum DAO's principles, detailed in their Constitution. Additionally, members can delegate their voting power if they cannot actively participate.

How did Arbitrum Transition into a DAO?

In a significant move towards decentralization, Arbitrum began its transition into a DAO in March 2023. This strategic shift was designed to provide users with greater control over the platform's evolution. The decentralization journey was highlighted by the announcement and airdrop of the new native governance token, Arbitrum Token (ARB). 

Who Created Arbitrum?

Arbitrum was developed by Offchain Labs, a New York-based company co-founded by Ed Felten, Steven Goldfeder, and Harry Kalodner. Ed Felten is a former Deputy U.S. Chief Technology Officer and a computer science professor at Princeton University. Steven Goldfeder and Harry Kalodner are both computer science Ph.D. graduates from Princeton. The team at Offchain Labs combined their expertise in technology and blockchain and started working on the development of the Arbitrum blockchain in 2018. In 2021 Arbitrum saw its mainnet launch, and in 2023 it transitioned into a DAO-governed project.

Arbitrum Ecosystem and Partners

Before its mainnet became open to everyone, Artbitrum had integrated over 250 dApps including the most popular protocols in the industry such as 1inch, Aave, Balancer, Cream Finance, Curve, DAI, Dfyn, or DODO. The Maker DAO, Uniswap, and Sushiswap communities also voted to integrate on Arbitrum.

Within the rapidly evolving Arbitrum ecosystem, several projects have distinguished themselves. One notable project is Hop Protocol, a solution aimed at enhancing cross-chain token transfers. Stargate Finance stands out as a prominent bridge with integrated swaps. Uniswap offers users an intuitive platform for token swaps and remains synonymous with decentralized exchanges. GMX with its distinct approach to derivatives trading in the decentralized market, has also established its firm footprint in the Arbitrum Ecosystem. Meanwhile, Radiant delves into the NFT (Non-Fungible Token) realm, emphasizing user experience and security.

Arbitrum integrated some notable infrastructure protocols such as the Chainlink oracles and the B.Protocol file transfer suite. The full list of successful Arbitrum integrations can be found on its dApp portal. There are also native Arbitrum blockchain explorer - Arbiscan created to monitor the activity on the network.

The creators of Arbitrum, Offchain Labs, gained the support of some prominent investors securing around $120 million in funding in two rounds led by Lightspeed Venture Partners, Coinbase Ventures, Pantera, Compound, and Blocknation.

What's next for Arbitrum?

Arbitrum launched its DAO governance and its native $ARB token on March 23, 2023, positioning itself as a decentralized autonomous organization. This move allows $ARB token holders to participate actively in key governance decisions. Despite facing technical challenges during the launch of the ARB token, the DAO treasury has since been significantly bolstered with unclaimed ARB tokens. As a result, Arbitrum's future appears promising, and discussions around potential developments and improvements are ongoing on the Arbitrum DAO governance forum.

Links

https://docs.arbitrum.io/