Arbitrum is a Layer 2 scaling solution for the Ethereum network that utilizes Optimistic Rollup technology to enhance transaction speed and efficiency while maintaining compatibility with the existing Ethereum infrastructure. Leveraging Optimistic Rollup technology allows for faster and more cost-effective transactions, ensuring compatibility with the current Ethereum ecosystem. Arbitrum's architecture consists of a combination of unique protocols, including Arbitrum Rollup and Arbitrum Nitro, working together to provide a seamless experience for developers and users.
Key Components of Arbitrum
Arbitrum Rollup
Arbitrum employs Arbitrum Rollup to improve scalability and reduce costs. This crucial mechanism aggregates off-chain transactions into a batch, known as "rollup," which is then verified and secured on the Ethereum blockchain to ensure transaction integrity. By intelligently aggregating multiple transactions, Arbitrum Rollup significantly enhances the efficiency of the Ethereum network, enabling faster and more cost-effective processing. Users benefit from accelerated transaction speeds and reduced costs, making Arbitrum an excellent solution for optimizing blockchain operations.
Arbitrum Virtual Machine (AVM)
The cornerstone of Arbitrum's infrastructure is the Arbitrum Virtual Machine (AVM). This key component serves as the execution environment for smart contracts and computational tasks within the Arbitrum ecosystem. A deep understanding of the core principles is crucial in exploring the question of "What is arbitration?" AVM seamlessly integrates with Ethereum's EVM, allowing easy integration with existing Ethereum applications. Developers can deploy and execute smart contracts on Arbitrum, taking full advantage of its scalability and efficiency.
Arbitrum Chain
At the core of the Arbitrum ecosystem is the Arbitrum Chain, the primary blockchain network that powers its operations. Operating as a Layer 2 solution above Ethereum, it utilizes Optimistic Rollup technology to enhance scalability. Arbitrum Chain seamlessly integrates with Ethereum, managing off-chain computations while Ethereum handles settlement and dispute resolution. This integration improves transaction throughput, lowers costs, and enhances the security of the decentralized Ethereum network, benefiting developers and users alike.
Arbitrum Market Data
Basic Data
As of the drafting date, Arbitrum's total transactions reached 462,745,361, with a total address count of 22,119,333 and 193,899 types of created proxy contracts. The total transaction volume amounted to 57.33 million ETH, with 136.79K ETH in on-chain transaction volume in the last 24 hours. There are 22,119,433 addresses in total, with 220,809 active addresses and 13,108,060 addresses holding ETH. Among them, 18,034,237 addresses are regular, and 4,085,098 addresses are contracts.
Protocol Revenue
This data measures the USD value of the total transaction fees paid by users over a period. Since the Cancun upgrade speculation, Arbitrum's protocol revenue has continued to rise, reaching a total of $65.97 million in the past year, with accumulated fees of $11.18 million in the last 30 days.
Total Value Locked (TVL)
Arbitrum One's TVL reached an all-time high of $10 billion, with a 10.50% increase in the past week. Currently, the total TVL for Ethereum Layer 2 networks is $208.2 billion, with Arbitrum One accounting for 48.03%.
Arbitrum Token Model
On March 16, 2023, Arbitrum introduced its token, $ARB, serving as the DAO governance token for Arbitrum One and Arbitrum Nova networks. The initial total supply of $ARB is 10 billion, with a maximum annual inflation of 2%. Token distribution includes allocations to the Arbitrum DAO treasury, Offchain Labs team/future teams and advisors, Offchain Labs investors, Arbitrum users through airdrops, and DAOs building on Arbitrum through airdrops. As of now, $ARB ranks 42nd globally, with a market capitalization of $2,418,654,984.60 and a circulating supply of 1,275,000,000 ARB (12.75%).
Use Cases of ARB Token
The ARB token serves as a means for decentralized governance within the Arbitrum ecosystem. ARB holders vote on governance proposals for Arbitrum One and Arbitrum Nova chains, influencing how the DAO treasury funds are utilized. Governance proposals can include upgrades to the chain, changes to network parameters, allocation of grants and bounties, integration of new features, and more. Unlike ETH on the Ethereum network, ARB does not function as a gas fee token. Fees on Arbitrum are paid in ETH or any other ERC-20 token supported by the DApp.
Popular Projects in the Arbitrum Ecosystem
1. GMX (Gaming Multiverse Exchange)
GMX is a decentralized perpetual contract trading platform that allows users to trade ETH, BTC, LINK, and UNI perpetual contracts with up to 30x leverage on a decentralized platform. GMX operates more complexly compared to centralized exchanges, requiring the use of oracles for price feeds. The execution of opening and closing positions is carried out by GMX Keepers (similar to crowd-sourcing), with users paying gas fees for transactions and additional fees for Keeper operations.
2. Camelot (Arbitrum's Native DEX)
Camelot serves as Arbitrum's native decentralized exchange (DEX). It operates as a conventional Uniswap V2+Curve type DEX, incorporating features such as a Launchpad, custom transaction fees, integration of LP with NFTs, and incentive mechanisms set by project teams.
3. RDNT (Radient)
RDNT is a lending protocol on Arbitrum with two innovations: utilizing LayerZero for cross-chain lending and enabling looped lending (currently inactive). RDNT is a leader on Arbitrum, surpassing the Arb version of Aave V3 in TVL, but faces significant long-term competition. RDNT users can deposit assets on any major chain and borrow supported assets cross-chain.
4. Treasure DAO
Treasure aims to build a "decentralized Nintendo," a series of on-chain games connected through the interoperability of in-game assets and Treasure's native token MAGIC. The most popular games in this series include strategy games like Bridgeworld, The Beacon, Smolverse, and resource management and strategy games like Realm. These games can be accessed through Trove, the central hub of the Treasure ecosystem, serving as a marketplace for in-game assets and Treasure NFT collectibles.
Conclusion
Arbitrum not only inherits Ethereum's robust DeFi genes but also aggregates numerous high-quality projects in the DeFi space, injecting stability into the ecosystem. Fully compatible with Ethereum L1, Arbitrum opens the door to convenience for developers, allowing them to use any EVM language and share the rich resources of the Ethereum ecosystem. Remarkably, Arbitrum reduces gas fees for on-chain transactions by over 90%, significantly enhancing user acceptance of on-chain transactions. These advantages collectively create a vibrant environment for DeFi innovation applications.
Additionally, to meet the growing demand for high-frequency interactions in the gaming and social sectors, Arbitrum introduced the new Nova chain as a strategic response. Isolating moderately from the DeFi ecosystem, it provides a stage for exploring more possibilities. While Arbitrum may still have room for improvement in certain aspects compared to the mature ecosystem of Polygon, it demonstrates unique potential and limitless possibilities. Looking ahead, Arbitrum undoubtedly deserves more anticipation, as we await its script for a new chapter of brilliance.
For more analysis, please follow Aibit's media account for real-time updates! This article is for reference only, does not represent any position, and is not intended as investment advice. Investment is risky, caution should be exercised.
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