What is Arbitrum?

Photo of author

By Jacob Maslow

The Arbitrum blockchain and its native ARB token is one of the hottest topics 2023. It was the most anticipated airdrop of the year, and people in the crypto community have already made money on it. What to do next? Is it worth buying a sensational asset? Or continue to methodically work on small fluctuations in the ETH to BTC exchange rate?

What is Arbitrum?

The Arbitrum blockchain is technologically a second-level solution for Ethereum. This blockchain operates based on Optimistic Rollap technology, which allows running smart contracts and Ethereum DApps with lower fees and throughput. In the first half of last year, Arbitrum became the leader in the number of transactions, volumes of blocked liquidity and the number of functioning applications among second-tier solutions.

The project team

The project was created by the American company Offchain Labs, which has existed since 2018. The company was founded by Ed Felten and his graduate students Stephen Goldfeder and Harry Kalodner, experts in cryptography and blockchain technology.

Attracted investments

The attraction of investments was made in several stages. In 2019, it was a $3.7 million seed investment. Approximately two years later, before the launch of the alpha version of the network, an investment round A was held, which raised $20 million.

The Arbitrum One mainnet officially launched on August 31, 2021. At the same time, another investment round was announced, which brought another $120 million. The Lightspeed Venture Partners fund led this round. In addition to him, Pantera Capital, Polychain Capital, Redpoint Ventures, and the infamous Alameda Research are among the major investors. However, her contribution is small, so this fact does not discredit the bright appearance of Arbitrum too much.

Technical features of the project

So, technically, Arbitrum is an Optimistic Rollup built on top of Ethereum. Rollap is the core layer 2 protocol technology on Ethereum. This technology ensures the privacy of transactions and reduces the load on the main network. First, a packet is formed from transactions at the second level, sent to the main network for final confirmation.

Any transaction is considered genuine by default unless proven otherwise to reduce the burden on the blockchain. Transactions are verified by validators who monitor cases with opening disputes. Any user can become a validator.

Ordinary users will only become victims of fraud if all validators act maliciously and in concert. The network will be secure if at least one honest validator remains in it. Moreover, even if all validators are crooks and rogues, but not in collusion among themselves, the network remains secure. If suspicions of fraud are proven, the pest will lose the rights of the validator, and his deposit will be confiscated.

The Arbitrum Virtual Machine (AVM), compatible with the Ethereum Virtual Machine, performs transactions between the networks of the first and second levels. Transaction processing and execution in the L2 network is performed by ArbOS. Technologically, the project is good, but there are questions about tokenomics, since the funds and the team own too much of the emission.

Where to buy Arbitrum

The ARB token is available on Kraken, Binance, Mexc, Bybit, Huobi, and other major centralized exchanges. It can be bought on the DEX and over-the-counter markets (OTC). The latter method is still very risky; there are a lot of scams in such markets. 

Is it worth investing in Arbitrum?

First of all, this is a fundamental and necessary project. Technologically, it is of value to the Ethereum ecosystem. However, the possibility of manipulation of the price of the token by the parties of large holders is not excluded. Theoretically, ARB can be a potentially profitable investment, but due to the “infant” age of the asset, it should be treated very carefully.

Images Courtesy of DepositPhotos