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Arbitrum, Uniswap V3 will run on a Layer 2 solution
Arbitrum, Uniswap V3 will run on a Layer 2 solution
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Arbitrum, Uniswap V3 will run on a Layer 2 solution

By Marco Cavicchioli - 29 May 2021

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The Uniswap community has unanimously decided to add support for Arbitrum’s Layer 2 to V3.

Arbitrum is a scaling solution for Ethereum that is currently being tested on the testnet.

It is a rollup that can scale any Ethereum smart contract, so it can be used by many DeFi dApps.

The Arbitrum Rollup smart contracts are secure and reliable, thanks to the underlying Ethereum blockchain, but at the same time increase the capacity of the dApp and significantly reduce its transaction fees.

This is why it was decided to integrate support for Arbitrum on Uniswap V3.

The impact of Arbitrum on Uniswap V3

Uniswap is by far the most widely used DEX on Ethereum in the world, but running on the base layer (i.e. directly on the blockchain) it now has high commission costs. Since Ethereum’s Layer 1 scaling solution, i.e. Proof-of-Stake version 2.0, is still in an experimental phase and is not expected to be released anytime soon, the Uniswap team is looking for alternatives to lower the commission costs on swaps.

As Vitalik Buterin himself suggested some time ago, rollups are a quick way to scale dApps, so Arbitrum could indeed be a way to act on Uniswap’s commission costs relatively quickly.

Rollups are trustless and permissionless, although they can reduce costs less than other Layer 2 solutions, such as sidechains, and do not increase the speed of transaction execution.

Nevertheless, Arbitrum requires only a fraction of the costs of native smart contracts on Layer 1, as it has low fixed costs for on-chain storage and computation, regardless of the number of resources used.

It also has a toolchain that automatically converts existing Solidity contracts to Arbitrum contracts, and is also compatible with web3, ether and go-ethereum. It also allows for transparent and secure transfer of tokens from the blockchain to its own contracts, making it very attractive to use on DEXs like Uniswap.

In fact, the Uniswap team has already started working on interface support and deployment planning once its V3 smart contracts are also deployed on Arbitrum. They are also continuing to work on deployment on another Layer 2, namely Optimism.

Layer 2 solutions will also provide many benefits in terms of user experience, with fast executions and low fees, but as these are still experimental technologies, that require serious testing in the field, their release on the mainnet will take some time.

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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