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Arbitrum: what it is and what it means for the cryptocurrency world
Arbitrum: what it is and what it means for the cryptocurrency world
Ethereum

Arbitrum: what it is and what it means for the cryptocurrency world

By Amelia Tomasicchio - 5 Jun 2021

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A few days ago, the popular DEX Uniswap announced the decision to add support for Arbitrum’s Layer 2 to V3, but what is it all about? 

Arbitrum and the scalability of Ethereum

As Ethereum’s layer number two, Arbitrum stands as a solution to scale this blockchain, a bit like Lightning Network wants to do for Bitcoin.

Although the project is still in the testing phase, this solution could help improve the speed and level of complexity of any Ethereum-based smart contract, for example, beneficial for all of DeFi’s decentralized applications and perhaps even NFTs.

The smart contracts on which Arbitrum is based thus increase the capabilities of individual dApps and significantly reduce transaction fee costs.

Although Arbitrum still charges for native smart contracts on Layer 1, these are low prices and only for on-chain storage and computation, regardless of the number of resources used.

The launch of this project was so important and heartfelt to the cryptocurrency community that it helped reduce Ethereum’s gas fees last week. However, there is also to say that recently, compared to the beginning of May, ETH transactions have, in any case, decreased, also perhaps given the price drops.

As stated by Ethereum founder Vitalik Buterin himself, rollups like Arbitrum are a fast technology for scaling dApps, so Arbitrum could be a way to take action on blockchain fee costs. 

Ethereum 2.0., DeFi and NFTs

Many people are waiting for the release of Ethereum 2.0. and Proof of Stake on this blockchain to have lower transaction fees, so in the meantime, alternative solutions are emerging, such as rollups or blockchain projects like Matic and Polkadot.

This problem is very much felt in DeFi since the decentralized applications are based on smart contracts that perform hundreds of operations per second, like transactions, and if each of these transactions comes to cost $80 – as happened when the Ethereum network was particularly clogged – it’s evident that the procedures become an absolute waste of money.

Moreover, with the NFTs hype and the minting and dropping of works, even the artists and creators in the industry are starting to ask themselves how to save on commission costs. Even though the market for non-fungible tokens also exists on blockchains like Cardano, Solana, and EOS, these are still not comparable, in terms of adoption, to Ethereum. 

For all these reasons, the search for new solutions to scale Ethereum is becoming more and more prosperous, and Arbitrum could really change the fate of the cryptocurrency market.

 

Amelia Tomasicchio
Amelia Tomasicchio

As expert in digital marketing, Amelia began working in the fintech sector in 2014 after writing her thesis on Bitcoin technology. Previously author for Cointelegraph and CMO at Eido. She is now the co-founder and editor-in-chief of The Cryptonomist.

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