What is Arbitrum (ARB): Complete Guide for Beginners and Investors
Arbitrum is a layer-2 scaling solution for Ethereum, designed to enhance speed and reduce transaction costs while maintaining the security of the Ethereum blockchain. Launched by Offchain Labs, Arbitrum quickly gained traction due to its ability to alleviate network congestion on Ethereum.
Arbitrum was developed by Offchain Labs, a company founded by a team of academics and Ethereum experts in 2021. It was created to tackle the high transaction fees and scalability issues faced by Ethereum. Key milestones for Arbitrum include the successful mainnet launch in August 2021, and its integration with several major decentralized applications to improve user experience by reducing gas fees.
TECHNOLOGY
Arbitrum uses Optimistic Rollups to process transactions off-chain and post them on Ethereum's mainnet. This solution allows faster transaction processing with reduced fees without compromising the security offered by Ethereum. The protocol assumes transactions are valid unless challenged, significantly increasing efficiency.
USE CASES
Arbitrum is used to improve the scalability of Ethereum-based applications. Some of the use cases include: Enabling faster and cheaper transactions for decentralized finance (DeFi) applications; Supporting NFT marketplaces to handle higher volumes at lower costs; Reducing congestion on the Ethereum mainnet to improve user experience.
FORECAST
Arbitrum is considered promising due to its contribution to solving Ethereum's scalability issues. As more applications opt for layer-2 solutions, demand for such platforms, including Arbitrum, is expected to grow. However, competition from other scaling solutions and developments in Ethereum itself can influence its future adoption.
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