February Story: Arbitrum’s Technology, Ecosystem, Popular Projects, And Future

Key Points:

• Arbitrum is rapidly expanding its ecosystem.
• It took the lead in February at the short peak of the crypto market and produced an outstanding performance.
• The performance of the network suggests that the Layer 2 racetrack will serve as the foundation for the upcoming bull market.

Towards the end of January, a brief bull market in the crypto market emerged as the Federal Reserve’s interest rate rise slowed. Bitcoin climbed to a new high in half a year, breaking past $25,000. Arbitrum has given the whole encryption industry new life as a result of the frequent benefits of Ethereum’s second layer. One is that in order to handle more frequent trading activity, Arbitrum will improve its technology in 2022. Second, thanks to the success of the Odyssey event’s first week, Arbitrum’s ecological initiative has attracted a lot of interest.

This week, we will focus on the development of Arbitrum and analyze its technical upgrades and future routes. At the same time, in terms of ecology, we analyzed the reasons for the success and future development of popular DeFi and game projects. For example, there have been innovations in mechanisms such as GMX, and protocol revenue has performed well in the bear market. On this basis, Arbitrum’s currency issuance is expected to continue to bring benefits.

Overview

Layer 2 will be the most captivating track at the beginning of 2023, which is also consistent with the opinions of the majority of institutions and important people. The eco-tokens on Optimism, Polygon, and Arbitrum did well in terms of currency pricing. Future homes for Ethereum will include new public chains like Terra and Solana, which will be influenced by the bear market’s thunderstorms. It may be claimed that Layer 2 and new public chains are in more of a rivalry. Arbitrum gained the lead in February at the brief apex of the cryptocurrency market and produced an outstanding performance.

With a TVL of 3.37 billion, 3.87% of the TVL share across all networks, and a TVL share of 53.04% in L2, Arbitrum currently has the greatest TVL in Ethereum’s second-layer growth plan. To be accurate, Arbitrum is not a blockchain but instead uses a compression method to upload off-chain transactions to the Ethereum mainnet. Arbitrum Rollup is an off-chain protocol that is handled by the Ethereum contract on the chain. This approach can help Ethereum partially overcome its congestion issue so that it can benefit from quick transactions, reduced gas costs, security assurances, and positive user experiences.

Chapter 1: Technology Upgrade

Arbitrum will shift about a lot in 2022. Together with Odyssey activities, it will also keep introducing new technologies and technological advancements, such as the introduction of the Arbitrum Nova and Arbitrum One dual chain and the launch of the Stylus programming environment. The fundamental technologies are described here, along with the issues that each address.

Arbitrum Nova — AnyTrust Chain

The network announced the creation of a new chain, “Arbitrum Nova,” on July 12, 2022. The chain, which is based on AnyTrust technology, is intended for social apps, gaming, and more cost-sensitive use cases. The foundation of AnyTrust technology is a minimal trust assumption that is secured by data availability committees. The management of off-chain transaction data and its provision to support batches will fall within the purview of this committee. As a result, AnyTrust enhances the user experience while saving the required 7-day withdrawal time for consumers. The following are the primary technological cores:

• Issue this DACert and sign Data Availability Certificates (DACerts) for batch transactions;
• The chain will switch back to the roll-up procedure if the committee cannot agree;
• The L2 chain will be used for data execution, and after a testing period, Ethereum will ratify the new aggregated state.

Nitro

On August 2022’s final day, the Nitro version of Arbitrum One was successfully updated. The Nitro update significantly speeds up the network and lowers transaction expenses. Nitro has mostly improved its technological capabilities in the following areas:

• Modified the ArbOS operating system and the existing AVM architecture;
• The dated, bespoke AVM architecture will be replaced with the well-liked WebAssembly (WASM) architecture.
• Geth has replaced the custom EVM emulation;
• In order to provide a more efficient batching and compression method for transactions, ArbOS will be made smaller and rebuilt in Go.

The new prover at the center of Arbitrum Nitro’s technology provides interactive fraud proofs on WASM code. This makes it possible to build and compile using common languages and tools. Moreover, Gethcore is immediately built into Arbitrum at the same time, improving EVM compatibility.

Stylus

Offchain Labs, a company working on the platform, has announced the release of Stylus, the next-generation programming environment for Arbitrum One and Arbitrum Nova.

The WebAssembly smart contract feature of Stylus enables users to deploy apps using their preferred programming languages (including Rust, C, and C++) to interact with The EVM program on Arbitrum. Stylus is significantly quicker than Ethereum Virtual Machine, has cheaper costs, and is completely compatible with it (EVM). Offchain Labs refers to Stylus as EVM+, however, it cannot take the place of EVM.

Chapter 2: Ecological Cooperation

The market share of Arbitrum has dramatically increased during the last 12 months. This expansion is due to three factors: 1. Layer 2’s ongoing optimism; 2. Arb’s anticipated currency issue; and 3. The expansion of ecological applications, particularly native apps.

Top DeFi protocols from the Ethereum Layer 1 mainnet, including Uniswap, Sushiswap, and Curve, as well as other well-known cross-chain protocols, have been merged and deployed on Arbitrum One since the mainnet’s debut in September of last year. Stargate and Synapse are two examples. The increase in these applications also demonstrates that programmers are upbeat about Arbitrum’s expansion strategy.

Cross-chain bridges, DeFi, NFT, and games were among the 14 most active projects on Arbitrum that were chosen by the Odyssey event’s organizer in June 2022. Although the exercise period was supposed to run for 8 weeks, it really stopped after just the first week. The network was overloaded, and the gas price was too high in the second week, which was the main reason Odyssey was suspended. It had surpassed the Ethereum mainnet gas fee at that point. In reality, this proved conclusively that there were too many users for the status of Arbitrum at the moment.

Even though the Odyssey was only hosted for a week, it nonetheless garnered a sufficient amount of media interest. Combining Arbitrum with NFT in the form of an activity week, sparked users’ interest in taking part and also gave them insight into the ecosystem of Arbitrum. It not only increased user numbers but also increased traffic to its environmental programs. In contrast to hastily providing coins for airdrops, it maintains the idea that coins will be issued in the future.

The data on the browser shows that Arbitrum added 207,000 new addresses between the start of the Odyssey event on June 21 and the completion of the first week of missions. Also, on June 27, there were 55,000 new addresses added in a single day, making it the day with the most additions. The Odyssey activity was successful, as can be seen.

After the Odyssey event, the network kept up its technological efforts and introduced new projects with cutting-edge ecological systems, which fully met its forecasts for the bull market at the end of January. Now, from October 2022 to January 2023, there will be an average of 608,365 active addresses, up 51.2% from September. The number of users and trade volume on Arbitrum have both grown in tandem.

Chapter 3: Analysis of popular projects

Native ecological initiatives on Arbitrum have captured the interest of the whole encryption industry over the last two months. These are a few impressive undertakings. The market value of these projects still has a gap and is still low when compared to other projects of the same type in other public chains. There will be lots of space for development with the release and further growth of Arbitrum.

Chapter 4: Future development

Arbitrum’s performance suggests that the Layer 2 track will serve as the foundation for the upcoming bull market. Nevertheless, there are still a few technical issues that need to be fixed, whether it is the Optimistic Rollup path or the zk Rollup method. Future development of the Arbitrum project will focus on three areas:

(1) Further technological advancement;

(2) Continued support for environmental initiatives;

(3) User attraction through token issuance.

First off, technically speaking, marginally centralized sorters continue to be critical of optimistic roll-up technology. Currently, Arbitrum features an upgradeable contract, a centralized sorter, and whitelist-proof verification. These are adequate to safeguard user assets even though they haven’t yet led to security issues. Nonetheless, this still raises the chance of censorship and user money loss. The best approach is to use decentralized sorters and permissionless evidence verification. For these challenges, Offchain Labs provided equivalent technical solutions as well:

• Continue to reduce fees and increase tps
• Decentralized
• Decentralize management and authorized software upgrades
• Decentralization of validators
• Sequencer decentralization

DeFi, cross-chain, and gaming are now the major uses of Arbitrum in terms of ecology. Nonetheless, more brand-new apps will be released on the platform in the future due to the developers’ and users’ continued development, with social and NFT projects receiving the greatest attention. At the same time, the Arbitrum Nova chain will really be employed, giving Arbitrum a competitive edge in the gaming industry given the success of Treasure and the expansion potential of Arbitrum Nova.

This is the aspect of the economic model that people are most looking forward to. The introduction of tokens comprising the:

(1) Token distribution strategy;

(2) Airdrop and incentive ecological plan;

(3) Governance plan is crucial to the long-term viability of Arbitrum.

A sound business plan will enable Arbitrum to grow in a way that will appeal to consumers and developers. In deciding L2’s governance and the long-term concentration of power within the ecosystem, token distribution will also be crucial. Tokens can also be used to decentralize crucial network operations like collators, which group and transmit transactions to L1.

According to the study above, 2023 will be the year that Arbitrum’s growth continues to soar. The Odyssey project may be continued, the present DeFi and gaming projects strengthened, and new NFT and distinctive native social initiatives introduced. The long-awaited token may be introduced at the same time and reward users and the system. Start installing the protocol and fully enabling the Nova chain.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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Harold

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