Arbitrum Introduction
A product of Offchain Labs: https://offchainlabs.com/
Arbitrum is a true layer 2 solution for Ethereum based on optimistic rollups. In exchange for some ease-of-use trade-offs, transactions on Arbitrum are much faster and cheaper.
"Arbitrum is an L2 scaling solution for Ethereum..." which uses optimistic rollups to reduce gas fees while offering the security guarantees of the Ethereum network.
Rollup explainer: https://www.youtube.com/watch?v=7pWxCklcNsU
(And how this relates to $$ saved for the user.)
In short, all transaction data is made available on mainnet (Ethereum) but optimistic rollups use a separate network (Arbitrum) to perform network calculations. Transaction validity is guaranteed by a crypto-economic challenge process.
Network security guarantees are especially important platforms in which users lock up a significant amount of capital for a significant amount of time. While there are other networks and sidechains that are cheaper and faster, Ethereum roll-up solutions (Arbitrum, Optimism, ZKrollups, etc.) offer the highest security guarantees while minimizing transaction costs.
Read more about Roll-ups here: https://research.paradigm.xyz/rollups
Read more about Arbitrum here https://medium.com/offchainlabs/how-arbitrum-rollup-works-39788e1ed73f
Arbitrum vs. Optimism: https://twitter.com/krzKaczor/status/1395812308451004419
When creating a non-fungible piggy on the Ethereum mainnet, the gas costs were quite demanding. This is due to the amount of information needed to correctly execute a piggy. Layer 1 gas costs were running around:
Layer 1 action
gas consumed
gas price
fee (ETH)
ETHUSD
fee (USD)
create
319408
10 gwei
0.0031941
$200
$ 0.64
auction
182889
10 gwei
0.0018289
$200
$ 0.37
oracle
211342
10 gwei
0.0021134
$200
$ 0.42
Previously the gas costs and transaction fees were tenable. A lot of gas was consumed when interacting with the SmartPiggies contracts, but the gas costs (~10 gwei) and Ethereum US Dollar cross rate (~$200) were low. When everything goes up, so does the transaction fees. When we look at current prices the story changes:
Layer 1 action
gas consumed
gas price
fee (ETH)
ETHUSD
fee (USD)
create
319408
100 gwei
0.0319408
$2000
$63.88
auction
182889
100 gwei
0.0182889
$2000
$36.58
oracle
211342
100 gwei
0.0211342
$2000
$42.26
The fees in the current market have increased by a factor of 100. If gas cost fluctuation is taken into account, when there is a market event and the gas price goes above 200 gwei, settling a piggy goes from $42 to $88 right when one may want to take that piggy action. This does not make for a great user experience.
If we look at the reductions from using Arbitrum, we get the following picture:
Layer 2 action
gas consumed
gas price
fee (ETH)
ETHUSD
fee (USD)
create
6752
100 gwei
0.0006752
$2000
$1.35
auction
5728
100 gwei
0.0005728
$2000
$1.16
oracle
2656
100 gwei
0.0002656
$2000
$0.53
Using Arbitrum as a scaling solution, SmartPiggies can be created, auctioned, and settled for under $5. This is more in line with the SmartPiggies mission or bringing access and opportunity, where before there was little to none.
There are other advantages to using a layer 2 solution, for example escaping the code size limitations inherent to the Ethereum mainnet, and yet more advantages to using Arbitrum. For more information, please visit the Arbitrum docs.
Footnotes
1 https://developer.offchainlabs.com/docs/inside_arbitrum
2 At current prices as of 2021https://ethgasstation.info/index.php
Last updated