There are a number of projects running on $ARB Arbitrum's L2 chain. Among them, around 340 projects (as of March 23, 2024) are Decentralized Finance (DeFi) projects with over $300 billion TVL, offering new ways to do financial activities like lending, borrowing, and trading using blockchain technology instead of traditional banks. Some of the renowned DeFi projects on Arbitrum Nitro include 1inch, Aave, Curve, Beefy Finance, and Uniswap.
These projects are running on Arbitrum's flagship product, Arbitrum Nitro (an improved version of the original Arbitrum Rollup). Optimistic rollup is a type of scaling solution that inherits security from a main blockchain (like Ethereum in Arbitrum's case) while processing transactions much faster and cheaper off-chain. Today, we'll break down the inner workings of Arbitrum Nitro in a simpler way to help ARB coin holders and potential investors understand its advantages.
Key features of Arbitrum Nitro:
Faster transactions: Nitro improves the speed of Arbitrum by optimizing how it processes transactions.
Lower fees: By reducing the data sent to the main Ethereum blockchain, Nitro lowers transaction fees on Arbitrum.
Security: Even though transactions happen faster on Arbitrum, they are still secured by the Ethereum blockchain.
How Arbitrum Nitro works:
Sequencing transactions: Nitro organizes transactions into a specific order before processing them.
Geth at the core: Nitro uses the same technology (Geth) that powers most Ethereum nodes to ensure compatibility.
Separate execution and proving: Nitro uses different processes for running transactions and verifying their results. This separation improves efficiency.
Optimistic rollup: Nitro assumes transactions are valid but allows challenges if there's a disagreement.
Benefits of using Arbitrum Nitro:
Developers can create applications on a faster and cheaper platform.
Users can interact with these applications without high transaction fees.
Challenges:
If validators disagree about the validity of an RBlock, a challenge is triggered.
The challenge uses a recursive dissection protocol to narrow down the disagreement to a single instruction.
The winner of the challenge keeps the loser's stake.
Validators:
Validators can be active (proposing new RBlocks), defensive (intervening if incorrect RBlocks are proposed), or watchtower (monitoring for incorrect RBlocks and raising alarms).
Anyone can become a validator, but most users won't need to.
Sequencer:
The Sequencer is a special full node that controls the order of transactions.
It can guarantee transaction results immediately without waiting for Ethereum confirmation.
A well-behaved Sequencer treats all users fairly and minimizes delays for non-Sequencer transactions.
Currently, Offchain Labs runs a centralized Sequencer, but the plan is to transition to decentralized fair sequencing in the future.
Bridging:
L1 and L2 chains interact asynchronously, meaning cross-chain calls take time.
L1 contracts can submit L2 transactions directly or use a ticket-based system for more robustness.
L2 contracts can call L1 contracts using a similar ticket-based system.
Total Fee and Gas Estimation:
Total fee is L2 basefee multiplied by (L2 gas used + L1 calldata fee).
Transactions fail if they don't provide enough gas or if the basefee limit is below the current basefee.
Let us know what you think! Looking for a complete list of Arbitrum Nitro projects? Check out defillama.com ! #Write2Erarn #ARB #FundamentalAnalysis