In the fast-developing blockchain technology world, scalability, and efficiency remain the main challenges. One of the revolutionary blockchains, that addresses the scalability trilemma is Arbitrum. It achieves the delicate balance between security, decentralization, and speed and changes the way we experience decentralized systems. Arbitrum seeks to decrease the network congestion and high transaction costs that negatively affect many dApps today. By introducing Optimistic Rollups, Arbitrum enables smart contracts to execute off-chain, alleviating the strain on the main Ethereum network while maintaining a robust layer of security.
What Is Arbitrum?
Arbitrum is an innovative blockchain technology designed to address one of the most pressing challenges in the world of decentralized systems: scalability. Built as a Layer 2 scaling solution on top of the Ethereum network, Arbitrum aims to significantly improve transaction throughput and reduce congestion while maintaining the security and decentralization features that make blockchain technology valuable.
Basically, Arbitrum employs a technique known as Optimistic Rollup. This approach enables smart contracts to execute off-chain, meaning that transactions can be processed faster and with lower fees compared to the main Ethereum network. The key innovation lies in the "optimistic" nature of the system, where transactions are initially processed off-chain and then verified on the main chain. This significantly reduces the computational burden and congestion on the main chain, resulting in faster and more efficient transactions.
By introducing Optimistic Rollup, Arbitrum offers a practical solution to the scalability trilemma, a longstanding challenge that seeks to balance security, decentralization, and scalability. This technology has multiple implications, especially for apps that demand high throughput, such as DeFi protocols, NFTs, and more.
Key Features of Arbitrum
- Scalability. One of the main pros of Arbitrum is its ability to significantly enhance scalability. By processing transactions off-chain through Optimistic Rollup, it decreases network congestion and increases the transaction throughput, offering a solution to the scalability challenges.
- Faster Transactions. With the off-chain execution of smart contracts, Arbitrum enables faster transaction processing. Users experience quicker confirmations and reduced transaction settlement times, enhancing the overall user experience across apps.
- Cost Efficiency. By reducing the computational load on the main chain, Arbitrum significantly lowers transaction fees. This is particularly advantageous for users who were concerned about high gas fees on Ethereum, making dApps more accessible and cost-effective.
- Eco-Friendly Solutions. The reduced computational demand on the main chain also leads to energy efficiency. This goes well with the growing concern for the environmental impact of blockchain networks.
- Interoperability. Arbitrum is built on Ethereum, making it compatible with existing Ethereum smart contracts and dApps. This interoperability enables a seamless transition both for developers and users.
- Decentralization and Security. Despite its off-chain execution, Arbitrum maintains a high level of security through the process of "optimistic" verification. Transactions are initially presumed valid which ensures data integrity and minimizes potential risks.
- Ecosystem Growth. Arbitrum encourages the development and adoption of new apps by offering a more efficient and cost-effective environment.
- User Adoption. The improved user experience, faster transactions, and lower fees make Arbitrum a more attractive option for users and businesses, potentially driving broader adoption of blockchain technology.
Arbitrum 2023: How Does $ARB Airdrop Effect It?
Arbitrum’s airdrop was one of the most anticipated events in the crypto world in the first half of 2023. As you know, on March 16, 2023, Arbitrum announced that ARB is planned to be released in the near future. “The token will be airdropped to early users and DAOs building on Arbitrum, with 12.75% of the total supply to be distributed.” – Coinmarketcap. Thus, the recipients received rewards regarding their interaction with Arbitrum until March 1, 2023. The $ARB Airdrop took place on March 23, 2023, marking the Arbitrum transition into a decentralized autonomous organization (DAO).
After the airdrop, both transaction volumes and daily user engagement remained at an incredible level, which analysts call historical. Even after the airdrop, this steady on-chain dynamics showed an increase in Arbitrum's network gas costs, which directly indicated its growing use. Moreover, the value of transactions and transfers showed similar growth patterns.
Despite the impressive data, the number of wallets that made the first transactions began to decline. Although it reached its highest level the day after the $ARB airdrop, the number of wallets gradually decreased over the next two months. Thus, we can conclude that after the airdrop and the decrease in interest in the event, the number of unique users decreased. However, it is worth noting that compared to historical data, the figures were still above average.
However, the airdrop still helped Arbitrum to gain attention and users, thanks to which the platform retained a significant share of the intermediate volume coming from Ethereum. Thus, the gross volume of Ethereum connected to Arbitrum not only maintained its resilience after the airdrop but also helped Arbitrum become the second-largest market after Polygon.
Source: Nansen Query
Transaction Volumes after ARB Airdrop
Speaking about the volume of transactions, it is worth noting that it began to decline significantly a few weeks after the airdrop. However, the figures were still higher than before. For example, on June 5, two and a half months after the airdrop, Arbitrum's intranet volume reached a record high of $2.4 billion.
In addition, it is worth paying attention to the change in volume, which was necessary for the bridges to connect the Arbitrum. As you know, cross-chain activity between Arbitrum and the other compatible EVM networks was incredibly high and reached its peak in March. In the following months, despite the decline in numbers, the numbers were still significant. Most likely, this was also influenced by the upcoming LayerZero airdrop.
What About ARB Token Price?
As you know, ARB is a native token of the Arbitrum platform, the release of which was long-awaited for the entire crypto community. On March 23, 2023, the token had an all-time high price of $11.80. After the release of ARB, most of the token was issued to experienced users of the Arbitrum community. Most often, such followers try to dump most of their tokens to make a profit, which can lead to devaluation.
However, Arbitrum’s team took care of the ARB tokenomics and released only 1,275,000,000 ARB into circulation, which is 12.75% of the total supply of 10,000,000,000 ARB. Thus, despite the large sales, Arbitrum was able to maintain a price structure that remains stable even as of August 2023.
From the moment of release and until June 10, the price of ARB did not fall below $1 US, which already speaks of the success of the token. Even though the price of the token dropped to $0.97 on June 10 and reached an all-time low of $0.91 on June 15, it began to rise again a couple of days after. By the end of June, the ARB price reached $1.10 again and has not fallen below $1.01 since.
As of August 15, 2023, the ARB token is trading at $1.14 with a market capitalization of $1,447,891,697. Moreover, the token’s trading volume over the past 24 hours is over $151 million and ranks 22nd among all cryptocurrencies in the world. “The chain’s TVL remains staggeringly high at $2 billion, making the network rank as the fourth-largest chain by assets circulating within smart contracts.” – Cryptonomist.
The Arbitrum blockchain still stands as a promising solution to address the scalability challenges plaguing decentralized systems. With its innovative optimistic rollups and seamless integration with Ethereum, it offers the potential to revolutionize transaction efficiency and lower costs. As it gains popularity, the technology is ready to unlock a new era of dApps and services, promoting wider adoption and innovation. However, its progress depends on navigating security concerns, competition from other scaling solutions, and evolving developer needs.
Undoubtedly, the ARB token airdrop has become not only a successful solution for the network but also a large-scale event in the crypto world. Moreover, the platform outperformed many projects in terms of activity after the airdrop, which also speaks of the success of the event. Even though after some time a number of wallets on the platform decreased, the activity on the platform still exceeds what it was before ARB, which gives the analyst the right to believe that ARB is likely to maintain its position in the market and further strengthen the influence of Arbitrum.
Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.