Arbitrum is a layer-2 scaling solution built to enhance Ethereum’s scalability and efficiency. It processes transactions off-chain, significantly reducing the data and computational load on Ethereum, which in turn lowers transaction costs and increases throughput. This makes Arbitrum potentially more useful for decentralised apps (dApps) and decentralised finance (DeFi) platforms.
Note
Luno does not currently support sending or receiving ARB, but you can still buy or sell it like any of our other cryptocurrencies. This decision has been made in order to ensure there are appropriate controls in place to maintain the highest standards of investor protection. Learn more about why you can't send or receive ARB.
How does Arbitrum work?
Arbitrum leverages rollup technology to enhance Ethereum’s scalability and efficiency. Rollups process transactions off-chain while bundling them into a single batch, which is then submitted to the Ethereum mainnet. This method aims to reduce the amount of data that needs to be processed and stored on-chain, resulting in lower transaction costs and faster processing times.
Specifically, Arbitrum uses Optimistic Rollups, which assume transactions are valid by default and only challenge them if fraud is suspected. This allows for higher throughput and low fees while maintaining Ethereum’s robust security model. By offloading the computational power burden from the Ethereum mainnet and leveraging its security, Arbitrum helps developers build and scale dApps and DeFi platforms more effectively.
Think of it like a factory assembly line. The factory workers (Optimistic Rollups) build and package products off the main assembly line, creating batches of finished goods. At the end of the day, a summary of all the products is sent to the quality control department (Ethereum mainnet). Quality control assumes the products are up to standard unless a customer reports a defect. This system speeds up production and reduces costs while maintaining quality, similar to how Optimistic Rollups improve transaction processing efficiency on Ethereum while ensuring validity through eventual checks.
What is the native cryptocurrency of Arbitrum
The native cryptocurrency of Arbitrum is ARB. It plays a crucial role in the Arbitrum ecosystem by facilitating transactions and governance within the network. ARB is used to pay for transaction fees and gas costs on the Arbitrum network, enabling users to interact with dApps and DeFi services more efficiently and cost-effectively.
In addition to its utility for transaction fees, ARB holders participate in governance of the Arbitrum network. They have the power to vote on various proposals, which can include feature enhancements, protocol upgrades, fund allocations, and the election of Security Council members. The Security Council is responsible for overseeing emergency and administrative actions within the network. This governance function ensures that ARB holders have a say in key decisions affecting the platform’s development and operations, highlighting ARB’s integral role in shaping the future of Arbitrum.
Who created Arbitrum
Arbitrum was founded by Steve Goldfeder, Harry Kalodner, and Ethan Cecchetti, emerging from research at Princeton University. The project was developed by Offchain Labs, a New-York based from and also co-founded by these individuals. Offchain Labs, led by the trio, focuses on creating advanced scaling solutions for blockchain technology.
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This information is not intended to be nor does it constitute financial, tax, legal, investment or other advice; nor is it a call to trade. The information is intended as general market commentary for information purposes only. Before making any decision or taking any action regarding your finances, you should consult a qualified Financial Advisor.