The Ethereum community is feeling tremendous pressure. As the market activity heats up and the NFT frenzy, Ethereum gas fees soar to a record high, except for the big players, everyone else can’t access Ethereum.
this is a big problem. Not only will it significantly reduce the user experience, it will also push new users to other ecosystems.
Fortunately, the solution is on the way.
Although it may be a little late to call it “L2 summer”, with the launch of the highly anticipated Arbitrum , the road to expansion has arrived. The real Layer 2 inherits the security of Ethereum and complements it with lightning-fast transaction speeds. Optimistic Rollup is very much needed to relieve congestion on L1 and reduce end-user fees, so that a wider audience can access Ethereum .
Although less than two weeks after its launch, Arbitrum has already begun to see a huge appeal: the value locked on the Internet has reached $96 million. In addition, we have begun to see the attractive potential of Layer2, because even if the capacity is artificially reduced, the average gas fee for token exchange on Arbitrum has been reduced by 12 times compared to Ethereum L1.
Want to experience the forefront of Ethereum expansion for yourself?
The following is a guide to playing Arbitrum, as well as some market opportunities that are ready and waiting for you.
Trust assumptions and other details
Before we finish connecting funds to Arbitrum and reaping the benefits, it is very important for users to understand the trust assumptions made by the network they are using.
Although Arbitrum intends to be completely decentralized, its team currently has significant control over the network. This is no different from the methods adopted by other Ethereum expansion solutions such as Polygon and Optimism, which have their own unique set of protection measures after their respective releases.
For example, the Arbitrum team can use a proxy contract controlled by a single private key to modify many key contracts in the system (it is not clear who owns this key and how to manage it).
The contracts that belong to the agency authority include the token bridge from Ethereum, the sequencer contract (processing batch transactions), the rollup contract on the main network, and some other contracts. It is worth noting that this protection measure is to ensure the stability of the early network, but it does represent a major centralizing force, because an entity can control the network, including the ability to shut down the network. (It is worth mentioning that , The team has made it clear that if there are technical or security issues, they may stop network activities).
In addition to these centralization trends, the team also implemented so-called “speed limits.” This limits the upper limit of the network capacity, and the current Arbitrum network capacity level is consistent with the Ethereum L1 capacity. This is why transaction fees seem to be high. Gas fees will initially increase, and as network usage increases, they may increase further. However, the team stated that they plan to increase the speed limit and increase network capacity over time.
Finally, like all optimistic Rollups, Arbitrum users have a 7-day withdrawal period. This is another factor that users should consider when deciding whether to transfer funds to Arbitrum, but it is worth noting that there are third-party services that solve this problem for users. For example, Hop Protocol plans to roll out support for Arbitrum to make withdrawals faster within a few days.
Now that we have understood Arbitrum, let’s take a look at how to transfer funds to the network.
The process of joining Arbitrum is no different from the process of any other chain. Users only need to add network support to the wallet, and then transfer funds through the Arbitrum Token Bridge.
Let us complete this process step by step.
1. First, enter the Arbitrum Token Bridge.
2. Next, you must add the network to your MetaMask. Click “Add/Switch to Arbitrum Network” and the system will provide information about the Arbitrum chain. Click “Approve” to connect to the network without manually entering any information. (Of course you can also enter the network details yourself).
3. Now is the time to transfer funds. Enter the amount of ETH or other tokens you want to bridge , and click “Deposit”. Then the system will prompt you for standard approval and confirmation of the transaction, for which you must pay a gas fee. Based on the current gas price, the bridging cost is about 30-35 USD (0.009 ETH).
4. You can monitor the status of the bridge transaction at the bottom of the interface. After about 10 minutes, your funds should be available for use on Arbitrum!
Opportunities on Arbitrum
Above we learned how to enter Arbitrum and the trust assumption of the Arbitrum network. Let’s take a look at some of the major agreements and revenue opportunities that have been deployed in Arbitrum.
Liquidity mining: in progress
Estimated APY: 50-75%, incentive token BAL
As a well-known decentralized exchange and asset management protocol, Balancer is the first major protocol to go online after the launch of Arbitrum. The protocol currently provides 15 different pools, which utilize customizable token weights, in which users can exchange assets and provide liquidity to earn transaction fees.
The two meaningful liquidity pools on the exchange are: w BTC /wETH/USDC (each asset has an equal weight of 1/3) and BAL/wETH (the ratio of two tokens is 60/40).
Each fund pool currently exceeds 6.2 million U.S. dollars and is motivated by BAL rewards. In addition, a 0.25% fee is charged for each transaction in the fund pool. Currently, the yield of wBTC/wETH/USDC is 55%, while the yield of BAL/wETH is 73%.
Liquidity mining: in progress
Estimated APY: 13-48%, incentive token SUSHI
SushiSwap is another important protocol deployed on Arbitrum. Sushiswap is the second largest decentralized exchange locked in volume and value on Ethereum. It currently allows Arbitrum users to trade, provide liquidity, and borrow through Kashi – while earning SUSHI income.
The latter event made SushiSwap an early hot spot for users seeking revenue. The agreement is currently using SUSHI rewards to incentivize five trading pairs, wETH/USDC, wETH/USDT, wETH/wBTC, wETH/LINK and wETH/SUSHI. Farmer miners can receive SUSHI rewards and the standard 0.25% transaction fee. The current annual rate of return of these fund pools is between 13-33%, of which the ETH/stable currency pair is the most profitable.
SushiSwap is also incentivizing Kashi, an agreement to create segregated lending pairs. Users who borrow in the USDC/wETH, USDT/wBTC, LINK/USDT and USDC/LINK markets will receive SUSHI rewards in addition to interest (if borrowing). The return rate of these pools is between 26-48%, and USDC/LINK has the highest return rate.
It should be noted that there is less liquidity on SushiSwap than Balancer: the most liquid trading pair and Kashi currency pairs wBTC/wETH and USDC/wETH hold USD 1.2 million and USD 208,000 respectively.
Liquidity mining: none
Estimated APY: Depends on transaction volume
Optimism is another promising Layer 2. Uniswap was deployed on Optimism very early, and Uniswap also deployed its V3 protocol to Arbitrum, allowing users to conduct transactions and provide liquidity as on the mainnet.
Although Uniswap does not currently provide any liquidity mining opportunities, it currently has more than 14 million US dollars in assets on Arbitrum, and its daily trading volume reaches millions.
The fund pool with the highest transaction volume since its launch is the 1% wETH/GMX fund pool (the native token of GMX, a decentralized perpetual transaction running on BSC and Arbitrum), and the two charge 0.05% and 0.30% wETH/USDC and capital pool. Although LP opportunities are relatively limited, the reduced gas cost increases accessibility for curious users trying to actively provide liquidity and manual rebalancing, which is required for V3.
With the launch of Arbitrum, the expansion of Ethereum has been in full swing. Although the Arbitrum network is not yet fully decentralized or running at full speed, users can still explore the forefront of Layer 2 with near-instant confirmation and significantly reduced gas fees.
Although many agreements have not yet been launched, there are still several outstanding projects and liquid mining opportunities for users to maximize the value of their assets and upgrade their DeFi games.
The gas fee status on the Ethereum mainnet may look bleak. But thankfully, there is a light at the end of the tunnel.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/arbitrum-guide-how-to-enter-arbitrum-what-are-the-profit-opportunities-on-it/
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