What challenges does Arbitrum have? Why introduce Nitro?

Since its launch last year, the L2 network Arbitrum has quickly gained huge traction because of its cheap and fast user experience. TVL (total locked value) has already exceeded billions of dollars, including Uniswap, SushiSwap, Balancer, Curve , 1inch, MakerDAO, Chainlink, Cream Finance and many other dApps have been deployed.

Arbitrum recently announced the launch of Devnet, the Nitro development network based on the Ethereum testnet. Nitro can greatly improve network throughput and reduce costs. In the future, the team will reset and optimize it several times according to the construction of Devnet, then migrate to the Arbitrum Rinkeby testnet, and finally migrate the current Arbitrum One to Nitro.

We can see that Arbitrum is still on the fast track of development, so what challenges does Arbitrum have in the future?What are the projects worth paying attention to in the ecology?

Everything starts with Optimistic Rollup.

Optimistic Rollup vs ZK Rollup

The Optimistic Rollup (OR) scaling solution is a technology designed to scale the general throughput of smart contracts on the suite Ethereum.

If developed relatively quickly, it can provide an easy solution for migrating existing dApps and services without too much sacrifice in security and scalability, which can help Eth 1.0 Adapt to growing demands.

In contrast, ZK Rollup is a more complex technology that can be used for token transfers and customized applications, but it will take longer to actually use it to implement general-purpose smart contracts , and even more research work is needed to efficiently encapsulate EVM into zero-knowledge proofs.

However, once the development of ZK Rollup is completed, all Ethereum dApps and services can now be smoothly migrated to ZK Rollup without much effort.

That’s why Arbitrum chose Optimistic Rollup instead of ZK Rollups, because Optimistic Rollup has an advantage in operating costs – people want this blockchain to have lower transaction costs and compatibility with existing tools.

The off-chain cost of building ZK Rollup proofs is very high and may require specialized hardware or massive parallelism, making the network more centralized.

Trustless and instant termination

When Arbitrum evaluates a rollup, it needs to determine whether the rollup needs to provide trustless, instant termination.In simple terms, this means that after a user submits a transaction, everyone knows the result of the transaction immediately and with certainty, and no one can modify or undo the transaction.

From an Arbitrum perspective, the best way to achieve instant finality is to separate the ordering of transactions from transaction execution.

If the execution of transactions is deterministic, then determining the order of the transactions is sufficient to determine the outcome, since the outcome is a deterministic function of the transaction order.

That is, if everyone knows the sequence of transactions, then everyone can easily determine the outcome, completing a sequence requires publishing the sequence to the Layer 1 chain with enough information to allow anyone to execute the transaction themselves so that no trust is required understand the results.

In the Optimistic Rollup system, publishing to the Layer 1 chain has the lowest cost, in fact Arbitrum usually publishes sorted transaction data to the Layer 1 chain every minute or so, providing users with fast certainty and guarantee that no one can undo their trade.

Also, Arbitrum produces a new Optimistic Rollup Result Assertion every hour or so, but since the sequence is already finalized and execution is deterministic, it doesn’t slow down finalization at all.

Challenges key to Arbitrum’s existence

Arbitrum’s security guarantees are enforced by validators, while Optimistic Rollup assumes that all transaction data is correct, but if the validator suspects fraud, the transaction can be disputed through a dispute resolution mechanism.

Therefore, Optimistic Rollup has a big challenge – if the verifier finds that there are suspicious transactions in it, the challenged transactions will be recovered during this period after the challenge is successful. Because of this, it only takes about 10 minutes to transfer funds from the Ethereum mainnet to Arbitrum, but it takes users about a week to transfer funds from Arbitrum back to the Ethereum mainnet.

From the perspective of user experience, users pay more attention to the speed of the transaction and the level of each gas fee during the transaction process. From this perspective, Arbitrum’s competitors are not only Layer 2 projects, but also high-performance Layer 1 main chains such as Solana, AVAX, and BSC. They all have the characteristics of high TPS and low handling fees, and cross-chain assets are fast, and there is no need to wait for a long time to exit.

In 2021, with the emergence of Layer 1 and Layer 2 projects, Ethereum assets will gradually flourish, and Arbitrum’s competitiveness will be difficult to maintain at a high point.

What big changes are coming with the upcoming Nitro?

Fundamental to the Arbitrum Nitro technology is a new prover that enables Arbitrum’s interactive fraud proofs on WASM code. That is, the L2 Arbitrum engine will run on WASM, and the entire system can be built and compiled using standard languages ​​and tools, replacing specially designed languages ​​and compilers.

Nitro will dramatically increase network capacity and reduce transaction costs, and Arbitrum is able to reduce these controls and significantly increase throughput. While Arbitrum today is already 90-95% cheaper than Ethereum on average, Nitro reduces costs even further.

Arbitrum Nitro is built on standard technologies such as WASM and Geth, so it is more EVM compatible and an order of magnitude faster than the original technology. When it’s ready, we’ll deploy it as a seamless upgrade to Arbitrum One.

The WebAssembly (WASM) architecture-driven version of Arbitrum will be a faster and more EVM-compatible version of Arbitrum, as existing EVM engines can run on WASM, and over time the project has grown from personal research Projects transition into production-level development work.

Ultimately when Arbitrum One migrates to Nitro it is a seamless migration, the only things users will notice are lower fees, increased capacity and an overall faster experience.

How much faster will the cost reduction, capacity increase, and overall faster experience be? The team expects L2 to execute 20 to 50 times faster and costs to drop significantly.

But Nitro is just the beginning. In the future, Arbitrum may not only play a role in leading Ethereum’s Layer 2, but may even extend Rollup to other Layer 1 projects to open up a larger pattern of public chain integration and development.

While these Ethereum-native dApps deployed on Arbitrum may represent most of the TVL value of this L2 network, many exciting new protocols and dApps are also being launched on Arbitrum.

Arbitrum Ecological Emerging Project

The three projects considered to be the most successful so far are Dopex, TreasureDAO and GMX.

Dopex

Dopex was the first major protocol to launch on Arbitrum, the two have even become alternative names for each other, Dopex was created by the anonymous TzTok-Chad, the protocol has entered the portfolio of every DeFi user, it is decentralized An options platform that enables users to trade options while maximizing liquidity and minimizing risk.

Currently, the protocol’s main product is its structured options vault, Single Staking Option Vaults (SSOVs): users can deposit assets such as ETH, DPX, rDPX CRV, BTC, BNB, etc. in a bullish or bearish vault, and collect premiums and farming Rewards, not only that, but users can also buy these options.

TreasureDAO

TreasureDAO is the first Metaverse project to build on Arbitrum, and it has a plan for it around the Bridgeworld game it is building, however, Bridgeworld is not an ordinary game, the goal is to be all the different A “bridge” between the Metaverse and NFT projects.

GMX

GMX is a decentralized perpetual contract exchange that has been launched on both Arbitrum and Avalanche, which allows users to trade ETH, BTC, LINK and UNI perpetual contracts with up to 30x leverage on a decentralized platform, Instead of using leverage through centralized exchanges like Binance or FTX to go short or long.

Although GMX has few products, the protocol has certainly become a major player in the decentralized perpetual contracts exchange market. To date, GMX has traded over $16 billion in volume and generated over $22 million in fees.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-challenges-does-arbitrum-have-why-introduce-nitro/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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