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ARB - Is Arbitrum's Token a Good Investment?

Pedro Veiga, Kassandra DAO

Amid Ethereum's scalability and cost challenges, the rise of Layer 2 networks has paved the way for efficient solutions. Arbitrum, a prominent Layer 2 blockchain, addresses these concerns by enabling rapid smart contract execution and reducing transaction expenses. Explore Arbitrum's potential within our investment pools or consider creating your own to engage with this innovative addition.


The Ethereum blockchain users suffer from a couple of issues, namely high gas fees and low transaction processing speeds (tps) when compared to alternative networks. These issues have led to a growing divergence of users from Ethereum, as they seek out more efficient blockchain options.

Despite its costliness, Ethereum remains renowned as the most secure smart contract blockchain available. This security factor remains a compelling reason that both developers and users continue to opt for Ethereum, despite its associated expenses.

In response to the imperative of maintaining Ethereum's security while enhancing scalability, a range of layer 2 networks have emerged in recent years, introducing a fresh narrative to the blockchain industry.

Within the scope of this article, we will delve into the Arbitrum blockchain, the upcoming addition to the Kassandra platform. Post-launch, you will have the opportunity to explore asset pools containing native Arbitrum assets, marking a significant development.

What is Arbitrum?

Arbitrum stands as a Layer 2 scalability solution tailored for the Ethereum blockchain. The project empowers a rapid execution of smart contract transactions while simultaneously curtailing the expenses incurred during transactions.

Layer 2 solutions are designed to amplify the capacity of the foundational Layer 1 blockchain. They accomplish this by offloading intricate computational tasks, such as processing transactions and storing data, to a secondary chain. In essence, the Layer 2 blockchain handles the execution of smart contracts, whereas the Layer 1 blockchain serves as the repository for data storage.

In the context of Ethereum, Arbitrum plays a pivotal role in managing blockchain transaction processing and batching, thereby alleviating congestion and cost concerns associated with the primary network.

How does Arbitrum Work?

Arbitrum employs a Layer 2 strategy that utilizes blockchain rollups to achieve efficient handling of transactions. Within this methodology, rollups implement a two-tier architecture that initially processes transactions outside the blockchain before eventually confirming them within the blockchain. This approach offers a notable advantage: the blockchain no longer needs to individually validate distinct transactions, as it can promptly validate a consolidated batch of transactions that have been "rolled up."

This approach to scalability stands in contrast to other Layer 2 approaches like sidechains, mainly due to the fact that rollups typically derive their security measures from the primary blockchain.

Arbitrum's scaling technique is founded on a specific category of rollups referred to as "optimistic rollups."


Understanding Optimistic Rollups

Optimistic rollups function similarly to other roll-up strategies by processing transactions off-chain, but they incorporate compression techniques during the bundling of transactions. This compression aids in diminishing gas fees and optimizing the utilization of block space. The key lies in storing only essential data on the Ethereum blockchain. Consequently, the implementation of optimistic rollups empowers the main blockchain to accommodate an increased volume of transactions while necessitating reduced space.

Optimistic rollups operate under an optimistic presumption that the majority of transactions are valid. They solely engage in resource-intensive verification processes when disputes arise. Participants within the network can initiate disputes concerning flawed blocks within a designated timeframe. In the presence of faulty blocks, the validator who sanctioned them stands to forfeit their collateral. Nevertheless, this intricate fraud detection procedure also results in a longer processing duration for withdrawals from the chain, spanning over a week.

ARB Tokenomics

The ARB Token launched in 2023 after a huge airdrop event. The token by itself does not present many use cases as of now, since it is not used to pay for transaction fees or to stake them.

As of now, the ARB token is only used to participate in governance decisions.

The maximum supply of ARB is 10 billion tokens, and the distribution is the following:


Source: Arbitrum Docs, Kassandra Finance


*In March 2023, 12.75% of the token supply was distributed to the community through an airdrop event.

Final Thoughts

We're really excited that Arbitrum is now part of our platform! If you're interested in getting involved with the token or checking our featured tokenized crypto portfolio Arbitrum ecosystem pool, or you can easily browse through the available pools on our platform or even create your own!

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