Author | Ben Giove

Translation |

Editor | Iris Dong

Dear Bankless community, the gas fee on the Ethereum mainnet is very high now.

The above are the current fees for trading on Uniswap.

Anyone with $5k or less pays >1% portfolio fees to use DeFi.

Living in Manhattan is too expensive. And I don't expect Manhattan to suddenly become cheaper - in fact, I expect the economic density of mainnet transactions to continue to increase (e.g. higher cost + higher transaction value).

But now this situation is pricing users and sending them to a more centralized ecosystem.I don't blame them - no one should have to pay a large portfolio for token exchange.

DeFi needs to be accessible to everyone, not just the crypto rich.

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Fees are now reduced by 50% to 95% compared to mainnet. Fees will continue to decrease as L2 usage increases. (data from L2Fees.info)

Last week marked the launch of Arbitrum, a promising Layer 2 scaling solution built on optimistic rollups (ORU).

Like other layer 2 rollups, Arbitrum inherits the security guarantees of Ethereum.This makes it as secure as the base layer.

Arbitrum has come, but the training wheels are still there. Fees are lower than Ethereum, but will increase with usage (be aware of this). Eventually testing will be done and Arbitrum will become fully decentralized, just not yet.

Now Arbitrum and Optimism, then EVM zk-rollups. Then eventually Ethereum data sharding will massively increase the throughput of all Layer 2. 🚀

Why?

Why?

Because it doesn't sacrifice decentralization.

There are no shortcuts.

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- RSA

Image credit: Logan Craig

Image credit: Logan Craig

We all feel the pressure. Gas fees have skyrocketed to all-time highs amid increased market activity and the NFT frenzy, making Ethereum inaccessible to all but the wealthiest users.

Source: The Block

Source: The Block

Thankfully, change is already on the way.

Although it is called"Summer of L2"Might be a bit late, but with the launch of Arbitrum, the scalability people were looking forward to has arrived.A true L2, inheriting the security of Ethereum, and complemented by lightning-fast transaction speeds, this scaling is much needed to ease L1 congestion and reduce end-user fees in order to make Ethereum more widely accepted.

Despite launching less than two weeks ago, Arbitrum is already starting to see significant traction: $96 million in value is already locked on the network. Moreover, we have begun to get a glimpse of the alluring potential of the second layer, because even at artificially reduced capacity,image description

Source: l2fees.info

Want to experience the performance of Ethereum scalability for yourself?

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Trust assumptions and other details

Before we understand the process of transferring funds to Arbitrum and earning a yield, it is important to understand the trust assumptions users make when using the network in its current state.

While Arbitrum intends to be fully decentralized, the team now has a great deal of control over the network. This is not dissimilar to the approach taken by other ethereum scaling solutions such as Polygon and Optimism, which each have their own unique set of safeguards after their respective launches.

For example, the Arbitrum team can modify many key contracts within the system through a proxy contract, which is controlled by a private key (it is not clear who owns this key and how it is managed).

The contracts belonging to the proxy authority include the Token bridge from Ethereum, the sequencer contract (entity of batch transactions), the rollup contract of the main network, and some other contracts. Although it should be noted thatThis safeguard is meant to ensure the stability of the network in its early days, but it does represent a major centralization vehicle where one entity has control over the network, including the ability to shut it down.(It's worth mentioning that the team has made it clear that they can halt network activity in the event of a technical or security issue). )

In addition to these centralized carriers, the team also set up the so-called"speed limit". This acts as an upper bound on network capacity, which is currently at a level that brings network capacity in line with Ethereum L1. This is why transaction fees appear high on the surface. Gas fees will initially rise and may rise further as network usage increases. However, the team also said they plan to increase the speed limit and increase network capacity over time.

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Migrate to Arbitrum

Now that we understand the internals of Arbitrum, let's take a look at how funds are migrated onto the network.

The process of onboarding to Arbitrum is no different from other chains. Users simply need to add support for the network in their wallets and then transfer funds through the Arbitrum Token bridge.

Let's take a step-by-step look at the process.

First, navigate to the Arbitrum Token Bridge.

Next, you'll add the network to your MetaMask. click"Add/Switch to Arbitrum Network", you will be prompted for information about the chain. click"approve"Connect to the network without manually entering any information. (If for any reason you want to enter the details of the network yourself, you can use this guide). )

deposit"deposit". You will then be prompted for the standard approval and confirmation transaction, for which you will need to pay the gas fee. At current gas prices, the cost of crossing the bridge is about $30-35 (0.009 ETH).

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Opportunities on Arbitrum

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Balancer

🧑🌾 Yield Farming: Yes

💰Estimated APY: 50-75% APR in BAL

Balancer, a well-known decentralized exchange and asset management project, is the first major protocol to go live after the launch of Arbitrum. The protocol currently provides fifteen different pools. With customizable Token weights, users can exchange assets and provide liquidity to earn transaction fees.

The two pools of meaningful liquidity in the exchange are wBTC/wETH/USDC, each asset has an equal 1/3 weight, and BAL/wETH, which account for 60/40 between the two Tokens.

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SushiSwap

🧑🌾 Yield Farming: Yes

💰Estimated APY: 13-48% APR for SUSHI

SushiSwap is another leading protocol deployed on Arbitrum. As the second largest decentralized exchange on Ethereum by volume and value locked, Sushiswap currently allows its Arbitrum users to trade, passively provide liquidity, and borrow and lend via Kashi — all while earning yield in SUSHI.

The latter activity made SushiSwap an early hotspot for yield-seeking users. The protocol is currently incentivizing five pairs with SUSHI rewards, wETH/USDC, wETH/USDT, wETH/wBTC, wETH/LINK, and wETH/SUSHI, and farmers can earn these rewards alongside the swap’s standard 0.25% transaction fee. These pools currently have an APR between 13-33%, with the ETH/stablecoin pair being the most profitable.

SushiSwap is also incentivizing Kashi, a protocol for creating independent lending pairs. Users who borrow or lend on the USDC/wETH, USDT/wBTC, LINK/USDT, and USDC/LINK markets will receive SUSHI rewards in addition to interest (if lending). The returns on these farms range from 26-48%, with USDC/LINK being the top end of the range.

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Uniswap

🧑🌾 Yield Farming: No

💰Estimated APY: Depends on transaction volume

As the forerunner of Optimism, another promising second layer, Uniswap has also deployed its V3 protocol to Arbitrum, allowing users to trade and provide liquidity just like on the mainnet.

While it doesn’t currently offer any yield farming opportunities, the decentralized exchange currently holds over $14 million in value while also facilitating millions of transactions per day.

Summarize

Summarize

Ethereum scaling is in full swing with the launch of Arbitrum.While the network is not yet fully decentralized or operating at full capacity, users can still explore Layer 2 boundaries with near-instant confirmations and drastically reduced gas costs.

While many protocols are yet to launch, there are several standout projects and yield farming opportunities for users to maximize the value of their assets and up their DeFi game.

The state of gas fees may look bleak. But thankfully, there is a light at the end of the tunnel.

Original link: https://newsletter.banklesshq.com/p/the-essential-guide-to-arbitrum