The integration can bring significant network effects to Arbitrum
Layer-2 scaling solution, Arbitrum was integrated with Binance crypto exchange on Friday, as per an announcement.
A user can now deposit crypto assets on its network. Currently, the exchange does not support withdrawals on Arbitrum. Binance has not announced when withdrawals will be enabled.
Benefits of Arbitrum for Users
Arbitrum makes Ethereum transactions quick and cheap. It uses Optimistic Rollups to scale Ethereum’s network which results in the cost efficiency and speed.
Another benefit is that now a user can directly use Arbitrum from the world’s largest Centralized Crypto Exchange, Binance.
Earlier, a user had to use the Ethereum mainnet to transfer the funds to Arbitrum using a bridge.
Once the withdrawals are allowed, the journey from fiat to Arbitrum and vice-versa will be shortened.
Due to its fast and cost-effective network, many Decentralized Finance (DeFi) projects host their network on Arbitrum. So, Binance users will now be able to save on costs and interact with many DeFi projects.
What is Optimistic Rollup?
Optimistic Rollups are Ethereum scaling solutions that use the security of the Ethereum consensus mechanism. They move transactions off layer-1. After the completion of transactions, they are batched and only the necessary part of the transaction is posted on the layer-1 chain.
Thereby, the data is compressed and posted back on the Ethereum chain.
Optimistic Rollups use fraud proofs and assume the transactions are correct. In case of a malicious act by a party, the fraud proofs are verified and the malicious actor is penalized.
Ethereum is the Godfather of all the DeFi projects present in the market.
This is also the reason for its network’s high gas fees or transaction fees. Due to the high degree of use, the network congests, resulting in high gas fees. The fees is so high that it disincentivises new users from using it.
That’s why scalability solutions such as Layer-2, Side-Chains, etc. arrived on the scene.
Binance’s adoption of Arbitrum will open the floodgates of adoption by retail investors. This may boost its ecosystem of DeFi projects and bring a significant amount of network effects to the platform.
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