After XAI, what other projects in the Arbitrum Orbit ecosystem are worth watching?
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After XAI, what other projects in the Arbitrum Orbit ecosystem are worth watching?
One of the distinguishing features of Arbitrum Orbit compared to other L2 competitors is "elastic block time," meaning Orbit produces blocks elastically based on demand.
Navigating Web3 tides with focused insightsAuthor: FRANCESCO
Translation: TechFlow
This article discusses the successful implementation of Layer 2 in Ethereum's scaling roadmap, with a particular focus on the competition between Arbitrum and Optimism. It explores Arbitrum’s Orbit program, different technological and business trade-offs, and how Arbitrum attracts projects and developers through its technology stack. Additionally, it analyzes the differing models of Arbitrum and Optimism, along with Orbit's unique features, offering readers an in-depth understanding of this domain.
Introduction
Layer 2 has solidified its role as the most successful implementation within Ethereum's scaling roadmap.
Among them, Arbitrum and Optimism have been fiercely competing to attract projects and talent onto their L2 platforms—a rivalry often referred to as the "L2 War."
Initially, this was a battle to establish L2 infrastructure and gather initial protocols and user bases.
Now that they are thriving, the next phase of this virtual war is determining who will attract more projects to build on their respective technology stacks.
To achieve this, they have adopted different approaches.
Arbitrum focuses more on refining its technology stack and decentralized governance, while Optimism takes a leaner approach summarized as “emphasizing growth.” Everything comes down to trade-offs.
Ultimately, as more protocols adopt the OP Stack, these differing trade-offs become apparent, leading many to believe Arbitrum is losing this race.
However, this isn’t a sprint—it’s a marathon.
Evolution of Orbit
If we analyze the data, Arbitrum remains the L2 with the highest TVL—over $2.5 billion—and hosts one of the most complex and composable DeFi ecosystems, with over 500 protocols.
Orbit is part of Arbitrum’s expansion strategy, enabling other projects to build upon its technology stack.
As part of this initiative, over 50 Arbitrum Orbit chains are already in development, with one Arbitrum founder predicting more than 150 Orbit chains by year-end.
What is Arbitrum Orbit?
Orbit is Arbitrum’s technology stack, allowing anyone to permissionlessly launch their own chain atop Arbitrum One or Nova. This is equivalent to OP Bedrock, where protocols can build their own chains.
For a more detailed introduction, click here: How to create your L3 on Arbitrum Orbit.
Arbitrum Orbit allows any developer to easily and permissionlessly launch their own L3 ecosystem on top of Arbitrum’s chains.
What can developers build on Orbit?
When building on Orbit, projects can decide whether to build an L2 or L3 on top of Orbit, and whether to choose Arbitrum One or Nova.
Depending on the necessary trade-offs between decentralization and performance, on Arbitrum Orbit you can choose to build:
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Arbitrum Rollup
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Arbitrum Anytrust
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L3s tailored for specific use cases
By creating their Orbit chain, projects can customize throughput, privacy, gas tokens, governance, and more.
Why should projects build on Orbit?
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Gas price reliability: dedicated throughput and traffic isolation
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Arbitrum Stylus: benefit from EVM compatibility
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Arbitrum Nitro: leverage upgrades from Arbitrum Nitro codebase
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Independent roadmap for Arbitrum
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Customizable permissions: choose who can read and deploy data and smart contracts (permissionless/permissioned)
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Choice of gas token: ETH, ARB, or project-specific tokens
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Account abstraction / transaction fee subsidization
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Customizable protocol settlement / execution / governance
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Low cost for launching prototypes
Differences from Optimism
In contrast to the OP model, Arbitrum has chosen to develop a licensed model.
When building a new Orbit chain, projects are fully authorized to adapt the Arbitrum codebase according to their own needs. These licenses are:
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Permanent: no one can take away your software license
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Recursive: an Orbit chain itself can host other chains governed under the same license
While developers can always permissionlessly deploy any L3, launching a new L2 chain directly on Ethereum using the Orbit stack requires either a custom license from Offchain Labs or approval from the Arbitrum DAO, which may grant such licenses at its discretion.
Almost like a trademark, Arbitrum prioritizes slower processes, ensuring checks and balances are in place to maintain alignment between Arbitrum and the L2s hosted via Orbit, whereas Optimism consistently favors faster methods to promote its tech stack.
What makes Orbit special?
One distinguishing feature of Arbitrum Orbit compared to other L2 competitors is “elastic block time,” meaning Orbit produces blocks elastically based on demand.
If there is a surge in transactions, an Orbit chain can produce up to four blocks per second; however, if the chain runs without transactions, no blocks are produced.
Why does this matter?
Producing empty blocks is costly, especially when settling on Ethereum. Newly launched chains might face serious issues due to transaction volume.
Orbit’s elastic block time saves money on L1 block settlements because no empty blocks are created, eliminating wasted expenditure.
Cumulatively, elastic block time enhances capital efficiency across the Arbitrum Orbit network. Here's a comparison example with an OP Stack chain that generated 7.8 million blocks despite only processing 577,000 transactions.
Orbit chains also benefit from Arbitrum Stylus, enabling them to write smart contracts in popular languages like “Rust, C, and C++” while maintaining full EVM compatibility.
Are developers already building on Orbit?
Multiple projects are already using Orbit to build their L3s:
@Cometh: a development platform for Web3 games and dApps
@SyndrHQ: an institutional-grade options and futures exchange
@polychainmon: a multi-chain NFT collection and gaming ecosystem
@meliorafnd: an L3 designed for fixed-income and points-based applications
@SankoGameCorp: an L3 designed for Web3 gaming
@oursong: a platform built around music copyright protection and creation
@DeriProtocol: a decentralized derivatives trading platform
@HookProtocol: an NFT derivatives trading platform
@Superpositionso: an L3 that incentivizes user engagement through rewards
@hytopiagg: a Web3 game built on its own L2
Most of these projects revolve around gaming, with others focusing on DeFi, music, and novel streaming incentive models.
With more Orbit chains set to launch, Arbitrum’s technology stack will fully demonstrate its potential at the infrastructure layer by 2024.
It’s worth remembering that Arbitrum is a first-stage rollup, while Optimism is still at stage zero, as it lacks real-time fraud proofs.
The benefits of a thriving network of Orbit chains will also extend to ARB.
Although most L3s may use their native tokens as gas, the ARB token could also benefit when Orbit chains adopt it as their gas token.
Orbit possesses all the elements needed for success:
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Flexible tech stack: all development stems from the Nitro codebase while maintaining full independence
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Arbitrum’s network effects
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Strong fiscal incentives driving growth
The Arbitrum DAO runs multiple grant programs for the ecosystem, so it’s reasonable to expect fiscal measures to stimulate builders on Orbit—such as gas subsidies. Are you ready to launch a series of new chains on Orbit?
Undeniably, Arbitrum has lagged behind Optimism in terms of tech stack adoption. With new Orbit chains rolling out, will we see a shift in 2024?
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