Rationale
We propose the cross-chain deployment of Venus Finance to Arbitrum One. Arbitrum One is the leading Layer 2 most in line with Vitalik’s vision of a rollup-centric roadmap. The ecosystem has seen successful cross-chain deployment of projects such as Wombat Exchange, DODO, Gains Network, and Lyra, We look forward to the opportunity to welcome Venus Finance to its ecosystem.
Summary
Arbitrum is the leading optimist roll-up solution from a TVL perspective, number of live dApps, gas efficiency, and computational capacity with the Nitro upgrade. Arbitrum One currently has over $6B TVL, 1000+ dApp integrations, 9.7M+ unique addresses, and occupies 60%+ of the roll-up market share. As Venus Finance continues its 2023 product roadmap development, we believe that deploying on Arbitrum can offer a number of benefits.
Motivations
- Arbitrum is the leading DeFi ecosystem on Ethereum Layer 2.
Arbitrum’s DeFi ecosystem has experienced tremendous growth since its launch:
- Arbitrum native defi teams - GMX, Radiant, Vesta Finance, Dopex, Camelot
- Blue-chip Ethereum teams - Uniswap, Sushiswap, Aave, Curve, 1inch, TraderJoe
- Many smaller up-and-coming DeFi projects
Arbitrum’s DeFi ecosystem benefits from a sticky user base and liquidity leveraging its leading roll-up technology:
- ~1.1M $ETH currently resides in Arbitrum bridge Even if you include the BNB chain, Arbitrum has double the ETH Bridged for all other chains combined, which means that it’s a great choice for Venus’s new long-tail asset isolated lending product.
- Deploying on Arbitrum can have a lot of benefits
DeFi projects that have deployed on Arbitrum have experienced a number of benefits, including:
- Gas cost savings and increased computation
- Nitro upgrade to Arbitrum One went live Aug 2022 which saw increased throughput, compared to pre-Nitro at 7x higher
- Advanced call data compression, reducing the amount of data posted to L1
- Ethereum L1 gas compatibility, bringing pricing and accounting for EVM operations in line with Ethereum
- Safer retryables, eliminating the failure mode where a retryable ticket fails to get created
- Geth tracing, for even broader debugging support
- According to L2fees, the average cost to send ETH is $0.06 and the average cost to swap tokens is $0.17. Compare that to Ethereum’s $0.78 fee to send ETH and $3.88 fee to swap tokens.
- Further work is being done (EIP-4844) to lower gas costs for users later this year, so this will continue to get better for Arbitrum users!
- User base growth
- According to Nansen Pro, Arbitrum One has 2.7m unique monthly active users for the past 30 days.
- Return to the original vision, on a truly aligned Ethereum rollup
- Even though the bear market has seen declining gas costs for users, we know this won’t stay this way forever. Eventually, the bull market will return and gas costs will spike again. If Venus proactively deploys on Arbitrum in cross-chain expansion, as every other major DeFi blue chip has, the Venus community will have a future-proof system to scale as Ethereum does.
- Mature infrastructure
- Arbitrum has support from numerous Ethereum infrastructure providers including Etherscan (Arbiscan), The Graph, Chainlink, Alchemy, Truffle, Dune Analytics, and Nansen. Tangentially, Offchain Labs also has also gained momentum with support for Google Cloud on Arbitrum Nova and the sentiment towards infrastructure providers working with Arbitrum technology is on the path to becoming even stronger.
- Arbitrum also has the strongest exchange support of any Layer 2 with support from Binance, Huobi & Crypto dot com as well as native USDC support from Circle.
- Partnership support
- Offchain Labs, the team behind Arbitrum, is agnostic in being helpful and supportive of all teams in the Arbitrum ecosystem. They can be helpful with intros to teams, co-marketing and technical support to ensure that Venus has success.
- Arbitrum is aligned with Vitalik’s vision of a rollup centric Ethereum roadmap
In Vitalik’s original post on a rollup centric Ethereum roadmap, Arbitrum is exactly that long term solution that handles execution and computation on the Arbitrum blockchain & posts the data back to Ethereum for its security. In tandem, acquiring Prysmatic Labs, the team behind the leading Eth proof-of-stake client, helps establish this alignment even more as Offchain Labs provides the resources to realize this vision.
- Arbitrum Foundation Grant Support
The Arbitrum Foundation’s grant program is now live. Venus Finance has the option to submit a proposal to the Arbitrum Foundation for a milestone-based grant. Similarly, Venus can also submit a DAO proposal for additional funding source.
Specifications (for each solution)
Arbitrum is an L2 scaling solution for Ethereum, offering a unique combination of benefits:
- Trustless security: security rooted in Ethereum, with any one party able to ensure correct Layer 2 results
- Compatibility with Ethereum: able to run unmodified EVM contracts and unmodified Ethereum transactions
- Scalability: moving contracts’ computation and storage off of the main Ethereum chain, allowing much higher throughput
- Minimum cost: designed and engineered to minimize the L1 gas footprint of the system, minimizing per-transaction cost.
- Some other Layer 2 systems provide some of these features, but to our knowledge no other system offers the same combination of features at the same cost.
Technical Considerations: Arbitrum One is built on the new Nitro tech stack, which means it’s compatible with Geth and supports all the existing Ethereum tooling.
Security Considerations: In order to do co-marketing and other initiatives, it’s recommended that projects are audited and have reputable references.
Decentralization Metrics: The goal for Arbitrum One is to be fully decentralized over time. Currently Arbitrum One has nine validators with plans to expand to more and eventually make validation permissionless. Offchain Labs, the company building Arbitrum One, also has plans to build a fully decentralized sequencer, which processes transactions on the network.
Risk Analysis
Both L2Beat as well as the Arbitrum docs page offer analysis of the potential risks. Offchain Labs’ continuously reviews and tests the technology stack and also sponsors a multi-million dollar bug bounty program to incentivize any party who funds such a critical bug to disclose it responsibly.
Key Discussion Points
- Venus’s crosschain roadmap: is L2 expansion in line with Venus’s development roadmap
- Product alignment: does Arbitrum align with Venus’s 2023 product development
- Deployment resources: will the benefits of Arbitrum deployment be worth the expected resources dedicated.
