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Uncovering the potential of Arbitrum Nova
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Key Takeaways
12 min read
  • Arbitrum Nova and Arbitrum One share the same codebase. The only distinction between them is whether they post call data to Ethereum or a data availability committee (DAC). By using a DAC, Nova avoids most of the costs associated with a rollup thus providing a more cost-effective solution for its users.
  • Despite a significant increase in TVL on Nova during the period of Mar 25 to Apr 12 by 259%, the trading volume on Nova's primary DEXs, including Sushiswap and Arbswap, have decreased substantially. However, the number of daily transactions and active users on Nova has continued to grow steadily since the Arbitrum airdrop, which is unlike the case of Arbitrum One.
  • Ethereum's upcoming EIP 4844 upgrade is expected to significantly reduce the cost of posting transaction data to Ethereum, which could directly impact the attractiveness of using Nova as a cost-saving solution compared to Arbitrum One and other L2 solutions as the fee differences may be negligible.
  • Nova has unique advantages over other high-throughput networks like Solana, including its immunity to gas spikes due to not publishing transaction data on Ethereum. While other networks may sacrifice decentralization for speed, Nova's approach using a DAC may offer a more balanced solution that allows it to stand out in the market.
  • While Arbitrum One and other L2 solutions have lowered transaction costs to around 10-20 cents on average, this may not be low enough for applications targeting users in emerging markets with different price points. Perhaps this is where Nova may find its product-market fit.

Introduction

Arbitrum Nova was released on August 10, 2022, with the primary goal of reducing transaction fees and supporting DApps that demand high transaction volumes with minimal expenses. Although existing Layer 2 solutions like Arbitrum One appear to have reasonable fees, some blockchain sectors, such as gaming, necessitate even lower transaction costs to remain practical for users. This is because these sectors usually generate large amounts of transactions, resulting in substantial fees over time.

Arbitrum Nova vs Arbitrum One

Although Arbitrum developed the Nova chain, it is distinct from Arbitrum One as it utilizes a new L2 network solution called AnyTrust Technology. Nova's unique design, which leverages an off-chain...