$AVAX: Avalanche-Powered DEX ‘Trader Joe’ Plans To Use Ethereum Layer 2 Scaling Solution Arbitrum

Avalanche-based decentralized exchange (DEX) Trader Joe plans to deploy on Ethereum layer 2 (L2) scaling solution Arbitrum.

According to Offchain Labs, the startup developing this popular Ethereum L2 scaling solution, Arbitrum is an “optimistic rollup” that offers the following the 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.“

Arbitrum’s developers’ documentation goes on to explain what the term “optimistic rollup” means:

“Arbitrum is a rollup, which means that the inputs to the chain — the messages that are put into the inbox — are all recorded on the Ethereum chain as calldata. Because of this, everyone has the information they would need to determine the current correct state of the chain — they have the full history of the inbox, and the results are uniquely determined by the inbox history, so they can reconstruct the state of the chain based only on public information, if needed.

“This also allows anyone to be a full participant in the Arbitrum protocol, to run an Arbitrum node or participate as a validator. Nothing about the history or state of the chain is a secret.

“Arbitrum is optimistic, which means that Arbitrum advances the state of its chain by letting any party (a “validator”) post a rollup block that that party claims is correct, and then giving everyone else a chance to challenge that claim. If the challenge period (roughly a week) passes and nobody has challenged the claimed rollup block, Arbitrum confirms the rollup block as correct. If somebody challenges the claim during the challenge period, then Arbitrum uses an efficient dispute resolution protocol (detailed below) to identify which party is lying. The liar will forfeit a deposit, and the truth-teller will take part of that deposit as a reward for their efforts (some of the deposit is burned, guaranteeing that the liar is punished even if there’s some collusion going on).

“Because a party who tries to cheat will lose a deposit, attempts to cheat should be very rare, and the normal case will be a single party posting a correct rollup block, and nobody challenging it.“

Trader Joe, the largest DEX and lending service on Avalanche ($AVAX), has locked up around $95 million in tokens, and is looking to Arbitrum to target new users. On 1 December 2022, in a blog post published on Substack, the team announced that it would be “deploying the highly innovative and efficient Liquidity Book AMM onto Arbitrum One… bringing zero slippage trades and discretized liquidity provisioning to all Arbinauts.”

According to a report by CoinDesk, this will mark the first time that Trader Joe will be deployed on a separate network.

The DEX will initially be launched on the Arbitrum testnet, with the mainnet expected to launch early in 2023. The report claims Trader Joe has captured more than $2.5 billion in locked value at its peak and continues to attract “the highest transactional volumes among all Avalanche-based products.”

While Trader Joe intends to make its Liquidy Book AMM product available at the initial launch, the DEX’s native token $JOE and other DeFi products will not be available on Arbitrum .

Arbitrum, an Ethereum-based scaling product, has become an increasingly popular landing spot for investors and traders due to its low cost transactions. The report claims that weekly transactions on Arbitrum have jumped 550% since August, with the network representing roughly two-thirds of the weekly transaction volume on Ethereum.