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How To Do Your Arbitrum Taxes

Discover how the Arbitrum network is solving Ethereum's scalability issues and how to file arbitrum taxes from this guide.

Discover how the Arbitrum network is solving Ethereum's scalability issues and how to file Arbitrum taxes from this guide.

The world of blockchain technology is constantly evolving, and as it does, new challenges arise that require innovative solutions. One of the most pressing issues that have emerged is scalability. The current generation of blockchain networks, such as Ethereum, has struggled to keep up with the increasing demands of the market. 

This is where Arbitrum comes in. By providing a more efficient and cost-effective way to process transactions, Arbitrum aims to address the scalability concerns that have long plagued the blockchain space. In this article, we will explore the workings of Arbitrum, and how it plans to change the face of blockchain as we know it.

What is Arbitrum?

Arbitrum is a layer 2 scaling solution for Ethereum with a focus on addressing the blockchain's scalability issues by significantly reducing transaction times and costs. It is a platform that provides off-chain scaling using a technology called Optimistic Rollups, which enables high-speed transaction processing by bundling them together before committing them to the Ethereum blockchain. 

This approach helps to overcome the network's current limitations and provides a more efficient way to handle transactions while ensuring the security of the underlying blockchain. Arbitrum has quickly gained attention and popularity due to its potential to enable mainstream adoption of Ethereum by providing a seamless, cost-effective, and secure user experience.

Connecting your Arbitrum Address to ZenLedger For Your Crypto Tax Forms

  • To import your Arbitrum transactions into ZenLedger for your crypto tax forms, all we need is your public address.
  • Select the proper blockchain or wallet from the dropdown list.
  • Paste your address into the address field in ZenLedger.
  • Select if the wallet is based in the USA or not.
  • Then hit the ADD COIN button.

Now, let’s see how Arbitrum works.

How Does Arbitrum Work?

Arbitrum is designed to solve the problem of high transaction fees and slow transaction times on the Ethereum network. It works by creating a sidechain that runs parallel to the Ethereum network, allowing for faster and cheaper transactions.

Arbitrum uses a technology called Optimistic Rollups, which is a type of Layer 2 scaling solution that bundles multiple transactions into a single batch, known as a rollup. These rollups are then submitted to the Ethereum mainnet as a single transaction, reducing the amount of data that needs to be stored on the mainnet and therefore reducing transaction fees.

One of the key advantages of Arbitrum is that it is fully compatible with Ethereum, meaning that Ethereum developers can easily port their applications over to the Arbitrum network without needing to make significant changes to their code. Additionally, Arbitrum is decentralized and trustless, meaning that users can interact with the network without having to rely on a central authority.

After looking at how does Artbitrum works? Let’s look at what makes it unique. 

What Makes Arbitrum Network Unique?

Arbitrum is unique in the sense that it uses roll-up technology, which is an off-chain scaling solution that allows for a high throughput of transactions while still maintaining the security and decentralization of the underlying blockchain. Unlike other rollup solutions, Arbitrum uses a unique optimistic rollup design that allows for faster transaction confirmations without sacrificing security. This is achieved through the use of fraud proofs, which allow the system to efficiently detect and penalize any malicious behavior. 

High EVM compatibility

With Arbitrum's compatibility with the EVM at the bytecode level, developers do not need to get familiar with a new language before building on Arbitrum. The team has produced comprehensive developer documentation and made it easy to get started using existing tooling for Ethereum. Additionally, Arbitrum minimizes transaction fees while providing sufficient incentives for validators thanks to its extremely efficient roll-up technology.

Developer Friendly

The developers of Arbitrum have made it their priority to ensure that building on their layer 2 solution is hassle-free. To this end, they have created extensive developer documentation for Arbitrum and have made it possible for developers to start using existing Ethereum tooling without the need to download any specific plugins or compilers like Hardhat or Truffle. This means that developers can quickly and easily get started with Arbitrum and begin building Ethereum-compatible smart contracts with minimal effort.

Low Fees

Arbitrum is not only developed to enhance Ethereum's transactional throughput, but it also reduces transaction fees considerably. This is due to its highly efficient roll-up technology, which enables Arbitrum to decrease fees to a small fraction of what they are on Ethereum while still ensuring sufficient incentives for validators.

Arbitrum Update

Offchain Labs, the developer behind the Arbitrum ecosystem, has announced an airdrop of $ARB, a new token designed to govern the two Arbitrum blockchains. The airdrop is scheduled for March 23, 2023, and will be distributed for free to users of both Arbitrum One, the larger of the two blockchains, and Arbitrum Nova, which is specifically designed for Web3 games and social media applications.

The $ARB token will play a key role in governing the Arbitrum ecosystem, with holders able to participate in key decision-making processes. Arbitrum crypto will also be used to incentivize validators and arbitrators responsible for confirming transactions and settling disputes on the network.


Arbitrum is a promising layer 2 scaling solution that offers developers an easy-to-use platform for building highly efficient and scalable Ethereum-compatible smart contracts. Arbitrum stands out among the many layer 2 solutions that try to solve Ethereum's problems. It has high EVM compatibility, good developer tools, and low fees.

Disclaimer: This material has been prepared for informational purposes only and is not intended to provide tax, legal, or financial advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

FAQs - Arbitrum

1) Is Arbitrum based on Ethereum?

Yes, Arbitrum is based on Ethereum and is compatible with the Ethereum Virtual Machine (EVM). It is a layer 2 scaling solution that aims to improve the efficiency and scalability of the Ethereum network, while also reducing transaction fees. By leveraging rollup technology, Arbitrum is able to process a large number of transactions off-chain, before settling the final state on the Ethereum blockchain, thereby reducing the load on the main chain.

2) Is Arbitrum Decentralised?

Yes, Arbitrum is a decentralized layer 2 scaling solution built on Ethereum. It is designed to provide a trustless, secure, and scalable environment for smart contract execution while retaining the decentralization and security guarantees of the Ethereum network.

3) Can I buy ETH on Arbitrum?

Arbitrum is not a platform for buying or selling cryptocurrencies, including Ethereum (ETH). It is a layer 2 scaling solution for Ethereum that aims to increase the network's throughput and reduce transaction fees.

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