Arbitrum WETH (WETH)

Use Case

Arbitrum WETH is a wrapped version of Ether (ETH) on the Arbitrum network. It is used to make ETH compatible with DeFi smart contracts on Arbitrum by converting ETH into an ERC-20 token. This allows ETH to be used in decentralized exchanges, lending platforms, and other DeFi applications on Arbitrum.

Compatibility

Arbitrum WETH is backed 1:1 by ETH locked in the Arbitrum bridge protocol on the Ethereum chain. This ensures that 1 Arbitrum WETH always equals 1 ETH, maintaining value parity while enabling faster and cheaper transactions on the Arbitrum Layer 2 network.

Bridging and Transactions

Users can bridge ETH from Ethereum mainnet to Arbitrum, where it becomes Arbitrum WETH. This wrapped token can then be used for trading, liquidity provision, and other DeFi activities with lower fees and faster speeds compared to Ethereum mainnet.

Trading and Liquidity

Arbitrum WETH is actively traded on decentralized exchanges like Uniswap V3 on Arbitrum, with high trading volumes and liquidity. It serves as a key asset for trading pairs and liquidity pools within the Arbitrum ecosystem.

Inflation and Supply

Arbitrum WETH has an uncapped supply but includes inflation control or burn mechanisms to manage token supply effectively.

Pros of Arbitrum WETH

• Compatibility: Arbitrum WETH is fully compatible with Ethereum smart contracts, making it easy for developers to use existing Ethereum tools and dApps without changes.
• Scalability: It benefits from Arbitrum’s Layer 2 scaling solution, which allows faster and cheaper transactions compared to Ethereum mainnet.
• Backed 1:1: Each Arbitrum WETH token is backed 1:1 by real ETH locked in the Arbitrum bridge, ensuring its value is tied to actual Ether.
• Large Market and Liquidity: It is a large-cap asset with active trading on decentralized exchanges like Uniswap V3 on Arbitrum, providing good liquidity.
• Inflation Control: Although it has an uncapped supply, there are mechanisms in place to control inflation or burn tokens.

Cons of Arbitrum WETH

• Bridge Risks: Using the Arbitrum bridge to move ETH to WETH involves some risks related to the bridge protocol.
• Price Lag: The price of Arbitrum WETH may slightly deviate from ETH due to delays between decentralized exchanges on Arbitrum and Ethereum mainnet.
• Withdrawal Delay: Moving assets back from Arbitrum Layer 2 to Ethereum Layer 1 can involve a waiting period (e.g., 7 days).
• Centralization Concerns: Arbitrum’s current setup involves some permissioned actors, which may affect decentralization.
• Market Performance: It can underperform compared to other cryptocurrencies in the Arbitrum ecosystem or the broader market at times.

Founders of Arbitrum WETH

The founders of Arbitrum WETH are the same as those of Arbitrum, developed by Offchain Labs. The key founders are Ed Felten, Steven Goldfeder, and Harry Kalodner. They met at Princeton University and started working on Arbitrum technology as a project. Ed Felten was formerly the Deputy U.S. Chief Technology Officer and a Princeton professor. Steven Goldfeder is the CEO of Offchain Labs, and Harry Kalodner is the CTO. Together, they created Arbitrum as a Layer-2 scaling solution for Ethereum.

Investors in Arbitrum WETH

Arbitrum WETH is backed by ETH locked in the Arbitrum bridge protocol on the Ethereum chain. The main investors are linked to the Arbitrum ecosystem, which includes:

• Offchain Labs: The developer team behind Arbitrum.
• Venture Capital Firms: Notably Lightspeed Venture Partners, Polychain Capital, and Pantera Capital.
• Individual Investors: Including well-known figures like Mark Cuban.

These investors support the Arbitrum network and its native tokens, including Arbitrum WETH, which is a wrapped version of ETH used within the Arbitrum Layer-2 scaling solution.

Halal Status of Arbitrum WETH

• General Compliance: Arbitrum is a Layer 2 scaling solution for Ethereum that focuses on improving transaction speed and reducing costs. It has been reviewed by Islamic scholars and is considered to have clear and ethical objectives aligned with Shariah principles.
• Scholarly Review: Multiple sources confirm that Arbitrum and its tokens, including governance tokens like ARB, have been examined and found to be halal due to their utility and the nature of their operations.
• Halal Criteria: Arbitrum avoids impermissible activities such as interest (riba), gambling, or involvement in haram industries. It is used to facilitate blockchain scalability and efficiency, which are legitimate and beneficial goals.
• Conclusion: Yes, Arbitrum WETH is halal because it operates within the framework of Shariah-compliant principles and has been certified as such by Islamic finance experts.