Arbitrum Orbit chains can now use select ERC-20 tokens for transaction fees

Arbitrum ARB -3.84% Orbit, which allows developers to build Layer 2 and Layer 3 blockchains using Ethereum scaling network Arbitrum's technology, has added support for custom gas tokens or tokens used to pay for blockchain transaction fees.

The development now allows Orbit blockchains to use select ERC-20 tokens (that meet the technical criteria) for handling gas or transaction fees on their networks, Arbitrum said Thursday. Until recently, Orbit chains could only use ether as the gas token.

Having the option of using ERC-20 tokens as gas tokens will allow Orbit chains to create utility for their own tokens and grow their ecosystem. "For example, a game might want to have an in-game economic model but may still wish to build on top of Arbitrum and Ethereum underneath the hood," David Dennis, product marketing lead at Offchain Labs, the main developer of Arbitrum, told The Block.

Arbitrum Orbit chains 

Xai Gaming, for instance, will immediately leverage the custom gas tokens feature. Xai first collaborated with Arbitrum last June to develop an Orbit chain and host the web3 game publisher Ex Populus's games. The Ex Populus team has experience from gaming companies such as Pixar, Ubisoft, and Activision Blizzard.

"By having a custom gas token, the Xai protocol can pay for gas on behalf of users with the gas subsidy contract. This greatly reduces friction for the end user," Soban "Soby" Saqib, co-founder of Ex Populus, told The Block. "We strongly believe that web3 gaming hasn't caught on because of the friction for traditional users."

"Furthermore, we incentivize sentry nodes to secure the network with the XAI token. This allows us to solve the 'verifiers dilemma' that occurs in distributed systems. All of the above is enabled by Orbit's custom gas tokens," Saqib added.

Other blockchain projects that will immediately leverage the custom gas tokens feature are Caldera and Celestia, Arbitrum said.

Orbit and ecosystem growth

Arbitrum Orbit was launched in March 2023 to attract more developers to the Arbitrum ecosystem. Orbit chains can be built on Arbitrum One and Arbitrum Nova — the two Layer 2 networks of Arbitrum. As for the custom gas tokens feature, it will only be supported on Orbit AnyTrust chains. Arbitrum offers rollup and AnyTrust technologies for building Orbit chains. "Arbitrum Nova is a type of AnyTrust chain, but not all chains using AnyTrust technology are Nova," Dennis said.

Arbitrum One is the largest Ethereum Layer 2 network, with the total value locked in its smart contracts currently standing at about $2.5 billion, according to DeFiLlama data. Arbitrum's native ARB token also hit an all-time high of $2.04 yesterday and is currently trading at about $1.88. Arbitrum recently granted about $40 million worth of ARB tokens to 29 projects to grow its ecosystem further.

(Updates to say that Arbitrum Orbit also facilitates the launch of Layer 2 chains).