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Passing the backlink will do the work, shifting the domain will come with the lot's of work read more here - <https://developers.google.com/search/docs/advanced/crawling/site-move-with-url-changes>

There are two ways you can use <https://smalldev.tools> to improve <https://arcana.network>'s SEO:
1. Backlinks: This will somewhat help to boost your DA but I see both of the websites have similar DA. Do not go overboard with this.
2. Referral traffic: Put in some CTA or Lead magnet content(Like product/feature page,  template or tools) on your best performing smalldev.tools webpages to drive relevant traffic to arcana.network. But again dont go overboard, else it will look spammy.  

The above answers are spot on, you could also create a backlink in another website that talks about both these websites as well. Google will find the backlink more relevant in that case

I think the DA and ranking of a website will improve by time if you focus on the quality content by helping your audiences. It will beba long term game, not a short term game. In the process of link exchange, it won't be a great idea.

yes but creating a backlink helps. you can generate 1 or 2 in a year