Arbitrum: The Ultimate Ethereum Scaling Solution for Faster, Cheaper, and More Scalable Transactions

Arbitrum: Everything You Need to Know

Ethereum is the most popular platform for decentralized applications (dApps), smart contracts, and decentralized finance (DeFi). However, it also faces some challenges such as high transaction fees, low throughput, and network congestion. To overcome these limitations, many developers and users are looking for alternative solutions that can offer faster, cheaper, and more scalable transactions without compromising on security and compatibility. One of these solutions is Arbitrum, a layer-two (L2) scaling solution for Ethereum.

What is Arbitrum?

Arbitrum is an Ethereum L2 scaling solution that uses optimistic rollups to achieve its goal of improving speed, scalability, and cost-efficiency on Ethereum. Optimistic rollups are a technique that moves most of the computation and storage load off-chain, while still relying on the security and finality of the main chain. Arbitrum benefits from the security and compatibility of Ethereum, as it inherits its smart contract functionality, developer tools, and ecosystem. Another benefit is the higher throughput and lower fees compared to Ethereum, as it reduces the amount of data that needs to be stored and verified on-chain.

Arbitrum’s native token is called ARB and is used for governance. ARB holders can vote on proposals that affect the features, protocol upgrades, funds allocation, and election of a Security Council. The Security Council is a group of trusted entities that can intervene in case of disputes or attacks on the network. Arbitrum also has its own layer-three (L3) solution called Orbit, which allows users to launch their own customizable chains that settle to Arbitrum One or Nova. Arbitrum One is the mainnet deployment of Arbitrum Rollup, while Arbitrum Nova is the upcoming launch of Arbitrum AnyTrust.

How does Arbitrum work?

Arbitrum works by creating off-chain execution environments called Arbitrum chains, where transactions are processed by validators. Validators are nodes that run the Arbitrum software and execute transactions according to the rules of the protocol. Validators can be anyone who stakes ARB tokens or pays a fee to join an existing validator set. Validators are responsible for maintaining the state of the Arbitrum chain, submitting proofs of correct execution to the main chain, and resolving any disputes that may arise.

Arbitrum uses a fraud-proof system to ensure the security and correctness of off-chain transactions. Fraud proofs are cryptographic proofs that can be submitted by anyone to challenge the validity of a transaction or a state update. If a fraud proof is submitted, the main chain will verify it and penalize the dishonest validator by slashing their stake or fee. This creates an incentive for validators to behave honestly and deter any malicious attempts to cheat or censor transactions.

Arbitrum also uses a data availability scheme to ensure that all transactions are publicly accessible and verifiable. Data availability means that anyone can download and reconstruct the state of an Arbitrum chain from the data published on the main chain. This prevents validators from withholding or tampering with data, as they would be caught by fraud proofs or challenged by other validators.

Who is the team behind Arbitrum?

Arbitrum is developed by Offchain Labs, a New York-based development company founded in 2018 by former Princeton University researchers with years of experience in computer science, cryptography, and blockchain. The founders are:

Ed Felten: He is a computer science professor at Princeton and served as President Obama’s Deputy CTO. He is the co-founder and Chief Scientist of Offchain Labs.

Steven Goldfeder: He is a computer scientist and entrepreneur who received his Ph.D. from Princeton. He is also the co-founder and CEO of Offchain Labs.

Harry Kalodner: He is a computer scientist and Ph.D. candidate at Princeton. He is also the co-founder and CTO of Offchain Labs.

In 2021, Offchain Labs announced that it raised $120 million in its latest Series B funding led by Lightspeed Venture Partners, valuing it at $1.2 billion. Other prominent investors include Polychain Capital, Pantera Capital, Mark Cuban, and more.

What are the use cases of Arbitrum?

Arbitrum aims to provide a scalable infrastructure for Ethereum-based dApps across various domains such as DeFi, gaming, social media, art, and more. Some of the notable projects that have integrated or announced their plans to integrate with Arbitrum are:

Uniswap: The leading decentralized exchange (DEX) on Ethereum has launched its alpha version on Arbitrum One in May 2021.

Aave: The leading decentralized lending platform on Ethereum has deployed its protocol on Arbitrum One in June 2021.

Chainlink: The leading decentralized oracle network on Ethereum has integrated with Arbitrum One in June 2021.

Reddit: The popular social media platform has partnered with Arbitrum to scale its Community Points system on Ethereum in June 2021.

Prohibition: A digital art platform that uses generative adversarial networks (GANs) to create unique and rare artworks has migrated to Arbitrum One in July 2021.

Xai: A gaming platform that uses blockchain technology to create immersive and interactive experiences has announced its plans to launch on Arbitrum Orbit in 2023.

These are just some of the examples of the growing adoption and interest in Arbitrum as a scaling solution for Ethereum. Arbitrum aims to become the preferred choice for developers and users who want to enjoy the benefits of Ethereum without compromising on performance, cost, or security.