What is Arbitrum? A Deep Dive into the Leading Ethereum Layer-2 Scaling Solution

Arbitrum is a suite of Layer-2 scaling solutions designed to address the persistent challenges of congestion on the Ethereum network. By leveraging Layer-2 technology, Arbitrum inherits the security of the Ethereum Layer-1 blockchain while significantly increasing transaction throughput, reducing fees, and accelerating transaction confirmation times compared to Layer-1.

Arbitrum Website: arbitrum.io

Arbitrum offers three primary scaling solutions: Rollup (OPU), Channels, and Sidechains.

• State Channels: Require users to submit a snapshot of the Ethereum state to a multi-signature contract. This snapshot contains crucial data like address balances. Such a system facilitates free off-chain transactions with instant finality and enhanced privacy.
• Sidechains: Independent blockchains with their own consensus rules, where Ethereum transactions can be transferred in a supervised manner to alleviate the burden on the main Ethereum network.
• Rollups: Function like advanced, non-custodial sidechains, significantly expanding the throughput capacity of the Ethereum mainnet. There are four main types of rollups: Optimistic Rollups, zkRollups, Plasma, and Validium.

Understanding Arbitrum One, AnyTrust, Arbitrum Nova, and Arbitrum Nitro

Offchain Labs, the company behind Arbitrum, has several distinct product offerings: Arbitrum AnyTrust, Arbitrum Nova, Arbitrum Nitro, and Arbitrum One.

• Arbitrum One: The flagship product, often referred to simply as Arbitrum, operates on Optimistic Rollup technology and caters to the DeFi and NFT markets.
• Arbitrum Nitro: Not a separate chain, but a substantial upgrade implemented on Arbitrum One to deliver enhanced performance and lower fees for users. Nitro also incorporates the WASM virtual machine and the Geth language.
• AnyTrust: A technology designed to optimize costs and speed, built on a “minimal trust assumption.”
• Arbitrum Nova: A chain built on Offchain Labs’ AnyTrust technology. This chain targets the Social, Gaming, and other sectors requiring high transaction volume with low fees.

Further Reading: What is Arbitrum Nova?

Decoding Optimistic Rollup

Optimistic Rollup is an off-chain scaling solution for Ethereum. Transactions are executed off-chain, but the data is compressed and stored on the base layer (Ethereum) to achieve consensus and verify data integrity and availability.

Within the broader landscape of Ethereum scaling solutions, Arbitrum is categorized as follows: Ethereum Scaling Solutions => Off-chain Scaling Solutions (Layer-2) => Rollup => Optimistic Rollup => Arbitrum. Other projects in the Optimistic Rollup category include Optimism, Boba Network, Metis, and Fuel.

Further Reading: What is Rollup?

Arbitrum: Key Features and Advantages

Distinguishing Features

Arbitrum’s core differentiation lies in its approach to Fraud Proofs, the mechanism for resolving disputes about the validity of proposed Rollup blocks. Arbitrum employs a multi-round interactive protocol to break down disputes into smaller, more manageable claims, ultimately resolving them on-chain.

Advantages

• Cost-Efficiency: The multi-round rollup approach significantly reduces the costs associated with Fraud Proofs, enabling broader applicability and support for complex transactions.
• EVM Compatibility: Arbitrum boasts full compatibility with the Ethereum Virtual Machine (EVM), ensuring a seamless development experience similar to working with smart contracts on Layer-1 and compatibility with existing Ethereum tools. It can execute EVM code directly without requiring recompilation of smart contracts.
• Faster Withdrawal Times: Compared to other Rollup solutions, Arbitrum offers significantly faster withdrawal times (approximately one day for Arbitrum compared to one to two weeks for Optimism). The project is actively exploring further optimizations to reduce withdrawal times even further. Since its Mainnet launch in late May 2021, Arbitrum has become a thriving ecosystem, boasting the fourth-highest Total Value Locked (TVL) in the market as of March 2023, with prominent projects like Uniswap, GMX, Sushiswap, and Curve operating within its ecosystem.

Disadvantages

• Dispute Resolution Time: The multi-round dispute resolution process, while cost-effective, can be more time-consuming.
• Interoperability Complexity: Arbitrum’s ambition to support multiple scaling solutions (sidechains and channels) introduces potential challenges in managing the complexity of transitions between these different approaches.

Arbitrum Coin (ARB): An Overview

Key Metrics

• Token Name: Arbitrum
• Ticker: ARB
• Blockchain: Arbitrum
• Token Contract: 0x912CE59144191C1204E64559FE8253a0e49E6548
• Token Type: Utility, Governance
• Total Supply: 10,000,000,000 ARB
• Circulating Supply: Updating…

Use Cases

• Governance token for the Arbitrum DAO
• Supporting ecosystem development

Token Allocation

• DAO Treasury: 42.78%
• Team & Advisors: 26.94%
• Investors: 17.53%
• Airdrop: 11.62%
• DAOs on Arbitrum: 1.13%

Token Release Schedule

• DAO Treasury: Determined by holder voting.
• Team & Advisors: Four-year vesting schedule with a one-year lock-up and three years of linear vesting.
• Investors: Four-year vesting schedule with a one-year lock-up and three years of linear vesting.
• Airdrop: Unlocked at block 16890400 (approximately March 23, 2023).
• DAOs on Arbitrum: Unlocked at block 16890400. High demand during the retroactive token claim often leads to network congestion and high fees.

Token Sale

Offchain Labs conducted three funding rounds, allocating a total of 1,753,000,000 ARB (17.53% of the total supply) to investors.

Purchasing and Storing ARB

Where to Buy

• Centralized Exchanges (CEXs): Several CEXs support ARB trading, deposits, and withdrawals.

• Decentralized Exchanges (DEXs): ARB can be traded on Uniswap and SushiSwap using the contract address: 0x912CE59144191C1204E64559FE8253a0e49E6548.

Wallets for Storing ARB

ARB can be stored in any wallet compatible with the Arbitrum network, including Coin98 Super App, Metamask, and Trust Wallet.

Arbitrum: History, Development, and Team

Milestones

• 2018: Offchain Labs founded.
• October 14, 2020: Arbitrum One testnet launched.
• May 27, 2021: Uniswap supports Arbitrum One.
• August 13, 2021: Chainlink supports Arbitrum One.
• August 30, 2021: Arbitrum collaborates with Etherscan to launch Arbiscan.
• September 1, 2021: Arbitrum One Mainnet launch.
• September 23, 2021: 1Inch supports Arbitrum One.
• February 3, 2022: AnyTrust Chains (later AnyTrust technology and Arbitrum Nova) announced.
• March 17, 2022: Aave v3 supports Arbitrum One.
• April 12, 2022: Arbitrum Odyssey program announced.
• June 25, 2022: Norway utilizes Arbitrum for unlisted company access.
• June 29, 2022: Arbitrum Odyssey paused due to overload.
• July 12, 2022: Arbitrum Nova announced.
• August 9, 2022: Arbitrum Nova launched.
• August 16, 2022: Andrew Saunders joins as CMO.
• August 31, 2022: Arbitrum One upgraded to Arbitrum Nitro.
• September 20, 2022: 400 ETH bounty awarded for bug discovery.
• September 20, 2022: OpenSea supports Arbitrum One.
• October 12, 2022: Offchain Labs acquires Prysmatic Labs.
• October 12, 2022: Offchain Labs acquires Prylabs.
• November 16, 2022: Decentralization plans announced.
• December 1, 2022: Trader Joe expands to Arbitrum.
• January 9, 2023: OpenSea supports Arbitrum One.

Team

• Ed Felten (Co-founder & Chief Scientist): On leave from Princeton University. Former Deputy U.S. Chief Technology Officer.
• Steven Goldfeder (Co-founder & CEO): PhD from Princeton University. Co-author of “Bitcoin and Cryptocurrency Technologies.”
• Harry Kalodner (Co-founder & CTO): PhD candidate at Princeton University. Researcher in cryptocurrency economics and anonymity.

Investors and Partners

Investors and Funding Rounds

Offchain Labs has raised $143.7 million across three rounds, achieving a valuation of $1.2 billion.

Partners

Arbitrum’s partners include numerous projects within its Layer-2 ecosystem, such as Uniswap, SushiSwap, GMX, AAVE, and Curve. Similar projects in the Optimistic Rollup space include Optimism, Boba Network, and Metis. Other Layer-2 solutions for Ethereum include ZkSync, StarkWare, and Polygon.