What is Arbitrum?

Arbitrum is an Ethereum Layer 2 solution based on the use of Optimistic Rollup, which allows to improve the scalability and speed of Ethereum transactions.

Arbitrum or Arbitrum One is an Ethereum layer 2 solution which uses Optimistic Rollup technology to enhance the capabilities of smart contracts, improving their speed and scalability, without jeopardizing the security and privacy of the network.

Since the implementation of The Merge, Ethereum users and developers have focused on improving scalability through Layer 2 solutions.

This technology is one of the biggest challenges for developers, but also one of the main assets of the blockchain for compete with traditional payment networks.

This is where Arbitrum shines, which could increase the number of transactions per second of Ethereum, without lose security or centralize the network.

In fact, Arbitrum is one of the most widely used Layer 2s of Ethereum, with a total value locked (TVL) of over $16.000 billion.

Who is behind Arbitrum?

Arbitrum is developed by offchain labs, which announced the launch of the mainnet, Arbitrum One, on August 31, 2021.

The company has received trust (in the form of investments) from companies like Coinbase Ventures, Compound, and Blocknation. 

In addition, the main DeFi protocols such as Aave, Balancer, Band Protocol, Curve or Uniswap they are taking advantage of Arbitrum's infrastructure to improve their performance and lower their fees.

Arbitrum, an Ethereum layer 2 based on Optimistic Rollups

Arbitrum is an Ethereum Layer 2 solution that is based on Optimistic Rollups focused on improving network scalability.

Specifically, it focuses on optimizing smart contracts for increase network speed and scalability, while adding new features related to privacy.

It allows to address some of the main problems of Ethereum smart contracts such as:

• Bad efficiency.
• High execution costs.

Both cause the network to become congested when traffic increases, which hurts the Ethereum user experience.

To solve these two problems, Arbitrum uses a system known as “backlog of transactions” to record batches of transactions sent on the main Ethereum chain and run them in one sidechain or sidechain, which is cheaper and scalable, but guaranteeing the security and results of the mainnet.

Optimistic Rollups: how does Arbitrum work?

As we have explained, everything that Arbitrum does is possible thanks to Optimistic Rollups, which accumulate transactions in a layer 2 and send them as a single transaction to the main layer.

What it does is “roll up” thousands of transactions that are sent to the main Ethereum layer as a single transaction. Thus, You only pay for one transaction and its cost is divided among the thousands of transactions that make up the rollup. Clever, isn't it?

In this way, most of the computational capacity necessary to carry out these transactions falls on Layer 2, decongesting Ethereum.

The term Optimistic it is due to the fact that any validator can publish a rollup block and confirm the validity of other blocks.

It is optimistic because it guarantees that the code will execute correctly, as long as the validators are honest and work in good faith.

Basically, it is a type of position: “Innocent until proven guilty”. In other words, the nodes "assume" that the activity follows the rules and that the transactions are reliable.

However, once processed, the validators have 7 days to “put on trial” any blocks suspected of containing malicious or false transactions.

If the block is incorrect or if the challenge is shown to be unjustified, the participation of the validator who has lied is confiscated, guaranteed that the validators will always act in good faith.

How do Arbitrum nodes work?

Arbitrum has two types of nodes:

• validator nodes that participate in the observation of the state of the chain.
• full nodes that help add transactions to layer 1 of Ethereum.

Arbitrum Virtual Machine

The platform has its own virtual machine, which is called Arbitrum Virtual Machine. 

In this Arbitrum's own smart contract execution environment, which exists in a layer above the EthBridge, the set of smart contracts that interact with the Arbitrum chain.

To run on the AVM, Ethereum smart contracts are automatically translated. Therefore, developers can replicate Ethereum DApps and launch us on Arbitrum for more efficient use of network resources.

Because the two blockchains are compatible at the code and crypto level, the process is virtually transparent, making it easier for developers to work with and easier for users to access.

What makes Arbitrum different from other Layers 2?

Layer 2 solutions have become one of the main options to improve the scalability of Ethereum. 

Therefore, when choosing one to work on, it is worth asking yourself what makes it different from the others:

• Low rates: Arbitrum not only improves processing speed, but also reduces transaction fees, thanks to the efficiency of its rollups.
• EVM Compatibility: Arbitrum is considered one of the most EVM compatible rollups. It is compatible at the bytecode level and works with the Ethereum languages ​​(Solidity and Vyper), facilitating the development of functionalities.
• Developer tools: To facilitate the creation of new solutions and DApps on top of Arbitrum, the team has developed extensive documentation and allows the use of existing tools for Ethereum.

Arbitrum was launched in 2021 as a ideal solution for Ethereum congestion, allowing DApps to enjoy faster and cheaper transactions.

Some of the big names in DeFi, such as UniSwap or Curve, already use it, which shows that its use has benefits for the blockchain.

Any Trust Chains, improving the security of Arbitrum

To improve security and scalability in Arbitrum, Any Trust Chains were introduced.

Arbitrum's Any Trust chains do not have the same guarantees of decentralization or lack of trust as Optimistic Rollups, although they remain similar in several ways.

While in Rollup, all data is published on the main Ethereum layer, in AnyTrust, data is managed off-chain.

In the event that a transaction is put on trial, the AnyTrust chain returns to “summary mode”. 

Unlike the Optimistic Rollup, in AnyTrust lThe nodes are grouped by committees and, at least 2 of them, must be honest.

Let's look at this in a little more detail.

These chains work with committees of nodes, with a minimal assumption about how many of these nodes are honest. For example, there may be a committee of 20 nodes of which it is assumed that at least two of them are trustworthy.

Compared to other Byzantine fail-safe blockchains, which require at least ⅔ of the nodes to be honest, the requirement is reduced from 14 to 2, thanks to the “back to accumulation” function, built on Ethereum.

By keeping the data off-chain the system has much lower fees. This is especially beneficial for those applications that require high transaction throughput and do not need the full decentralization that “transaction stacking” offers.

Arbitrum Nova

Arbitrum Nova is another layer 2 network, created by Arbitrum, focused on games and social applications, as it offers much higher speed and much lower transaction fees.

Specifically, Arbitrum Nova is focused on projects with large volumes of transactions and who need safe and low-cost solutions.

How are the two chains different? The main chain, known as Arbitrum One, is based on Optimistic Rollup technology, while Arbitrum Nova is built on the AnyTrust.

While Arbitrum One sends all transactions to Ethereum, Nova does use an “availability committee”, in this way, the information only passes to the main chain if the committee fails in its work.

Bibliography and sources

• https://www.alchemy.com/dapps/arbitrum
• https://www.blockchain-council.org/ethereum/arbitrum-bridge/
• https://medium.com/offchainlabs/introducing-anytrust-chains-cheaper-faster-l2-chains-with-minimal-trust-assumptions-
• https://developer.arbitrum.io/intro/
• https://medium.com/offchainlabs/introducing-nova-arbitrum-anytrust-mainnet-is-open-for-developers