Arbitrum is an Ethereum scaling solution designed by Offchain Labs to reduce the costs and latency of decentralized applications (dApps) for users and developers. Using a variation of one of Ethereum’s popular scaling solutions, known as an “Optimistic rollup”, the Arbitrum Rollup protocol minimizes the amount of data used on-chain and supports arbitrary Ethereum Virtual Machine (EVM) smart contracts using common Ethereum tooling. Arbitrum smart contracts can be created using the Solidity programming language. These smart contracts drastically reduce transaction fees and are highly customizable without compromising on privacy and security. For those who are wondering, “what is Arbitrum?” – let’s take a closer look!

In this article, we’re going to dive deep into Arbitrum’s technology and look at various types of Ethereum scaling solutions. Also, we’ll look at the background of Arbitrum, including the development team, Offchain Labs. Moreover, we’ll explore the launch of Arbitrum One mainnet chain and the competitive advantages it boasts. 

Arbitrum is designed to facilitate the mass scaling and adoption of the second-largest blockchain in the industry. For our readers new to blockchain technology and cryptocurrency, to fully understand the value propositions of Arbitrum we strongly suggest checking out Ivan on Tech Academy. Our Blockchain & Bitcoin 101 course explains the fundamentals of this cutting-edge technology with easy-to-follow video-guided tutorials! 

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What is Arbitrum?

Arbitrum is an Ethereum scaling solution that facilitates low-cost smart contracts with high throughput in a secure and trustless manner. Furthermore, Arbitrum uses three modes. These are AnyTrust Channels, AnyTrust Sidechains, and Arbitrum Rollup modes. 

Developed by Offchain Labs, Arbitrum allows users to deploy and interact with smart contracts with minimal costs compared to using Ethereum natively. Also, Arbitrum uses the same tooling as Ethereum, without any loss of security or decentralization. Moreover, Arbitrum smart contracts can use any Ethereum-based token. Plus, anyone can be elected to validate without the need for custom tooling. 

Offchain Labs

Originating from the research department of Princeton University, Offchain Labs, Inc. is a startup committed to building innovative Ethereum scaling solutions, based in New York. Focusing on enterprise-grade applications and mass scalability, Offchain Labs makes it easy for developers to focus on the user experience and business logic of a project. Offchain Labs makes creating smart contracts on an Ethereum layer-2 architecture a seamless process for developers. Meanwhile, Offchain Labs does the heavy lifting under the hood ensuring production-level security. 

Founded in 2018 by Harry Kalodner, Steven Goldfeder, and Ed Felten, Offchain Labs has successfully raised $3.7 million in seed funding during one round in April 2019. According to G2 Stack, Offchain Labs incorporates 13 technology services and products including Google Fonts, Google Analytics, and HTML5. With funding from five major investors, Offchain Labs has most recently gained support from Coinbase Ventures and Pantera Capital. 

Ethereum Scaling Solutions

It is widely agreed that for blockchain-based applications to achieve mass adoption, they must become faster and affordable to use. As a result, Ethereum layer-2 solutions and aggregate layers have become increasingly popular. Currently, transaction fees on the second-largest blockchain are often too high for everyday users during times of network congestion. This became increasingly apparent with the rise of decentralized finance (DeFi), smart contract-based yield farming applications and decentralized exchanges (DEXs) such as Aave, Compound, Maker, and Uniswap. 

To alleviate this, Ethereum scaling solutions such as Sharding, Sidechains, Plasma, Channels, and Rollups take many of the computations required for decentralized applications (dApps) off-chain. Resultantly, dApps created using Etherum scaling solutions are often much faster, with lower transaction fees. Moreover, by executing computations off-chain, the cost to developers and users is minimized thanks to layer-2 scaling solutions.

Rollups

There are various types of rollup protocols created to scale open contracts on Ethereum, the largest smart contract-enabled blockchain. Rollups have become one of the go-to scaling solutions for smart contract-based blockchain applications. This is because they save computational resources and storage by “rolling up” several pieces of data relating to the execution of smart contracts into a single cryptographically hashed transaction. 

There are two main types of rollups. These are Optimistic rollups, and zero knowledge rollups (or, ZK-rollups as they are commonly known). ZK-rollups take computations off-chain before submitting a “validity proof” back to the chain. However, Optimistic rollups assume the validity of transactions by default. It is only in the event of a challenge to consensus that computations are run when using optimistic rollups.

Arbitrum Rollup

Arbitrum Rollup is based on the Optimistic rollup protocol. However, Arbitrum’s rollup technology is more advanced compared to other rollup chains, with very little data stored on-chain. Also, Abritrum Rollups work with all Ethereum developer tools and fully support arbitrary Ethereum Virtual Machine (EVM) smart contracts. Moreover, Arbitrum offers the same Ethereum standard frontend tooling with integrations and partnerships with The Graph, Truffle Suite, ether.js, and more!

Arbitrum is created on top of Ethereum and supports the same Remote Procedure Call (RPC) interface. The developer experience should feel incredibly similar to Ethereum. Also, Arbitrum is designed to be a seamless, faster, and more cost-efficient way of building decentralized applications (dApps). Further, this is achieved whilst maintaining the security of the Ethereum network. 

How Does Arbitrum Work?

As an Ethereum scaling solution, Arbitrum runs on top of the Ethereum blockchain. As with Ethereum, decentralized applications (dApps) built using Arbitrum are written in the Solidity programming language. This is then compiled using the open-source Arbitrum compiler. Also, any Ethereum-based tokens can be used in conjunction with Arbitrum dApps.

Mostly, Arbitrum dApps only utilize the main chain upon startup and when currency is transferred in and out of Arbitrum. A large number of interactions take place off-chain, resulting in fast turnaround and finality.

Furthermore, Arbitrum dApps retain high levels of privacy. Cryptographic hashes of the state of a dApp are published on-chain. This means that only the participants who validate the execution of a dApp are privy to the dApp’s code and storage. Furthermore, developers can select their own validators, and choose what information is shared with users. This makes for highly customizable decentralized applications (dApps) that cater to a wide range of use cases.

Arbitrum Mainnet Beta

Sticking with the true nature of blockchain supporting decentralization, the Arbitrum mainnet will be permissionless and open-source. This means anyone can create a decentralized application on Arbitrum without any gatekeepers or pay-walls. 

However, during the first few months of launch, Arbitrum is maintaining certain controls over the protocol. This is for security reasons, being able to pause and/or upgrade contracts on the system in response to any security breaches. Moreover, the team behind Arbitrum wants to ensure the complete safety of users’ funds during the initial launch period whilst people familiarize themselves with the protocol. To maintain transparency, Arbitrum is naming the launch mainnet beta, recognizing the semi-centralized controls.

Arbitrum has completed many contract audits, operating “significant security diligence” on its code. Arbitrum is targeting the end of summer 2021 to completely remove controls and facilitate true decentralization of the chain. Moreover, users may notice an increase in speed when using Arbitrum following the launch of the mainnet. During the mainnet beta phase, the chain is being operated under “conservative speed”.

Arbitrum One

Arbitrum One is the name of the mainnet chain built as a layer-2 solution on Ethereum. Although technically still in mainnet beta, Arbitrum One is Arbitrum’s Rollup flagship chain. Arbitrum One has a chainID of 0xa4b1 (decimal: 42161). In the future, Arbitrum Rollup technology may be used in conjunction with other rollup chains. The team wanted to differentiate between the name of their technology (Arbitrum) and the name of the layer-2 chain (Arbitrum One) to avoid confusion. 

During the launch of the mainnet chain, Arbitrum One was open to developers who had requested access before going live. With over 250 development projects requesting access, Arbitrum plans to open the chain to end-users once a quorum of projects have deployed live applications on the network.

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Why Use Arbitrum?

What is Arbitrum doing to attract developers to use Arbitrum instead of Ethereum to build decentralized applications? There are many reasons, from the cost of development to the security of the consensus algorithm. With AnyTrust Guarantee, Arbitrum will always execute a validator’s transaction if they are acting honestly, “even if all of the other validators are colluding to (try to) cheat”. Whereas many chains require a majority or two-thirds-honest assumptions, the AnyTrust Guarantee allows anyone who chooses to become a validator to have a guarantee of honest correct behavior. Moreover, Arbitrum offers validators the ability to stand up to applications for their rights and deserved currency and behavior expected of a platform. 

Furthermore, developers can use Arbitrum with the familiarity of Ethereum programming tools. As Arbitrum is fully compatible with the Ethereum Virtual Machine (EVM) there’s no need to use custom compilers, rewrite code, or download new tools. Arbitrum is scalable, secure, and efficient. Developers can deploy large contracts on Arbitrum going beyond the Ethereum contract size and transaction gas limits. All of this is achieved with familiar programming languages and tools developers are likely to already be using. 

AbritrumTransaction Fees

Claiming to be the most optimistic rollup in the industry, Arbitrum costs are minuscule compared to the native Ethereum gas fees, claiming to reduce fees by more than 50x.

The transaction fees are paid for in ETH, with fees covering the cost of posting calldata on Ethereum. Plus, a portion of the fees goes back into the cost of supporting the operations of the Arbitrum One chain. To use the chain, users must first use the Arbitrum bridge to transfer ETH to the native layer-2 wallet from Ethereum. 

Summary of What is Arbitrum?

Arbitrum is an innovative and developer-friendly scaling solution for Ethereum. Using novel Arbitrum Rollup technology, developers can deploy decentralized applications (dApps) with familiar tools and programming languages, at the fraction of the cost of Ethereum. Moreover, the high throughput of Arbitrum One means transactions are confirmed much faster too. 

Since the launch of the mainnet beta in May 2021, Arbitrum One has seen increased adoption with hundreds of projects building on the network. Throughout the summer, Offchain Labs, the team behind the Arbitrum development, is slowly relinquishing controls of the protocol. Offchain Labs hopes Arbitrum One will become completely decentralized and operate self-sustainably by the end of Q4 2021. 

The adoption of blockchain technology is spreading industry-wide, including real estate, healthcare, energy, and insurance – even the fashion and sports industries. If you’re not a programmer but still interested in getting involved, check out Ivan on Tech Academy! Our Blockchain Business Masterclass course is perfect if you’d like to be able to manage a blockchain-based project. Further, you can learn about real-world use cases of global corporations implementing Baseline Protocol with our Blockchain For Enterprise course! Also, check out our OriginTrail 101 course to learn about blockchain in supply chain management.  

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