Introduction: A Layer 2 Solution for Ethereum
Arbitrum is a Layer 2 solution for Ethereum, designed to significantly increase the speed and reduce the cost of transactions. It achieves this by moving most of the computational work off the Ethereum mainnet (Layer 1) and onto a secondary chain (Layer 2). This allows for faster transaction processing and lower fees, while still maintaining the security and decentralization benefits of the Ethereum network.
How Arbitrum Works
Layer 2 Scaling
Arbitrum’s Layer 2 scaling solution is based on a technology called Optimistic Rollup. This technology allows for the execution of smart contracts off-chain, while still maintaining the security of the Ethereum mainnet. The Optimistic Rollup technique involves executing transactions off-chain and posting a summary of the transaction data (a “rollup”) to the Ethereum mainnet. This rollup can be challenged by any network participant if they believe it to be incorrect.
The lifecycle of an Arbitrum transaction begins with a client creating a signed transaction. This transaction is then received by the Sequencer, an entity responsible for transaction ordering. The Sequencer can receive a transaction either directly from a client or from the Ethereum mainnet via the Delayed Inbox. Once the Sequencer receives a transaction, it orders it in its off-chain Inbox and executes it using the Arbitrum Nitro Virtual Machine (VM).
The Sequencer then posts a batch of Layer 2 transactions, including the client’s transaction, onto the Ethereum mainnet. This posting is done every few minutes under normal conditions. Once the Sequencer posts a batch, its transactions’ ordering is entirely determined by the Ethereum mainnet, and the Sequencer has no further say in the transaction’s lifecycle.
An active validator then runs the Arbitrum VM over the inputs in the Inbox and makes an on-chain assertion about the chain’s latest state, i.e., a rollup block or “RBlock”. This RBlock is then confirmed on the Ethereum mainnet, and the Outbox root on the Ethereum mainnet gets updated.
Arbitrum Rollup and Arbitrum AnyTrust
Arbitrum Rollup is an Optimistic Rollup protocol that is trustless and permissionless. All chain data is required to be posted on Layer 1, ensuring the availability of this data directly from the security properties of Ethereum itself. This allows any party to participate in validating the chain and ensuring its safety.
Arbitrum AnyTrust, on the other hand, introduces a trust assumption in exchange for lower fees. Data availability is managed by a Data Availability Committee (DAC), a fixed, permissioned set of entities. This model assumes that at least a certain number of members of the committee are honest.
Benefits of Arbitrum
Arbitrum offers several benefits for Ethereum users and developers. These include:
- Scalability: By moving most of the computational work off the Ethereum mainnet, Arbitrum can process transactions much faster and at a lower cost.
- Compatibility: Arbitrum is fully compatible with Ethereum, meaning that developers can use the same tools and languages they are already familiar with.
- Security: Despite moving transactions off-chain, Arbitrum maintains the security of the Ethereum mainnet. This is due to the Optimistic Rollup technique, which allows any network participant to challenge a rollup if they believe it to be incorrect.
- Decentralization: Arbitrum Rollup is trustless and permissionless, allowing any party to participate in validating the chain.