Arbitrum (ARB)

Arbitrum is a generalized optimistic-rollup that settles to Ethereum. The Layer 2 scaling solution provides users with lightning-fast semi-confirmations and cheaper transaction fees, while inheriting the security of Ethereum L1.

Basics

• Based in:
• Started in / Announced on: 2015
• Mainnet release: candidate is out (25-3-2021). Scheduled to launch for devs on 28-5-2021. Did so on 30-5-2021. Mainnet for everyone was launched on 1-9-2021.
• Offchain's premiere product.

History

• From Deribit Insights (8-7-2021):

"On a frigid Princeton morning six and a half years ago, a group of undergraduates working with Professor Ed Felten delivered a presentation on the project they had signed up to build: a blockchain-based arbitration system. The objective was to circumvent some of the anticipated scaling challenges of smart contract platforms, and the plan was to design a blockchain that relied on a system of challenges and dispute resolution to lighten the computational workload for traditional miners. “Arbitrum,” as the system was called, would have suffered the same fate as most other promising academic computer science projects, if not for two ambitious PhD students, Steven Goldfeder and Harry Kalodner, who approached Felten a few years later with the idea of building out a robust layer 2 solution based upon the initial concept. Soon thereafter, Felten, Goldfeder, and Kalodner co-founded Offchain Labs and have since shepherded Arbitrum from abstract idea to concrete reality."

Audits & Exploits

• Bug bounty program can be found [insert here].

Bugs/Exploits

• From Week in Ethereum (13-8-2022):

"Yield missing function override post mortem, $206k was at risk on Arbitrum"

• From Week in Ethereum (15-1-2022):

"Arbitrum Sequencer downtime due to hardware failure, backup had software upgrade in progress, Arbitrum still in beta, plans to decentralize Sequencer."

• From their blog (15-9-2021):

"Beginning at 10:14 AM Eastern today (September 14, 2021) and continuing for approximately 45 minutes, the Arbitrum Sequencer was offline. Funds were never at risk, but the submission of new transactions stopped during the downtime."

Governance

Admin Keys

• Partnered up with Chainlink (10-12-2021). From EthHub:

"Arbitrum will be using Chainlink’s FSS technology for minimizing MEV on Arbitrum One and decentralizing the sequencer."

• From the Dev Mainnet announcement (29-5-2021):

"We’re currently targeting the end of the summer to phase out these controls."

Technology

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].
• Built on: Ethereum

• Programming language used: "Compatible with EVM at bytecode, so your Solidity contracts and tools work." (29-3-2021).

Transaction Details

• Capacity (TPS):
• Latency:

How it works

• Arbitrum One is the mainnet Ethereum L2 chain built using the Arbitrum technology.

• From the Dev Mainnet announcement (29-5-2021):

"The majority of the fees collected on Arbitrum are used to pay for posting calldata on Ethereum (so they end up going to the Ethereum miners), and there are also costs to operate the chain and the supporting infrastructure. ETH is the native asset on Arbitrum, and fees will be paid in ETH on L2. For more info on fees, see here. In order to use the chain, users will first have to use the Arbitrum bridge to transfer ETH from Ethereum to their L2 wallet."

Upgrades

Arbitrum Nitro

• Arbitrum One upgrades to Nitro August 31, its whitepaper got released on 27-8-2022.
• Partnered up with Chainlink (10-12-2021). From EthHub:

"Arbitrum will be using Chainlink’s FSS technology for minimizing MEV on Arbitrum One and decentralizing the sequencer."

• From EthHub (19-10-2021):

"Arbitrum Nitro is next iteration of Arbitrum, which the team has been working on for months. It’s built on standard technologies like WASM and Geth, so it’s more EVM-compatible, an order-of-magnitude faster than the current tech, and adds another 0. When it’s ready it’ll be deployed as a seamless upgrade to Arbitrum One."

Scaling

• From EthHub (26-1-2021):

"Rollup Plan. Arbitrum plans to support a community chain that uses just ETH for transaction fees (no new token)."

Interoperability

• From EthHub (10-12-2021):

"Polygon and Wanchain are launching a decentralized L2 to L2 cross-chain bridge that connects Arbitrum and Polygon’s PoS chain."

Other Details

Pipelining

• From Deribit Insights (8-7-2021):

"Pipelining allows network validators to continue processing transactions for final approval even if a previously-processed transaction is under dispute. What this creates is a “pipeline” of recently-processed but yet-to-be-finalized transactions, instead of a bottleneck that prevents the sequencer from processing transactions and network parties from submitting challenges.

Pipelining is possible because anyone monitoring the network can know immediately whether a dispute is valid or invalid even before the dispute resolution process is finished. In essence, validators can operate as if the disputed transaction is already finalized and continue building the chain (i.e. processing transactions) on whichever outcome, or “branch,” is correct. This process, blunts the force of any would-be spamming attack.

Oracle Method

• UMA optimistic oracle went live (5-2-2022).
• DIA oracles are live (14-10-2021).
• Chainlink oracles are now live on the Arbitrum Rollup testnet (16-3-2021). Live on mainnet (12-8-2021).

Their Other Projects

AnyTrust

• From Week in Ethereum (5-3-2022):

"Ultra low cost transactions, hash of data posted on mainnet, operated by committee, assumes minimal members honest as can fallback to rollup.  Similar trust assumptions to Validium." AnyTrust chains will operate alongside Arbitrum One.

Roadmap

• Can be found [Insert link here].

Usage

• From The Defiant (8-9-2022):

"Activity on Arbitrum quadrupled after its Nitro upgrade, with daily transactions hitting all-time highs during consecutive days this week. According to data from Arbiscan, there were 319,000 transactions executed on the blockchain network on Sep 1, the day after Arbitrum’s Nitro upgrade went live."

• From Delphi Digital (14-9-2021):

"On Friday, ~$170M worth of ETH had been bridged onto Arbitrum. That changed over the weekend though, as yield farms for speculative tokens like ArbiNyan and Carbon.fi (which is already down 99%) managed to spur FOMO and cause bridge volume to spike. Arbinyan’s ETH pool currently has over $1.45B of ETH. Meanwhile, Arbitrum’s ETH bridge custodies over ~$2b worth of ETH. It’s worth noting that a single whale wallet was responsible for ~168K ETH bridged. Arbitrum grew >$2b in bridge TVL with only ~500 unique depositors."

Projects that use or built on it

• From Bitcoin.com (2-9-2021):

"Arbitrum’s technology is leveraged by defi projects like Aave, Balancer, Band Protocol, Coinbase Wallet, Chainlink, Curve, DAI stablecoins, Etherscan, Dodo, Metamask, Shapeshift, Sushiswap, Uniswap, and many more."

• Anyswap; is now live on Arbitrum enabling cross-chain swaps between other layer 1 and layer 2 chains (6-2-2021).
• Bancor; has deployed a testnet (11-2-2021).
• CREAM; will launch on it (16-6-2021).
• DXdao, from their blog (29-1-2021):

"Plans to launch Swapr, Omen and a DXdao base on Arbitrum, a Layer 2 scaling solution that uses an optimistic rollup."

• The Graph; went live (8-6-2021).
• MCDEX. From Paradigm (8-12-2020):

"MCDEX Launched on Arbitrum Rollup Testnet: The MCDEX perpetual swap platform platform is now able to be used on Arbitrum’s layer 2 rollup technology (testnet only for now)."

• Reddit; using it for its community points (7-2021). Will also provide the infra for all other community points (10-8-2022).

How it works

• Uniswap had a vote and launched on Arbitrum.

Competition

• Other L2 solutions like Optimism.
• From Deribit Insights (8-7-2021):

"The simplest way to describe the difference is that Optimism’s dispute resolution relies more heavily on the Ethereum Virtual Machine (EVM) than Arbitrum’s. When someone submits a challenge on Optimism, the entire transaction in question is run through the EVM. By contrast, Arbitrum uses an offchain dispute resolution process to whittle down the dispute to a single step within a transaction. The protocol then sends this single step assertion, as opposed to the entire transaction, to the EVM for final verification. Conceptually, Optimism’s dispute resolution process is thus considerably simpler than Arbitrum’s. Optimism’s approach to dispute resolution—i.e. running entire transactions through the EVM—is not just conceptually simpler: it’s quicker too. There aren’t “multiple rounds” of back and forth, as there are in Arbitrum’s process. In fact, for this reason, Optimism’s rollups are often called “single round” whereas Arbitrum’s are “multi round.” Practically speaking, this means that in the case of a disputed transaction, final confirmation on Ethereum is delayed in Arbitrum’s case longer than it is in Optimism’s case.

On the flip side, the advantage of Arbitrum’s dispute resolution is that it is cheaper in terms of onchain (i.e. on Ethereum) transaction costs. The bite-sized chunk of code that the EVM eventually processes after the completion of the back-and-forth dispute resolution process requires much less gas (in most cases) than it does to re-process the entire transaction onchain. Arbitrum should be more gas efficient than Optimism—and therefore cheaper for users—not only in the rare case of a dispute, but also in the predominant “happy” case."

• From this thread (22-5-2021):

"The biggest distinction is what happens when two parties disagree on the state after executing a tx ie. implementation of the fraud proof (FP) mechanism. Optimism uses single round fraud proofs. This means that L1 executes the whole L2 transaction on-chain to verify the state root. This makes FPs instant which is nice. But there are some problems too:

• you need to supervise tx execution hence need for OVM (aka rewriting EVM to avoid sideeffects) • L2 tx gas is bound by L1 block gas limit • you need on-chain state roots after each TX - costs more :( • source of potential security issues

Arbitrum features multi-round fraud proofs. You can dumb it down to doing a binary search between two parties to find the first opcode of a whole block that they disagree on. Once found only this particular opcode is executed on-chain. It has some nice properties: • it requires posting on-chain just one state proof for a whole bunch of txs, • L1 block gas limit doesn't matter since L2 txs will never entirely execute on L1 Drawbacks: • It requires EVM -> AVM translation (thankfully it's automatic) • it's slow - in the worst case it takes up to 2 weeks to finish FP. Realistically it's 1 week. • requires original claimer to be online and cooperative

Optimism's approach has one *HUGE* drawback. Imagine that there is a hardfork and Ethereum consensus rules change. One of the opcodes is removed/repriced or modified in some other way. Suddenly re-executing past tx on L1 will result in a different final state. Arbitrum fully controls AVM specs and doesn't have this problem.

Optimism requires a special solidity compiler to generate OVM bytecode. So, unfortunately, it works only with Solidity and only with particular versions of solidity. On the other hand, their L2 node is just modified geth which is great for compatibility.

Arbitrum on the surface is fully compatible with EVM/JSON RPC spec but their node is a custom implementation. It does automatic EVM→ AVM transpilation to support fraud proofs. Thanks to this low-level translation, it supports any EVM language (vyper, YUL+ etc).

Optimism uses weth but Arbtirum has native eth support. Optimism launches with wallet abstraction built in too. Arbitrum launches with a unified permissionless bridge to bridge any tokens to L2 (it deploys generic ERC20 as a L2 counterpart). Optimism prefers dedicated bridges but of course, deploying "unibridge" on optimism is possible as well."

Team, Funding, Partners

Team

• Full team can be found [here].

• Ed Felten; former Obama deputy chief technology officer and founder of Offchain Labs.
• Steven Goldfeder
• Harry Kalodner

Funding

• Raised $3.7M in a funding round led by Pantera Capital.
• Raised $120M (1-9-2021). Offchain Labs investors included Lightspeed Venture Partners, Mark Cuban, Polychain Capital, Ribbit Capital, Redpoint Ventures, Pantera Capital, and Alameda Research.

Partners

• Reddit selected Arbitrum Nova as its partner after it bested other Ethereum L2s in a competition titled “The Great Reddit Scaling Bake-Off.”
• Partnered up with Chainlink (10-12-2021). From EthHub:

"Arbitrum will be using Chainlink’s FSS technology for minimizing MEV on Arbitrum One and decentralizing the sequencer."

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