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Luniverse NOVA X Arbitrum 01 What is Arbitrum & Why ?

This series of posts is produced in collaboration with ART: Aslan Research Team, a research team within the Aslan Academy, a blockchain research organization.

As part of Luniverse NOVA’s support of the Arbitrum chain, this series of posts is designed to help you better understand Arbitrum. You don’t need to have a complex knowledge of blockchain, we’ve organized the content in a way that makes it easy to understand.

In this article, we’ll cover how Arbitrum came to be, the features of the Arbitrum Chain, its main products and technologies, the mainnet and testnet, and an overview of Arbitrum’s history and roadmap.

1-1. Background of the Birth of Arbitrum

Ethereum is currently the undisputed No. 1 layer 1 blockchain. However, as we discussed in our last Polygon article, Ethereum suffers from the Trilemma: the tradeoff between scalability, decentralization, and security. Since Ethereum is already the best at decentralization and security, scalability is its biggest problem, which is why we’re seeing a number of L2 solutions like Polygon and Arbitrum to overcome this scalability issue.

As we covered in a previous article, Polygon is a Layer 2 scaling solution that emerged to overcome Ethereum’s scalability issues. As mentioned above, the Ethereum network has high transaction fees and processing times, as well as scalability issues, which limits the variety of users and the development of decentralized applications (DApps). To solve these problems, Polygon aims to improve Ethereum’s scalability, reduce costs and latency by using Plasma technology as a foundation. 

Like Polygon, Arbitrum aims to reduce the high transaction fees and processing times of the Ethereum network. However, unlike Polygon, which utilizes plasma technology, Arbitrum aims to improve Ethereum’s scalability by using technology based on roll-ups.

Other Solution – Polygon(Plasma) | Arbitrum(Roll-up)

Arbitrum came about in the same vein as Polygon, which we discussed earlier, to solve Ethereum’s scalability problem. The difference is that Polygon solved it through plasma, and Avitrum solves it through rollups.

While Polygon PoS has achieved incredible gas savings without sacrificing Ethereum’s security, the underlying problem with Plasma is data availability, which is why we’re seeing a trend toward focusing resources on things like L2 scaling and ZK rollups to find a better solution.

Polygon: Plasma

Polygon PoS is a public chain on the Polygon network that exists as a sidechain to Ethereum, utilizing the Proof-of-Stake (PoS) consensus algorithm and Plasma to improve the performance and scalability of the Ethereum network. A more detailed description of Plasma can be found in the Plasma section of our previous article.

While Polygon PoS has achieved incredible gas savings without sacrificing Ethereum’s security, the underlying problem with Plasma is data availability, which is why we’re seeing a trend toward focusing resources on things like L2 scaling and ZK rollups to find a better solution.

Arbitrum: Roll-up

Arbitrum is another Ethereum Layer 2 scaling solution, and it’s a protocol that uses rollups.


Rollups are a way to process transactions on Layer 2 and send only the final result to Layer 1, the Ethereum mainnet, to reduce the load on the mainnet and improve throughput. There are two main types of rollups: optimal rollups and ZK rollups.

1) Optimistic Rollup

Transaction verification is performed using a proof-of-fraud approach. The data is assumed to be correct, and validators have a period of time to dispute any incorrect data they find. After the challenge period, the data is assumed to be correct and the state is finalized. This approach supports common smart contracts and has low initial implementation costs, but can incur high gas costs during the challenge and verification process.

2) ZK Rollup

Transaction validation is performed using the proof-of-validity method. The sequencer submits a zero-knowledge proof along with the transaction data to Ethereum to verify the correctness of the data. Incorrect data is rejected from the start, with no appeal period and fast status finalization. ZKRollups offer a higher level of security and lower gas costs, but can be limited in their support for complex smart contracts.

Avitrum’s rollups perform transaction validation using the fraud proof approach of optimal rollup technology. Optimal rollups assume that the data is correct, and validators have a period of time to dispute any incorrect data they find, after which the data is considered correct and the status is finalized.

Offchain Labs, the developers of Avitrum, summarize the top reasons for choosing Optimal Rollups.

  1. fulfills user-demanded properties: Optimal rollups provide the properties users want, such as safety, guaranteed progress, visibility, and fast finality, in a trustless manner.

  2. Reduces network centralization: ZK Proofs are expensive to process, and often require dedicated hardware or parallel processing to fully participate in the ZK protocol, which can increase network centralization. Optimistic rollups, on the other hand, reduce these issues.

  3. Low cost: Compared to complex ZK proofs with high off-chain costs, the cost of running the code is much lower with optimal rollups compared to computing complex cryptographic proofs. This results in a significant operational cost advantage.

See also: Offchain Labs

Like Polygon, Avitrum aims to solve Ethereum’s trilemma problem, and while Polygon utilizes plasma technology, Avitrum aims to improve Ethereum’s scalability by utilizing rollup technology. Avitrum specifically uses optimal rollups for transaction verification via fraud proofs, reducing initial implementation costs and supporting common smart contracts.

In conclusion, while these two technologies have different approaches, they both share the common goal of improving the Ethereum network by reducing its load and increasing its efficiency.

1-2. Arbitrum Features and Technology

The first permissionless Ethereum layer 2 rollup with full Ethereum smart contract functionality

Arbitrum was the first of many L2s to launch an L2 mainnet in 2020, and with its Stylus and WASM virtual machines, it offers EVM parity, faster speeds, and lower gas costs. This makes it the L2 mainnet of choice for many Ethereum developers.

In fact, as you can see in the chart, it is currently the most active Layer 2 network with a market share of 60.83%.

Arbitrum Nitro → Lower gas costs, EVM compatibility

Arbitrum Nitro is the technology stack used in Arbitrum One and Nova, and is built around four main concepts.

  1. Sequencing, Followed by Deterministic Execution : Sequencing, followed by Deterministic Execution.
    Transactions are processed using a method called Sequencing followed by Deterministic Execution. It uses a two-step strategy where transactions are first organized into a single ordered Sequence, which is then processed by a Deterministic state transition function.
  1. Geth at the Core: Using Geth as the core code (EVM compatibility)
    Nitro compiles the core code of the go-ethereum (“Geth”) Ethereum node software to support Ethereum’s data structures, formats, and virtual machines. Geth is the core code of go-ethereum, which allows Nitro to support Ethereum’s data structures, formats, and virtual machines, and ensures high compatibility with Ethereum.
  2. Separate Execution from Proving : Separate Execution from Proving (Utilizing WASM)
    Nitro introduces ‘Separate Execution from Proving’ to compile the same source code twice. The first time is the native code optimized for speed on Nitro nodes, and the second time is the WASM code optimized for portability and security, which is used for proof.
  3. Optimistic Rollup with Interactive Fraud Proofs: Optimistic Rollup with Interactive Fraud Proofs.
    Settling transactions on the layer 1 Ethereum chain. This method utilizes the Optimal Rollup protocol with interactive fraud proofs pioneered by Avitrum.

References: Avitrum official dox

Arbitrum One → The first EVM Rollup to achieve the second stage of decentralization

Arbitrum One is an L2 optimal rollup chain that implements Arbitrum’s rollup protocol. The chain serves to reduce Ethereum’s gas costs by bundling multiple transactions and publishing them to Ethereum’s L1 chain at once. It relies on an ‘Optimistic execution’ approach, which assumes that all transactions are processed correctly by default. As a result, validators who detect incorrect transactions are rewarded. In this way, it achieves both efficient transaction processing and reliability.

In addition, Arbitrum One utilizes the Arbitrum Nitro technology stack. The Nitro technology stack leverages a Geth-based architecture to enable fast, low-cost transactions while maintaining compatibility with Ethereum through calldata compression, implementation of isolated contexts, and compatibility with Ethereum L1 gas. As such, Arbitrum One is an L2 optimal rollup chain that enables Ethereum dApps to be built and run at an efficient cost.


3 Lines Summary

  • Arbitrum is the first permissionless Ethereum L2 EVM rollup scaling solution and is the most active L2 network. EVM equivalence is achieved through Stylus and WASM, and Rollup employs an Optimistic Rollup approach,
  • Arbitrum Rollup and Arbitrum AnyTrust are protocols that make Ethereum transactions faster and cheaper. DAPPs can be built using Arbitrum One and Arbitrum Nova, chains that implement these protocols respectively.
  • Improve decentralization and scalability through Arbitrum DAO and Arbitrum Orbit. DAO achieves the above objectives through the ARB token and Orbit through the introduction of the L3 concept.

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