Arbitrum Went Live – What Is It and What Does It Do?

What can be a better way of starting September than the easing announcement from Offchain Labs releasing Arbitrum to the mainnet for everyone?

Scaling and Ethereum—basically all Proof-of-Work–is not elite on this metric.

For obvious reasons.

In the early days, Ethereum, Bitcoin, and crypto were a niche industry, a preserve of the nerds. Solutions the old-timers said were to disrupt the status quo by being laundromats.

They were wrong.

In the early days, Ethereum, Bitcoin, and crypto were a niche industry, a preserve of the nerds. Solutions the old-timers said were to disrupt the status quo by being laundromats.

They were wrong.

Arbitrum is a Necessary Solution to the “Incredible Ethereum Community”

Arbitrum is a necessary innovation because Ethereum is now a global phenomenon. A force.

According to Offchain Labs, this scaling option brings “the much-needed gas relief to the incredible Ethereum community.”

From the statement, the goal of Arbitrum is to indirectly improve user experience by first lowering the barrier to entry, which means keeping fees low.

It won’t make sense to take a $5 profit yet pay $50 in Gas fees when derivatives trading in a trustless manner? Right?

To get started, Arbitrum is a Layer-2 solution relying on Optimistic Rollups with the sole purpose of scaling Ethereum and, as above, keeping Gas fees low.

This is their overarching objective.

How Arbitrum Works

By being “optimistic” it means Arbitrum will rely on validators “to act right”, believing them that all transactions will be processed truthfully.

As a rollup, all Arbitrum transactions will be bundled off-chain and regularly confirmed—published—on the mainnet. The distributed node of Ethereum validators performs the confirmation.

This way, Arbitrum would help relieve the Ethereum mainnet and tame the rising, prohibitive Gas fees once the number of projects picks up.

Their decision to rope in optimistic rollups is due to smart contract compatibility, meaning porting over from the mainnet would be relatively easy and fast, precisely what the DeFi community needs.

The History of Arbitrum, Ed Experience in the White House, and $120 Million Serie B Fund Raise

However, to better understand Arbitrum is to look back at history and its composition.

Offchain Labs is an outfit that announced its ambitious plans of scaling Ethereum back in 2018.

It was founded by Ed Felton, a Computer Science graduate from Princeton who served as the Deputy Chief Technology Officer in the White House where he was one of the senior advisors of Barack Obama and Donald Trump between 2015 and 2017.

The experience of Ed and his prior work in the top echelon of power is why Offchain Labs quickly took off, receiving investments from Coinbase Ventures, Pantera, Compound, and others.

Coinbase Ventures is a big name in the scene and their direct involvement — as a CEX operator — is a marker of quality and belief in the project’s success.

This is not forgetting that it also raised $120 million on mainnet launch in a Serie B funding round led by Lightspeed Venture Partners, of which the billionaire investor, Mark Cuban, took part.

Arbitrum Versus Optimism

The code of Arbitrum One was released in late May, and Offchain Labs granted access to over 250 developers who had requested it.

One of the biggest DeFi projects currently planning to adopt Arbitrum is Uniswap—the largest DEX in the world on Ethereum.

Even so, integration might take longer than expected because Uniswap is already testing Optimism in Alpha. Besides, not everyone agreed on this shift to Arbitrum.

Which brings us to the question: What is the difference between Arbitrum and Optimism?

Well, as mentioned earlier, both solutions rely on Optimistic Rollups where transactions are bundled off-chain for faster finality. However, this arrangement means they have to “trust” a validator lest they try to trick the system.

How the two vary is how they dispute challenges.

While Optimism risks congesting the Ethereum layer by re-executing challenges on layer-1 to check which of the parties are correct in their assertions, Arbitrum takes a different route.

Not to keep the arbitration process intensive and strenuous on Layer-1, it continuously subdivides the challenge until the disputed information is small enough to be resolved on Layer-1.1

Why Arbitrum is Special

Layer-2 is the immediate, practical scaling solution for Ethereum. There is no single perfect option unless the base layer is tuned to scale on its own.

That would mean sacrificing decentralization, which might be consequential on security, which keeps the network a multi-billion trustless juggernaut.

Arbitrum is the only solution based on Optimistic Rollups — a model that Vitalik is rallying behind. Even as developers work on resolving the Gas quagmire, efficiency is the name of the game.

This is where Arbitrum might come on top because of its challenge resolution.

Assuming validators act honestly and Arbitrum resolves challenges faster than competitors, it could emerge as a bona fide Optimistic Rollups-based Layer-2 scaling option for hundreds of DeFi protocols.

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