One of the popular decentralized blockchain platforms to date is Ethereum. This one platform is so complex that it enables the development and execution of decentralized applications (dApps) and smart contracts.
However, despite having many advantages, Ethereum still faces one major problem: scalability. This includes how quickly and efficiently new blocks can be added to the blockchain.
To address scalability issues on the Ethereum network, Arbitrum is a promising second-layer (Layer 2) solution.
Arbitrum, developed by Offchain Labs, is a protocol designed to increase the performance and efficiency of the Ethereum network by moving most transactions to the second layer.
So, to better understand what arbitral is, its development and history, how it works, features, advantages and disadvantages, and risks, see the following review.
What is Arbitration?
As mentioned above, Arbitrum is a Layer 2 protocol and solution for the Ethereum network that increases the scalability and efficiency of transactions.
Arbitrum, as a Layer 2 solution, works by moving most of the transactions and data processing from the main Ethereum network to the second layer, which is faster and more cost-effective.
In this regard, Arbitrum enables users and developers to run decentralized applications (dApps) and smart contracts at the second layer with higher speeds and minimal transaction fees.
Arbitrum uses a “rollup” approach, in which transactions are collected and checked by a group of trusted validators.
Once validated, the results are compressed into a single transaction and broadcast to the main Ethereum network as a verified “proof-of-transaction.”
Arbitrum Development and History
Historically, Arbitrum was founded by the Offchain Labs team of Ed Felten, Steven Goldfeder, and Harry Kalodner. This team is known to have a strong background in security and blockchain technology.
The Offchain Labs team founded Arbitrum to address the scalability issues the main Ethereum network faces.
With a broad understanding of blockchain and security, the Offchain Labs team developed an innovative Layer 2 solution in Arbitrum.
Offchain Labs announced that it is raising $120 million in its latest Series B funding led by Lightspeed Venture Partners worth $1.2 billion in 2021.
For your information, two types of Arbitrum chains operate on the main Ethereum network. These are (1) Arbitrum Rollup chain or Arbitrum One and (2) AnyTrust chain or Arbitrum Nova.
However, on August 31, 2022, Arbitrum One migrated to the Nitro system. For information, the Arbitrum Nitro platform that continues to run on the Arbitrum One network increases transaction speeds of 7-10 times faster.
In addition, the data compression technique is also more sophisticated. This can lower costs and provide a better user experience. Arbitrum One is known to still focus on DeFi and NFT projects.
Meanwhile, Arbitrum Nova utilizes AnyTrust technology and is considered the right solution for projects with high transaction volumes, for example, gaming which often mints new items and social applications.
How Arbitration Works
Arbitrum is known to use the Optimistic Rollup architecture. This allows transactions to be processed outside the network and then verified within the network.
This approach reduces the processing time and costs required to execute transactions without compromising network security and reliability. Please note the Optimistic Rollup process consists of two stages, including:
1. Submission phase
In the submission phase, transactions will occur outside the main blockchain and are considered valid by validators, namely parties verifying transactions and storing transaction summaries on the main blockchain.
2. Challenge phase
In this challenging phase, transactions will be checked by a validator. If there is an error, the transaction will be canceled, and the summary will be changed.
Arbitrum feature
Here are some of the features of Arbitrum that you need to know, including:
1. Scalability
Explanation of the significant scalability improvements offered by Arbitrum, enabling more transactions to be processed at lower fees.
Arbitrum offers a significant increase in scalability by moving most of the transactions to the second layer, namely the rollup chain. This allows more transactions to be processed at lower fees.
2. Transaction Speed
Arbitrum also possible transactions almost instantaneously by using the Optimistic Rollup architecture and optimized transaction finalization mechanism.
With a combination of fast chain rollup, an Optimistic Rollup mechanism, and optimized verification at layer 1, Arbitrum will provide a faster and more efficient user experience.
Users can send and confirm transactions almost instantly on the rollup chain, while verification at layer 1 ensures the legitimacy of the transaction. This reduces the waiting time required for transactions and improves the user experience.
3. Low Cost
Arbitrum’s strengths are overcoming the high transaction fees on the main Ethereum network and making it more affordable for users. One of Arbitrum’s main strengths is its ability to overcome the high transaction fees that often occur on the main Ethereum network.
With reduced transaction fees, verification efficiency, increased scalability, and compatibility with the Ethereum ecosystem, Arbitrum makes it more affordable for users to transact on the blockchain network.
Ultimately, this will drive broader adoption and create a more cost-effective user experience.
4. Ethereum compatibility
An explanation of the ease of migrating and deploying existing applications on the main Ethereum network to Arbitrum
Arbitrum was designed with a focus on compatibility with the existing Ethereum ecosystem. This means that migrating and deploying existing applications on the main Ethereum network to Arbitrum is relatively easy and can be done with little/no significant changes.
Advantages and Disadvantages of Arbitrum
The following is an explanation regarding the advantages and disadvantages of Arbitrum that you need to know, including:
1. Excess Arbitration
Arbitrum has several significant advantages in increasing the performance, efficiency, and scalability of the Ethereum network. One of Arbitrum’s main strengths is its ability to increase the performance and scalability of the Ethereum network.
In addition, Arbitrum can also increase cost efficiency in sending transactions on the Ethereum network. In addition, by moving most of the transactions to the rollup chain, Arbitrum increased transaction speed significantly.
2. Lack of Arbitration
Describes the risks and challenges associated with using Arbitrum, such as centralization risks and dependency on the main Ethereum network.”
Even though Arbitrum has many advantages, disadvantages, and risks need to be considered regarding its use, including the risk of centralization because Arbitrum uses an Optimistic Rollup approach.
Another risk is a dependency on the main Ethereum network. Please note that Arbitrum relies on the main Ethereum network as the main security layer to verify block rollup commitments.
Therefore, if there is a problem or disruption to the main Ethereum network, it can affect the function and performance of Arbitrum.
Arbitration Risk
Following are some of the Arbitrum risks that you need to know, including:
1. Challenge Period
It should be noted that the design of optimistic rollups involves a challenge period of up to 7 days. The challenge period is enforced when a transaction is found to be incorrect.
This period is enforced to provide many opportunities to check that all blocks are valid transactions, so users who want to withdraw their tokens from Arbitrum must wait seven days.
2. Validator Not Decentralized
Another risk is that the Arbitrum validator still needs to be fully decentralized. Arbitrum itself uses permissioned validators and recently announced the expansion of its validator set with more organizations joining its network.
The validators/organizations joined to secure the Arbitrum chain are Consensys, Ethereum Foundation, L2BEAT, Mycelium, Offchain Labs, P2P, Quicknode, DLRC, and Unit410.
3. Risk of Losing Assets/Funds
In addition, theft of funds can occur if none of the validators checks the published status. Fraud proofs assume at least one validator is honest and capable of accepting malicious code upgrades.
In addition, funds can only be recovered if there is an error in implementing such a complex one-stop Nitro and WASM.
Conclusion
In conclusion, in its history, Arbitrum was founded by the Offchain Labs team consisting of Ed Felten, Steven Goldfeder, and Harry Kalodner. Arbitrum’s goal is to address the scalability issues the main Ethereum network faces.
For your information, two types of Arbitrum chains operate on the main Ethereum network. These are (1) Arbitrum Rollup chain or Arbitrum One and (2) AnyTrust chain or Arbitrum Nova. However, on August 31, 2022, Arbitrum One migrated to the Nitro system.
Arbitrum is known to use the Optimistic Rollup architecture. This allows transactions to be processed outside the network and then verified within the network.
This approach reduces the processing time and costs required to execute transactions without compromising network security and reliability.
Please note the Optimistic Rollup process consists of two stages, including (1) the submission phase and (2) the challenge phase.
Like the use of any technology, using Arbitrum involves certain risks, including:
- A challenging period.
- The validator has yet to be decentralized.
- The risk of losing assets or funds.
To minimize the risks associated with using Arbitrum, steps need to be taken, among others, by understanding the basic concepts and principles of Arbitrum and ensuring the use of the latest and updated software versions from Arbitrum.
In addition, it is also important to choose a trusted and proven service and infrastructure provider with experience in running Arbitrum, conducting smart contract audits, and verifying the code thoroughly.
In addition, users should also understand the risks associated with migrating assets to Arbitrum and take appropriate security measures, for example, securely backing up private keys.
So, now you know what Arbitrum is, its development and history, how it works, features, advantages and disadvantages, and risks.
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