Arbitrum: Ethereum's Leading Scaling Solution -

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Scaling is one the biggest unresolved issues in crypto, especially on the Ethereum Network. Arbitrum is a recent attempt on Ethereum to combat the current fees, and it’s been quite successful. To put numbers in perspective, Arbitrum is the 7th Largest blockchain globally ranked by total locked value. Despite 2022 being one of the harshest years for crypto projects, Arbitrum had their best year to date, where they were able to continue scaling and building without trouble.

While cheap, fast, and scalable networks are the goal, let’s look into how Arbitrum is achieving this.

How Arbitrum is scaling & improving Ethereum

Developed by Offchain Labs, Arbitrum was created as an attempt to improve smart contract validation coding and focus entirely on scalability. The protocol leverages Ethereum’s mainnet security so the protocol developers can focus entirely on scaling. Arbitrum is compatible with Ethereum Virtual Machine which allows this security advantage, and it also allows interconnected ecosystems built on both the L1 Ethereum and the L2 Arbitrum to work alongside each other.

Arbitrum uses transaction rollups to execute transactions on the layer 2 chain – these are validated by nodes. After an entire block of transactions are validated, the data records are published on the mainnet as a single entity, thus compacting all necessary information and drastically reducing the Ethereum mainnet traffic.

This process is automated by the smart contracts on Arbitrum’s chain. The nodes are compensated for their validations by the Arbitrum blockchain, which profits off the multiple NFT & gaming projects built on its chain. Arbitrum is a profitable model of blockchain that maintains enough capital to payout and incentivize faster validation. Overall, this has reduced network fees by an average of around 46 times cheaper per transaction over the past 3 months.

The Framework

Smart contracts carry submitted transactions to the chain’s inbox. The state of the chain (fees, speed of transaction) depends on the amount / significance of transactions going through the chain’s validation process at the given moment.

The process is rapidly sped up with the implementation of optimistic rollups, which only need to post a randomized small portion of the transactions on chain, and the rest are automatically assumed as valid while they are processed off-chain.

Beta & Nitro

Arbitrum launched a Beta version in Q2 2021 where it changed from being a layer 2 protocol to a layer 2 ecosystem. Since then, the Beta version has become livid with DeFi applications, NFT & gaming services, and bridged projects such as Aave, Stargate Finance, OpenSea + more.

These services have created an increasingly effective organic growth method with so many active communities and services being able to easily connect to the Arbitrum network.

Arbitrum also went on to release its upgrade, Arbitrum Nitro, in Q3 2022 to improve throughput and interoperability with the Ethereum Virtual Machine as well as Arbitrum’s own virtual machine. This changed the way transactions as a whole are validated on the Arbitrum blockchain. The tech upgrade uses WebAssembly Code (WASM) to run fraud proofs, validating the validity of the data processed between both the Ethereum L1 chain and the Arbitrum L2. Here’s a look at Nitro’s method for processing transactions:

Step 1: A single order sequence of transactions are processed by a transaction function (smart contract) to determine the state of each transaction.

Step 2: The Go-Ethereum (Geth) core code is written into Arbitrum Nitro’s system. By including the core code, it makes Nitro ultra-compatible, and opens access to utilities such as Ethereum’s Virtual Machine, database, formats, and security.

Step 3: The transaction code can then be directed into both a Proving station on the native Arbitrum code, and into WASM on the Nitro code. The Proving station is used as an extra layer of security & proof and is optimal for cross-chain transactions as it is easily portable from here. The transaction code in WASM uses Nitro nodes for fast and simple native transactions. Therefore, the transaction can be fast and secure simultaneously.

Step 4: Transactions are then reported to the Layer 1 Ethereum chain through rollup protocols interacting with Arbitrum’s fraud proofs.

ArbOS is the operational code for Nitro that runs the layer 2 operations. With newly upgraded code written in the Geth programming, ArbOS is able to enhance the communication between Arbitrum and Ethereum.

Additional benefits of Arbitrum Nitro: