23 Nov 2022•
5 min read
Welcome to the latest edition of the Wormhole Chains series, where we discuss some of the latest chains that have been added to the Wormhole network. Today, we’re looking into Arbitrum.
Arbitrum is an L2 scaling solution for Ethereum. On Arbitrum, users can do all things they are able to do on Ethereum — use dApps, deploy smart contracts, conduct ERC20 transactions, etc. — but the corresponding transactions are cheaper and faster. Arbitrum’s flagship product, Arbitrum Rollup, is an Optimistic rollup protocol that inherits Ethereum’s security while minimizing the amount of data used on-chain. Arbitrum uses, just like Ethereum, the Solidity programming language, and numerous integration options provide standard Ethereum front-end tooling for Arbitrum, making it easy to work with.
Generally speaking, no — nothing is wrong with Ethereum. But: the Ethereum blockchain only allows about 10–20 transactions per second (TPS) to be computed. When this limit is reached, users are forced to compete against each other for their transactions to be completed ahead of others, which causes transaction fees to increase — reaching hundreds of dollars at times of very high usage, like popular NFT mints.
But this design was a deliberate decision in Ethereum’s creation to maximize security. To reach consensus on the current state, all nodes process each and every transaction in Ethereum’s history and keep a copy of them in their blockchain ledger.
One of Ethereum’s key principles, being an open, decentralized, peer-to-peer system, means that it should be reasonably accessible for anyone to run an Ethereum node and validate transactions. If the whole process would to become too expensive, it would lead to few (rich) entities running the network, which would contradict the premise of decentralization.
The combination of these two factors — (1) every node has to process every transaction and (2) it should be relatively accessible to run a node — means Ethereum transaction throughput has to be limited and capped fairly low.
This is where Arbitrum enters the game and aims to help by offering a solution to increase throughput (transactions per second) and decrease costs.
To understand how Arbitrum works, we first need to understand how rollups work:
Over the last few years, rollups have become one of the most popular contract-based scaling solutions for blockchain applications. Rollups are smart contracts that scale the main chain by essentially “rolling up” transactions into a batch and validating them off-chain. After doing so, they then send the minimum amount of data back to the main network. By rolling up and compressing the data, rollups allow higher throughput (more TPS), increased speed, and lower transaction costs.
There are two main kinds of rollups: ZK (zero knowledge) and Optimistic Rollups.
ZK-rollups rely on cryptographic proofs, called ZK-STARKs, to validate data and perform computations off-chain, eliminating the need for trust in validators while still having the ability to perform increased numbers of transactions.
ZK proofs represent powerful security. They represent publicly verifiable proof that something is true without having to reveal any other information than what is proven.
Here’s a simple analogy:
Imagine you have a closed combination lock and want to prove to someone that you know the correct combination to open it. You could do so by unlocking it without revealing the combination itself. Voilà — you just certified that you know certain information (in this case, the combination) without disclosing said information.
When used to secure blockchains, it’s a bit more complicated than that, but here is a great explanation of how ZK rollups work.
Optimistic rollups assume all L2 transactions sent to the main chain are valid unless a node suspects that a fraudulent transaction is occurring. By performing validity proofs only when fraud is suspected, optimistic rollups increase transaction speed and throughput. More details can be found here.
Arbitrum Rollups are an advanced Optimistic rollup protocol that store very little data on-chain for optimal scalability.
Here’s how this works according to Arbitrum’s great documentation:
Unlike regular, L1 Ethereum transactions, Arbitrum doesn’t require Ethereum nodes to process every Arbitrum transaction; rather, Ethereum adopts an “innocent until proven guilty” attitude to Arbitrum. Layer 1 initially “optimistically assumes” activity on Arbitrum is following the proper rules. If a violation occurs (i.e., somebody claims, “now I have all of your money”), this claim can be disputed back on L1; fraud will be proven, the invalid claim disregarded, and the malicious party will be financially penalized. This ability to adjudicate and prove fraud on L1 is Arbitrum’s key, fundamental feature, and is how and why the system inherits Ethereum’s security.
Arbitrum is being developed by Offchain Labs, the brainchild of Ed Felten, professor at Princeton and former Deputy U.S. Chief Technology Officer in the Obama White House, and his Co-Founders CEO, Steven Goldfeder, and CTO, Harry Kalodner. Offchain Labs was founded in 2018, but the tech was first developed at Princeton. You can find a YouTube video where the tech was discussed back in early 2015. Learn more about Offchain Labs in this TechCrunch article.
While Ethereum only averages 10–20 transactions per second, Arbitrum can handle 7x that transaction load. Transactions on Ethereum cost several dollars (at times of high usage, they can reach up to several hundred dollars), while they only cost a few cents on Arbitrum.
Arbitrum does not have a native token.
Stay up to date with Arbitrum by following their social channels:
If you’re new to Wormhole, here’s what you need to know:
⚬ The protocol’s total volume stands at over $35B, with several million transactions completed.
⚬ Currently, several thousand messages are submitted each day.
Check out Chase M., a Wormhole contributor, explaining more about Wormhole below:
Wormhole allows users to send assets to and from any of the supported chains without double-wrapping the asset. It enables seamless access to each network’s vibrant DeFi & NFT ecosystems!
Arbitrum is the latest addition to Wormhole’s network of supported chains — check out the Portal bridge to see which chains you can bridge to!
If you have questions, need support, or just want to connect, join the Wormhole community and keep up to date with our upcoming announcements. We’re always happy to hear feedback — join our Discord, and drop us a comment!
Here’s your chance to get in on this one.
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