CoinEx Institution: Arbitrum, A Star Project of Layer 2, Is Coming Soon, Which Vitalik Is Optimistic About

On the evening of February 28, 2021, Vitalik had an AMA on the Ethereum Layer 2 technology and answered some community concerns. Among them, he mentioned his recognition for Arbitrum, a Layer 2 project to be launched on the mainnet in March. To this end, in this article, we will talk about the background, team and testnet of this star project (just have a try as there might be an airdrop). Having suffered the congestion of the Ethereum network, we can enjoy the smooth experience of the long-awaited Ethereum Layer 2 network in advance.

Rollup, the cornerstone of Ethereum expansion in the short to medium term

The Ethereum network has been in congestion for a long time, and the community has also proposed various expansion plans. The key to Layer 1 expansion (on the Ethereum chain) is sharding, but the final implementation of ETH2.0 is still far away. The Layer 2 expansion (off the Ethereum chain) has a wide range of solutions, including state channels, side chains, and Plasma. As a new type of Layer 2 expansion solution, Rollup has made considerable progress in the last one or two years and can support the general EVM Code. No wonder even Vitalik has recognized Rollup as the cornerstone of Ethereum’s expansion in the short to medium term.

In a rollup, the actual computation and storage of the contract are done off-chain, and transaction data is stored on Ethereum through a series of compression techniques. We can think of the assertion posted by the validator on the chain as “rolling up” all of the calls and their results into a single on-chain transaction. The Rollup projects are different in how to ensure the correctness of the assertions posted to Ethereum.

Among these projects, Optimistic Rollup refers to an optimistic Rollup as its name suggests. Just like optimists believe that human is kind by nature, Optimistic Rollup is optimistic in the sense that when an assertion is posted, it does not contain an accompanying proof guaranteeing its validity. Instead, when the assertion is posted on-chain, the validator making that assertion posts a bond, and there is a time window in which anyone can post their own bond and challenge the assertion, if they think it’s wrong. This is sometimes called a “fraud proof”. If the asserter is wrong, they will lose their bond. If the challenge period expires with no successful challenges, the assertion is accepted and becomes final. All Optimistic Rollups are interactive, and we can further classify Optimistic Rollups by how many rounds of interaction are required to resolve disputes. Arbitrum Rollups fall into the category of multi-round interactive rollups.

A star project with a strong background

Arbitrum was originally an academic project at Princeton University. Co-founder Ed Felten used to be a professor of computer science at the school and the former chief technology officer of the Obama White House. Many core members of the project team OffchainLabs come from Princeton, which is comparable to Avalanche from Cornell University. Arbitrum also boasts powerful backers, and secured $3.7 million in seed funding led by Pantera with involvement from venture capital firms such as Compound VC and Coinbase Ventures.

Arbitrum is a set of Ethereum scaling solutions that can implement high-throughput, low-cost smart contracts while maintaining trustless security. Arbitrum has three modes, namely AnyTrust channel, AnyTrust side chain and Arbitrum Rollup. Currently, Arbitrum Rollup is online on the testnet.

In 2018, the multi-round interactive Optimistic Rollup protocol was first released at the Usenix Security conference. In multi-round interactive rollup, like Arbitrum Rollup, there is an initial challenge window during which a challenger can post a bond and claim that the assertion was wrong. What follows is a back-and-forth interactive protocol between the asserter and the challenger, with an on-chain contract acting as a referee for the protocol. In the end the referee determines that one party made a false claim, and punishes that party by taking their bond. The idea is to minimize the amount of on-chain work to resolve the dispute by using an interactive protocol between the two disputants to narrow down the dispute as far as possible before the on-chain referee has to evaluate evidence about the contract’s behavior “on the merits”.

Compared to other Rollup approaches, Arbitrum Rollup’s design shines in that the amount of data on chain is quite low, and it can support arbitrary EVM smart contracts and works with all Ethereum developer tooling. Arbitrum Rollup has no restrictions on the types of contracts written, and does not require developers to rewrite applications using unfamiliar abstraction or programming languages. Supported by a complete smart contract, Arbitrum comes with a Solidity compiler with which developers can easily port existing contracts or develop new contracts. Like other Rollups, the Arbitrum Rollup chain is built on the Ethereum blockchain so that all transaction data is recorded on and secured by the Ethereum blockchain.

To conclude, the general EVM support, the professional team, and the capital of top investment organizations have all pushed Arbitrum to stardom in the industry.

Work with partners to build a Layer 2 DeFi ecosystem

Faced with the big changes in the Ethereum ecosystem, Arbitrum did not work behind closed doors, but continued to attract new partners. It has long been deploying the Layer 2 DeFi ecosystem based on Arbitrum Rollup, including various infrastructure such as wallets.

On November 6, 2020, Offchain Labs built Arbiswap with Uniswap’s open source code, which was a Uniswap based on Arbitrum Rollup. It has an interface similar to UniSwap, but the difference is an extra “L1/L2 Bridge” in Arbiswap to transfer Arbitrum Rollup assets to Ethereum. The team claimed that Arbiswap can process 390 transactions per second, compared with only 7 Uniswap transactions on Ethereum Layer 1, thereby reducing gas costs by 55 times and greatly accelerating transactions. Users only need to modify the RPC to the Arbitrum testnet to access Arbiswap on the Layer 2 network.

In addition, the team also provides the Arbitrum token bridge (https://bridge.arbitrum.io/), which allows users to directly transfer assets between the Ethereum Kovan testnet and the Arbitrum testnet, facilitating an intuitive and convenient way of converting ETH, ERC-20 and ERC-721 tokens between Layer 1 and Layer 2.

On January 29, 2020, Arbitrum released the Arbitrum Rollout demo (https://portal.arbitrum.io/), which fully demonstrated its comprehensive DeFi ecosystem. The first batch of projects include Bancor (a decentralized trading protocol), Bounce (a decentralized auction protocol), Burgerswap (AMM), Hop, MCDEX (a decentralized perpetual contract exchange), and Swapr (a decentralized exchange). It is reported that many more top-notch projects are studying to support Arbitrum. At the same time, the team also built some mainstream DeFi protocols on the market with open source code.

From a user and developer perspective, interacting with Arbitrum feels exactly like interacting with Ethereum. Arbitrum supports the same RPC interface as Ethereum, supports all EVM languages, and natively supports all Ethereum tooling without any special adapters. The only way in which an Arbitrum Rollup chain does not resemble Ethereum is the cost: transactions on Arbitrum cost a small fraction of what they would if run natively on Ethereum.

Conclusion

Based on Rollup’s universal EVM support, Arbitrum, with its extraordinary team and backers, is rapidly seizing the niche market of Ethereum expansion by building an open and integrated Layer 2 ecosystem with many partners. Ethereum users who suffer from network congestion are expected to enjoy a fast and low-fee DeFi experience in the near future.

References:

Gas Cost Reduced by 55 Times? Try Uniswap V2 on Arbitrum Rollup

Summary of Vitalik Buterin’s AMA: A Full Interpretation of the Layer 2 Technology of Ethereum Rollup

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