How to Understand Arbitrum in a simple way

Arbitrum One, the public beta version of Arbitrum’s main network, has been open to all users for only two weeks. This Ethereum layer 2 expansion network has attracted more than $1.5 billion worth of cryptocurrencies to the chain, while the total lock-up value of the whole layer 2 sector is only $2.2 billion.

Arbitrum is an on-chain contract to manage off-chain protocol on Ethereum built by the Offchain Labs team. It is a real L2 network that inherits the security of Ethereum’s main network and has lightning-fast transaction speed. This solution is urgently needed for alleviating the congestion on Ethereum L1 and reducing the transaction fee for end-users, which will help more people adopt the Ethereum network.

In short, participants submit their transaction data to the Ethereum chain, and users can view the transaction, but the calculation and storage of the transaction are performed off-chain. Arbitrum will periodically send to Ethereum a hash containing the complete status that occurred on Arbitrum, and this hash will be placed on the chain as the result to achieve immutability and finality.

Although Arbitrum intends to be completely decentralized, its team currently has significant control over the network. This is no different from the methods adopted by other Ethereum expansion solutions such as Polygon and Optimism, which have their own unique set of protection measures after their release. For example, the Arbitrum team can use a proxy contract controlled by a single private key to modify many key contracts in the system (it is unclear who owns the key and how to manage it). Arbitrum technology currently launches Arbitrum One. The Arbitrum contract is deployed on the Ethereum main network and has begun to accept projects, and is currently in the mainnet testing stage. According to Arbitrum, more than 250 teams have applied for entry, and it is open to all developers. In the next few weeks, we can see that more and more DeFi projects will enter the Arbitrum ecosystem. At present, some important participants in the Ethereum ecosystem, such as Etherscan, are also supporting the Arbitrum One chain.

For ordinary users, one thing that needs to understand is that there is a 7-day challenge period for Arbitrum users to withdraw money. This is because the framework of Arbitrum is similar to that of Optimistic Rollups. In terms of result verification, Arbitrum belongs to the category of fraud-proof, while ZK rollups belong to the category of encryption-validity proof.

On the premise, the fraud-proof rollups assume that the results on the submission chain are available, and anyone can extract and execute the transaction data of Layer 1 to check whether the contract is executed correctly by comparing the status. The encryption-proof Rollups adopts a mathematical method to achieve validity through zero-knowledge proof, which is essentially impossible to falsify. Therefore, the encryption-validity proof belongs to active proof, while fraud-proof belongs to passive proof. When people disagree with the result, disputes will arise and arbitration is required.

On the whole, ZK Rollups has higher security and faster finality, which means that its extraction time is faster and it is more suitable for transfer and other scenarios. Both Optimistic Rollup and Arbitrum have a challenging period, which needs to be completed before it can be finally confirmed and the coin can be withdrawn. This is its deficiency. However, for ZK Rollups to generate encryption validity proofs, its computational cost is very high, very expensive, and it will take some time to mature.

Due to the obstacles in the user experience (mainly the 7-day challenge waiting period for withdrawal), Arbitrum One may dissuade some users in the initial stage, but the diversity or legitimacy of Arbitrum One, compare with other L2 networks, it’s incomparable.

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