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Prerequisites: 

To better understand this blog, you should master the basic concepts of Ethereum first.  

What is Arbitrum?

Due to limitations on transaction throughput on the Ethereum Mainnet (i.e. layer 1), developers proposed layer 2 protocols to handle transactions off layer 1 so as to improve Ethereum’s performance and user experience.

Arbitrum is a layer 2 solution created by Offchain Labs. The team solves Ethereum scalability with multi-round interactive Optimistic Rollup (i.e. one of the mainstream layer 2 solutions).

How does Arbitrum’s solution work?

Arbitrum is a L2 protocol which guarantees that the data posted to layer 1 is valid through multiple-round interactive Optimistic Rollup.

  • Rollup: One of the layer 2 solutions that perform transaction execution outside the main Ethereum chain (layer 1), but post transaction data on layer 1.
  • Optimistic Rollup: One type of Rollups which optimistically believes that the data posted to the Ethereum mainnet is correct, and if anyone observes that the data is wrong (i.e., there is fraud), they can issue a challenge during a period. Therefore Optimistic Rollup is also called fraud proof. In this way, it is guaranteed that the data finally posted to the Ethereum mainnet is valid.
  • Multi-round interactive Optimistic Rollup: The validator on layer 2 posts the bundled data to layer 1 and locks a bond in the smart contact. If someone thinks the transaction data is wrong, he has to issue a challenge in a time window and lock a bond in the smart contract too.

The validator and the challenger continuously split the disputed part in a dichotomous way off-chain until the the dispute is narrowed down to a specific part, and then go to layer 1 to resolve it.

By using a multi-round interactive design, Arbitrum can efficiently resolve disputes on layer 1 at a low cost.

Main features

  • Extremely low transaction fees
  • Trustless protocol
  • EVM-compatible
  • Funds are as cryptographically secure, as in the Ethereum mainnet
  • Users are always in control of their funds
  • No requirement for operational activity to keep the funds safe

Arbitrum wallet

Take imToken for example, first download and install imToken (https://token.im/ ) and create/import an identity wallet.

Note: Check the website security certificate before downloading

Deposit

Before doing transactions on the Arbitrum mainnet, you need to deposit the token into your Arbitrum wallet first.

Go to “Browser”,  enter “Arbitrum Bridge” into the search bar and click the DApp. Select the type of token you want to deposit and enter the amount in the deposit box. After confirming all the information is correct, click "deposit" and pay the miner fee.

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Switching to the Arbitrum Network 

Enter the asset page of the ETH wallet, click “Ethereum Mainnet” - “Arbitrum” to switch to the Arbitrum network. 

Now you can see the deposited tokens in the Arbitrum wallet.

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You can also check the most popular DApps in the Arbitrum ecosystem by clicking on "Ecosystem DApps" on the asset page.

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Withdrawal

If you want to withdraw the assets from the Arbitrum wallet to your ETH wallet, you can click "Ecosystem DApps" - "Arbitrum Bridge" on the asset page. Enter the withdrawal amount, confirm all the information is correct, then click "withdraw" and pay the miner fee.

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Study 

Layer 2

In order to scale Ethereum to accommodate a growing number of users, developers have proposed 2 solutions, namely, layer 2 and sharding (a layer 1 scaling solution). 

Layer 1 refers to the Ethereum blockchain itself, and layer 2 is a network or technology that operates on top of Ethereum to improve its scalability and efficiency.

Mainstream layer 2 solutions include ZK Rollup, Optimistic Rollup, Plasma, State Channels, Validium, etc.

Optimistic Rollup

Rollup is a collective term for solutions designed to improve the performance of the Ethereum mainnet by handling transactions off-chain while keeping part of the data of each transaction on-chain.

There are two main types of Rollup solutions: ZK Rollup and Optimistic Rollup. 

ZK Rollup is a layer 2 solution that uses zero-knowledge proof, but it is not EVM-compatible and takes a long time to generate zero-knowledge proof. So Optimistic Rollup was proposed in June 2019. In this scheme, zero-knowledge proof is removed, however, a penalty mechanism is added to ensure data security (slightly lower than ZK Rollup) while supporting general smart contracts more easily.

Optimistic Rollup executes smart contracts through OVM (Optimistic Virtual Machine), which is full-featured and EVM-compatible. This means that developers can migrate DApps to layer 2 with just a few lines of code.

Offchain Labs

Offchain Labs, the development team behind Arbitrum, is a blockchain startup focused on enterprise applications and based in New York City.

It‘s co-founder Ed Felten is a professor of computer science at Princeton University and former Chief Technologist of the Obama Administration. He founded Offchain Labs with three other co-founders in the fall of 2018.

Arbitrum block explorer

Arbitrum block explorer is an open source web tool that stays synchronous with the Arbitrum network and allows you to view information about blocks, transactions, addresses on Arbitrum.

Arbitrum ecosystem

  • Aave
  • Balancer
  • Chainlink
  • DeBank
  • Curve
  • Etherscan
  • imToken
  • Infura
  • DODO
  • Celer Bridge
    …...

Learn more