Arbitrum: Everything to Know

By  Beluga Research August 15, 2023

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  • Arbitrum is a layer 2 scaling solution that enhances Ethereum's efficiency and throughput to enable faster, cheaper transactions
  • It uses optimistic rollups, a construction that collects, or "rolls up," transactions into batches before entering them on a mainnet
  • Arbitrum offers more scalability, lower fees, and more speed than the Ethereum mainnet
  • It maintains compatibility with Ethereum smart contracts, making it easy for developers to migrate their applications


Arbitrum is a layer 2 scaling solution that enhances Ethereum's efficiency and throughput to enable faster, cheaper transactions. Arbitrum operates on top of the existing Ethereum blockchain to enhance the scalability and throughput of the underlying blockchain network. Arbitrum accomplishes this by offloading a significant portion of transactions to the Arbitrum chain, a secondary chain. The Arbitrum chain processes transactions more quickly and at a fraction of the cost than the main chain.

A Brief History

Offchain Labs, a blockchain research and development company, developed Arbitrum. The project began as an academic research initiative at Princeton University. Later it evolved into a full-fledged platform. Offchain Labs released the first version of Arbitrum, Arbitrum One, in May 2021.

Arbitrum: Everything to Know

Arbitrum achieves scalability by utilizing a technique called "optimistic rollups." This approach involves most of the transaction processing occurs off-chain. Only the essential information is submitted to the main chain. The offloading of computations reduces the burden on the main chain. As a result, transactions on Arbitrum are faster and more cost-effective.

One of the primary advantages of Arbitrum is its scalability. By processing transactions off-chain and aggregating them into a single proof submitted to the main chain, Arbitrum significantly increases the number of transactions that the network can handle. This scalability improvement enhances the overall user experience. The scalability also reduces congestion and transaction fees.

Arbitrum retains the security guarantees of the underlying blockchain. The solution periodically submits proofs to the main chain. This ensures that the off-chain computations are valid and secure. This feature provides users with the benefits of scalability without compromising the fundamental security properties of the blockchain.

Arbitrum compared to other layer 2 solutions. Arbitrum distinguishes itself from other layer 2 solutions by its compatibility with Ethereum. It is designed to be fully compatible with existing Ethereum smart contracts. Developers can easily migrate their applications to Arbitrum without significant modifications. The compatibility and interoperability make Arbitrum an attractive choice for developers and users who are familiar with Ethereum.

Further, Arbitrum aims to provide a positive user experience by minimizing the need for users to manage multiple wallets or learn new interfaces. Users can interact with Arbitrum-powered applications using their existing Ethereum wallets. This simplifies the onboarding process.

Getting Started

  • Acquire an Ethereum wallet and access to an application or platform that supports the integration of Arbitrum. Then users can transfer Ethereum assets to the Arbitrum network.
  • Benefit from Arbitrum's enhanced scalability and performance.

Unique Aspects

  • Utilization of optimistic rollups. This technology enables Arbitrum to process a large number of transactions off-chain while still maintaining the security guarantees provided by the Ethereum mainnet. By bundling multiple transactions into a single batch, Arbitrum reduces congestion on the Ethereum network. Arbitrum also significantly decreases transaction fees. Arbitrum's compatibility with existing Ethereum smart contracts allows developers to deploy their applications on the platform without extensive modifications.
  • Faster transaction finality than the Ethereum mainnet. While Ethereum's confirmation times can vary, Arbitrum achieves near-instant finality for transactions. This offers users amore responsive and efficient experience. This near-instant finality is made possible by the off-chain nature of Arbitrum's transaction processing. Transactions are validated and confirmed within the Arbitrum network before being submitted to the Ethereum mainnet.
  • "Instant Withdrawals." Users can quickly and securely withdraw their assets from the Arbitrum network back to the Ethereum mainnet. This feature provides users with flexibility. It ensures that their funds remain accessible during periods of volatility.


  • Scalability - Arbitrum significantly improves the scalability of Ethereum by enabling a higher number of transactions per second. This allows for a smooth user experience and reduces congestion on the Ethereum network.
  • Low Fees - Arbitrum offers users lower transaction fees than the Ethereum mainnet. This makes it more cost-effective for users to participate in decentralized applications (dApps) and interact with smart contracts.
  • Fast Confirmation Times - Transactions on Arbitrum are confirmed faster than on the Ethereum network. This is made possible by aggregating multiple transactions into a single batch. The aggregation results in quicker settlement times. Users can experience near-instant transaction finality, enhancing the overall efficiency of the network.
  • Interoperability - Arbitrum is compatible with existing Ethereum smart contracts and dApps. This makes it easy for developers to migrate their applications to the Arbitrum network. The interoperability allows for smooth integration. It also ensures that the existing Ethereum ecosystem can leverage the benefits of Arbitrum without significant modifications.
  • Security - Arbitrum maintains a high level of security by anchoring its operations to the Ethereum mainnet. Any malicious activity or tampering on the Arbitrum network can be detected and resolved on the Ethereum mainnet.


  • Centralization Concerns - While Arbitrum aims to enhance scalability and efficiency, some critics argue that it introduces a certain degree of centralization. The validation of transactions and the execution of smart contracts are handled by a limited set of validators. This raises concerns about decentralization and censorship resistance.
  • Dependency on Ethereum - As a layer 2 solution, Arbitrum relies on the security and consensus mechanisms of the Ethereum network. Any vulnerabilities or issues that arise on the Ethereum network can impact the security and reliability of Arbitrum.
  • Transition Challenges - Migrating existing Ethereum applications to Arbitrum may require developers to make adjustments to their code and architecture. This transition process can be complex and time-consuming. It creates barriers for developers invested in the Ethereum ecosystem.
  • Limited Smart Contract Functionality - Arbitrum is compatible with Ethereum smart contracts, but there may be certain limitations on the functionality and capabilities of these contracts within the Arbitrum environment. Developers should consider these limitations when building or migrating their applications.