(Hadalsame) 10 July 2023 – Over the past few years, Ethereum Layer 2 blockchains such as Arbitrum and Optimism have emerged as significant trends in the crypto space. Unlike bespoke blockchains like Solana, Cardano, and Avalanche which aim to compete with Ethereum directly, Layer 2 chains seek to complement Ethereum’s functionality. Their primary objective is to address Ethereum’s scalability limitations, characterized by low transaction throughput and high fees, without compromising its security and decentralization.
In this article, we delve into comparing Arbitrum and other Layer 2 and Layer 1 platforms, exploring how Arbitrum contributes to scaling Ethereum while maintaining a decentralized approach. We also discuss what lies ahead on Arbitrum’s product roadmap. What distinguishes Layer 1s from Layer 2s built on Ethereum?
From a technology perspective, Ethereum excels in terms of security, decentralization, ecosystem, and innovation. When it comes to Layer 2s like Arbitrum, the key differentiator is that they are part of Ethereum rather than competing against it. Layer 1s, on the other hand, tend to be competitive. It’s important to acknowledge the technical experimentation taking place, with different Layer 1s making varying trade-offs in security, decentralization, and scalability to achieve their goals.
Can you elaborate on these trade-offs?
Let’s focus on Layer 2s and their contributions. The blockchain trilemma posits that optimizing security, decentralization, and scalability simultaneously is challenging. While Ethereum can be scaled more effectively than it currently does, alternative Layer 1s achieve higher transaction throughput by making it harder to run the software. This creates de facto centralization, as only more powerful machines can participate, making it difficult for average users to contribute to network security.
However, scalability is crucial for Ethereum’s utility. Layer 2s inherit security from Ethereum, but they take it a step further. Layer 2s have a different security threshold, where Ethereum and just one Layer 2 node are required, instead of a supermajority as in Layer 1 blockchains. This lower threshold enables Layer 2s to process more transactions while maintaining security. Thus, Ethereum can remain decentralized and secure.
How does the security mechanism work in Arbitrum?
In Ethereum, nodes actively participate in making blocks, visible across the network. In Arbitrum, a node initially posts something, and a period follows during which any participant can challenge the transaction before it becomes final.
So, is this where “optimistic rollups” come into play?
Exactly. In optimistic rollups, if everything is in order, the number of observers is unknown because nodes don’t have an active role. Live Arbitrum chains have a whitelist of players who can post challenges, but anyone can follow along. Notably, there are about a dozen major players, including Offchain Labs, the Ethereum Foundation, Google Cloud, ConsenSys, and Unit 410 from Coinbase. Additionally, the ecosystem comprises various participants.
How do zk rollups differ from optimistic rollups, and why did Arbitrum choose the optimistic approach?
The core difference lies in how they prove transaction validity. In zk rollups, validity proofs are provided, demonstrating transaction accuracy. In optimistic rollups, fraud proofs are employed, meaning transactions are accepted optimistically without immediate proof, but the proof mechanism comes into play if challenged. Optimistic systems are often more efficient and have existed in computer science literature for some time.