Arbitrum is a layer 2 scaling solution for Ethereum, designed to enhance the scalability of the Ethereum blockchain, improve the speed of transactions, and reduce transaction costs. It utilises optimistic rollup technology to achieve these goals while maintaining a high level of compatibility with Ethereum smart contracts.
Arbitrum works by implementing optimistic rollups, a technology that offloads computation and data storage from Ethereum to reduce congestion and costs. It batches multiple transactions into a single one, which is then recorded on the main Ethereum blockchain. This process allows for efficient verification of transactions, utilising Ethereum's security features. Arbitrum also supports smart contracts with high compatibility at the bytecode level, allowing for seamless integration of dApps.
Potential use cases for Arbitrum include:
Arbitrum was developed by Offchain Labs, which was founded in 2018 by Ed Felten, Steven Goldfeder, and Harry Kalodner. The network officially launched on August 31, 2022. Arbitrum has seen significant partnerships, such as integration with Coinbase and a proposed transition to a decentralised autonomous organisation (DAO) governed by ARB token holders. The platform has achieved substantial milestones, including reaching high transaction volumes and securing large amounts of value locked in its smart contracts. Future developments include the implementation of a staking mechanism and the preparation for upcoming Ethereum upgrades to enhance efficiency.