Is Arbitrum the optimal solution for Rollup solutions?

There are more DeFi applications deployed on this chain than just UniswapV3.

Is Arbitrum the optimal solution for Rollup solutions?

On May 28th, Arbitrum announced the opening of its mainnet to developers. The following day, the Uniswap community approved the proposal to “deploy Uniswap v3 on Arbitrum” with nearly 100% support. These new developments have once again put this scaling solution for the Layer2 layer of Etherium on the hot seat.

The problem of Ethernet network congestion and high GAS fees has been around for a long time, and various scaling solutions have been proposed by the community, including various Layer2 scaling solutions, including state channel, sidechain and Plasma, Rollup, etc. Among them, Rollup is highly respected.

The most important feature of Rollup is that the actual calculation and storage of smart contracts are done under the chain, and the transaction data is saved on the main Ethernet network through a series of compression techniques, and the security is guaranteed by the Ethernet blockchain. Vitalik Buterin, the founder of Ether, has repeatedly said in public that Rollup is the best choice for Ether expansion in the short to medium term.

As the mainnet of Rollup-like project Optimism was postponed from March to July, this gave a first opportunity to similar project Arbitrum. Arbitrum, which has just opened its mainnet, is now operational ahead of Optimism.

In addition to developers’ access to the main network to deploy contracts, users can also replace RPC nodes through their wallets MetaMask to access the Arbitrum test network and applications. The team provides Bridge arbitrum, an Arbitrum asset bridge, which can directly transfer assets from the Kovan test network on the Ether Layer1 to the Arbitrum test network, and currently supports ETH and a variety of assets under both ERC-20 and ERC-721 standards.

What is Arbitrum Rollup? What is the operation mechanism? What are the applications deployed? How does it differ from Optimistic Rollup and ZK Rollup? This issue of DeFi Honeycomb will bring the relevant explanation.

Introduction

Arbitrum is an Ethernet Layer2 scaling solution developed by the OffchainLabs team that enables high throughput, allowing developers to deploy and operate smart contracts at low cost, while maintaining trust-free security.

Arbitrum was originally a scientific research project at Princeton University, and since the concept of Rollup, an Ether scaling technology, was mentioned in 2018, the team has worked to solve Ether congestion with Rollup technology scaling.

Simply put, Arbitrum is an off-chain protocol managed by an on-chain Ether contract that utilizes Rollup technology. In vernacular, Rollup is the methodology of Ethernet scaling technology, and Arbitrum turns the technical theory into reality.

Rollup technology seeks to record all transaction data on the main chain. The core idea is to aggregate and compress a large amount of transaction data originally scattered in blocks into a single transaction and publish it on the main chain; while the actual calculation and storage of contracts are done off-chain. This allows the computing and storage pressure of the main chain to be reduced, thus achieving high throughput of the network.

In January, OffchainLabs launched a demo product for the DeFi ecosystem on the Arbitrum test network. The first supported applications include Bancor, a decentralized trading protocol, Bounce.finance, a decentralized auction tool, and MCDEX, a decentralized perpetual contract exchange, among other applications.

On May 28th Offchain Labs team announced that Arbitrum has deployed Arbitrum One, a beta version of the main Ethernet network, and opened it to developers, with over 250 teams applying to access the developer beta network. (In order not to confuse Arbitrum technology and Ether Layer2 chain, the team named the mainnet chain as Arbitrum One, i.e. Arbitrum One is the mainnet Ether Layer2 chain built using Arbitrum technology).

Operation Mechanism

The main feature of Rollup is that all transaction data is recorded on the chain, that is, Arbitrum puts the part about security on the Ethernet chain, and puts the actual calculation and storage to be executed off-chain.

For example, if user A generates a transaction data on Arbitrum, this data will be recorded on the ethereum chain for everyone to check this transaction. But the calculation and storage involved in this transaction are done on the Arbitrum chain, i.e., under the Ethernet chain. It is used in such a way to achieve scaling and reduce the load on the Ethernet chain.

All transactions executed by users on the Arbitrum chain need to be submitted to the Inbox (inbox) smart contract running on the EtherChain. Arbitrum periodically packages multiple transactions and submits them in bulk to the EtherChain nodes through an aggregator. For example, every 5 or 10 minutes, a hash containing the complete status of all transactions that occurred on Arbitrum is sent to Etherpad, and this hash is recorded on the Etherpad chain and made public to everyone.

Since all of Arbitrum’s transaction data is posted to Ether, then the cost of each transaction, and the number of transactions that Arbitrum can support per second, is limited by the amount of data allowed to be posted to Ether during that time.

Therefore, Arbitrum optimizes and compresses transactions, such as aggregating multiple transactions through an aggregator and then submitting them in bulk, which minimizes the number of times content needs to be published on the chain and increases throughput; it also evenly spreads out the cost per transaction, achieving the effect of lower transaction fees.

Features

Trustless Security

Since the transaction data is recorded on Ether, which means that Arbitrum security is rooted in Ether, security is guaranteed by the Ether blockchain.

Fully compatible with Ethernet EVM

Applications on Ethernet and other compatible EVM chains can be migrated directly without any modifications. With support for Solidity and multiple EVM languages, developers can easily migrate existing contracts or develop new ones.

License-Free Contract Deployment

No matter who you are, you can deploy contracts on Arbitrum immediately and it’s as easy to get started as changing your RPC, following the principle that Arbitrum runs EVM code directly without any custom tools or translators.

Scalability

Move contract computation and storage off the Ethernet mainchain for higher throughput.

Lowest Cost

Submitting transactions in bulk via aggregators minimizes Layer1 processing costs and minimizes the cost per transaction to be shared equally.

Applications

Uniswap (UNI)

The community vote on the UniswapV3 deployment to Arbitrum proposal ended on May 29th with overwhelming support, and Uniswap founder Hayden Adams tweeted that if the vote passes, he will deploy the V3 smart contract to Arbitrum and has already started deployment plans.

SushiSwap (SUSHI)

Officially announced on May 30, SushiSwap has been deployed on Arbitrum.

Decentralized Trading Platform DODO (DODO)

Officially announced on June 1, DODO’s V1 and V2 smart contracts have been deployed to the Arbitrum mainnet.

Decentralized Exchange Bancor (BNT)

was developed and deployed on Arbitrum at the end of January, and users can access the application through the test network at the earliest.

Decentralized derivatives trading platform MonteCarloDEX

Formerly known as MonteCarloDEX, the first project to use the Arbitrum scaling solution, MCDEX has been running on the Arbitrum test network until now, and MCDEX V3 will be deployed to the main network on May 28.

Arbiswap

The Offchain Labs team used the Uniswap open source code in November 2020 to create a decentralized exchange on Arbitrum with a similar interface to Uniswap, the only difference being that the Arbiswap page has an additional asset bridge, the Arbitrum Bridge, which users use to transfer assets between the L1 and L2 layers. Users can replace the RPC node on the Arbitrum test network with a MestMask wallet to experience the transaction speed and low fees on Arbitrum.

Team tests show that Ethernet Layer 1 can only process up to 7 Uniswap transactions per second, while Arbiswap can process up to 390 transactions per second even when the Arbitrum chain is fully loaded, while reducing the cost of Gas by 55 times.

It should also be noted that Arbitrum does not officially issue any related tokens, and in the Arbitrum mainnet beta version ETH is used as fuel and all fees are paid using ETH.

Differences between different solutions of Rollup

As the saying goes, there is no harm without comparison. Arbitrum, which went live early, already has a first-mover advantage and shows differentiating features in technical terms over other Rollup-like scaling technologies in practice.

Rollup technology is currently in practice by several teams, forming Arbitrum Rollup, Optimistic Rollup, and ZK Rollup solutions, which, like various schools of thought, have their own supporters.

Arbitrum Rollup and Optimistic Rollup are similar in terms of framework process, but the difference between them and ZK Rollup lies in the verification of the final transaction results. The former two use a fraud proof approach, while ZK Rollup uses a zero-knowledge proof.

By fraud proof, it is assumed that all submitting traders are good unless proven guilty. Someone challenges, and the party who challenges first pledges a certain amount of margin to prevent malicious attacks; if the chain is proven innocent, the margin pledged by the challenging party is forfeited.

For example, if node A submits data for a certain transaction generated on the chain and B disagrees, how should the transaction proceed? How does the network continue to function? There are basically two options: prove fraud or re-execute the transaction. both Arbitrum Rollup and Optimistic Rollup use the fraud proof approach.

ZK Rollup solution

Users can actively prove the outcome of transactions, and transfers and withdrawals can be confirmed quickly.

For example, user A transacts on a ZK Rollup-like chain, the aggregator submits this transaction data to Ether, and ZK Rollup can immediately verify that the aggregator provides the transaction data without problems. This approach is more advantageous in terms of security and achieving finality of transactions.

However, ZK Rollup is computationally expensive in the proof process and can only be used to implement transactions and transfers with a relatively simple process, which can lead to high spending costs in deploying and operating complex smart contracts. In addition, it is difficult to migrate applications on Ether due to the high level of the ZK Rollup development language, which is not compatible with EVM. Although Vitalik, the founder of Etherium, has endorsed the ZK Rollup solution in public, these problems cannot be solved in a short period of time.

Arbitrum Rollup and Optimistic Rollup

Both of them use fraud proofs with delayed nature, and the presumption is that the submitted on-chain data are error-free, and Layer1 layer comes back to check whether they are correct or not.

The major difference between Arbitrum Rollup and Optimistic Rollup is the difference in the way they resolve disagreements when the fraud proof process encounters them. That is, when executing a transaction execution, if the status is disputed, how should it be resolved?

Arbitrum uses multiple rounds of fraud proof, while Optimistic uses a single round of fraud proof.

Arbitrum implements multi-round fraud proof, which means that the dispute points are broken down layer by layer to find the most critical dispute point, and then the Ether contract is used to determine whether it is correct. Optimistic single-round fraud proof, on the other hand, would require moving the entire Layer 2 transaction to the Layer 1 main chain and verifying it on the main chain, which would increase the processing cost when invoking the contract on the main chain.

In addition to the number of fraud proof rounds, the ability to be fully compatible with Ether EVM is also the focus of the Rollup solution. After all, the increased demand for the Layer 2 network is mainly due to the congestion and high cost of the Ether network that was highlighted after the DeFi outbreak.

Arbitrum Rollup is fully compatible with EVM; in contrast, Optimistic Rollup is also compatible with EVM, but not yet 100%. The founder of dForce, a decentralized financial protocol, Yang Mindao, is concerned about this, saying that the fact that Optimism (which uses Optimistic Rollup technology) is not 100% EVM-compatible is a major strategic miscalculation, not to mention the delayed market launch, “These people don’t understand that 99.9% compatibility and 100% incompatibility are actually the same thing.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/is-arbitrum-the-optimal-solution-for-rollup-solutions/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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