The team behind the star two-tier solution Arbitrum is about to go live, Offchain Labs talks about the project mechanism and planning

Offchain Labs co-founders Steven Goldfeder and Ed Felten share the origins of Arbitrum, how it works, and how they plan to move forward.

The team behind the star two-tier solution Arbitrum is about to go live, Offchain Labs talks about the project mechanism and planning

Note: This article was first published on March 19, 2121

In the past year of DeFi’s boom, bottlenecks in the performance of the Ethernet network have become increasingly apparent. Ether 2.0 is nowhere in sight, and a number of Layer 2 scaling solutions are already preparing to go live, becoming a track of considerable market interest since the beginning of the year. Arbitrum, the star scaling solution launched by Offchain Labs team, is one of them.

On March 16, Kai, the investment director of SNZ, had a great conversation with Steven Goldfeder and Ed Felten, the two co-founders of Offchain Labs, to share the origin of the concept, working principle and progress plan of Arbitrum.

Kai: We have two of the founding partners of Arbitrum Rollup with us today. One is Ed Felten, the founder of Arbitrum Rollup and former Secretary of Technology of the United States. One is Steven, who is currently the CEO of the project.

Arbitrum is one of the key projects in Layer 2 that Vitalik mentioned earlier. They will go live in the near future and we are very honored to have both of them. This is also the first appearance of the Arbitrum Rollup team in China.

First question: Can you introduce yourselves and share how you got into blockchain?

Ed Felten: I was a professor of computer science at Princeton for most of my life, and I officially entered the blockchain industry in 2013, mainly doing research at that time. The first version of Arbitrum was launched in 2014, when it was still purely a research type project.

In 2015, I was invited by the President of the United States to temporarily leave Princeton University and join the White House as a senior advisor to President Obama. One of the things I did while serving the U.S. government was research on cryptocurrencies and blockchain. 2017 saw a return to academia. I was asked by two graduate students, Steven, who is on the show today, and Harry, who is now the co-founder of Arbitrum, “Do you remember the research you did on the Arbitrum project? The timing was right, so maybe we could pick it up again”.

We decided to take the project and build a more complete system, and in 2018, we published an academic paper describing the entire Arbitrum system. That’s when the three of us realized that Ether would definitely face scalability issues. And it was a good opportunity for us to bring Arbitrum into commercial practice.

Steven: I also got into the blockchain industry in 2013. I happened to be a PhD student at Princeton at the time, majoring in cryptocurrencies, cryptography, and various blockchain protocols. I worked with Ed and other colleagues to write a textbook on blockchain, cryptography, and cryptocurrencies, which is now used by over two hundred universities worldwide. The book has been translated into five languages, including Chinese. Chinese students in these fields are already familiar with this textbook.

To follow up on what Ed said earlier, after he left the White House and returned to Princeton, one of the other co-founders and I went to him and started this conversation in his office. We realized that there was a business opportunity for Arbitrum Rollup before the paper was published in 2018. So we started the company soon after the paper was published, and the first round of funding started back in 2019.

There is another interesting story in the startup process. The term “Rollup” didn’t exist when we were working on the project. When we introduced the project and what we were doing to people, they would ask if we were doing Stateful Channel or Plasma, but it was neither. We started doing it when the term “Rollup” didn’t exist.

The concept of Rollup has been very hot in 2020 and 2021. We are the first solution in this field that can support Ethernet EVM.

Moderator: Second question, please tell us about the Arbitrum Rollup project and the story and idea behind its creation.

Ed Felten: I’d like to go back to the origins of the Arbitrum concept. When we were doing blockchain research, the question that was on my mind at the time was: What is the use of blockchain? For example, Bitcoin was very hot at that time. But what interested me most as a computer scientist was smart contracts. I think smart contracts are very powerful, but it became clear to me early on that smart contracts are facing scaling challenges.

For example, think of Ether as a globally shared computer. Allow all users to run their smart contracts on this computer. Then obviously, it’s very expensive, the computing speed is very slow, and the performance is limited. So I started thinking about scalability very early on. Even before Ether was around, I was thinking about how to solve the scalability problem if an Ether-like system emerged. This was the genesis of the Arbitrum project.

We wanted to solve the scalability problem with an off-chain solution, but without sacrificing security. At the beginning, I did some projects with some undergraduates and actually tried to solve the scalability problem by building a system. But that system was only partially functional and not a very complete system. So the project that Steven and Harry and I did together in 2017 made the system more complete. As far as setting up the company,, more of our efforts were to make Arbitrum compatible with Ether.

Steven: Part of the story I’m going to tell overlaps with Ed. I was a late entrant to the blockchain space compared to Ed. I remember Ed teaching a blockchain-related course in ’14 or ’15. But I hadn’t gotten into Princeton yet. Harry and I realized at that time that Ether had great potential and its broad application potential would be used by the mainstream world, but on the other hand, there were definitely problems with the scalability of Ether. So we waited for Ed’s return. When Ed came back from the White House, we started the Arbitrum project together.

I also did a little bit of work for other crypto projects while I was doing my PhD. So I definitely believe that the potential in this area is huge. But also I realized very early on that scalability was a huge problem that needed the right technology to solve.

Arbitrum, after two and a half years of doing it, proved that we had the right idea. And the timing is just right. The market is now realizing that on the one hand, Ether has a huge potential, but the scalability needs to be solved. The solution to the scalability problem also has huge potential for the blockchain industry.

In our earliest days of funding, we also spent a lot of energy trying to convince the market. When I first raised money, some investors would ask me, “Why are you so convinced that we need this solution in the future? I said, “I’m pretty sure that one day Ether will get large-scale mainstream adoption, but at the same time there will be scalability issues. Now this assertion has also become a reality.

Moderator: Both of you have mentioned scalability, which is a pressing issue for Ether. Scalability is also the core problem of Arbitrum, an off-chain solution.

Third question: Can you explain the operation principle and main features of the Arbitrum solution?

Ed Felten: Let me first introduce the design principles of Arbitrum, there are three main points: firstly, it is compatible with Ether; secondly, it allows as many activities as possible to be carried out under the Ether chain. The third principle is that no trust is required. Anyone can force the chain to do the right thing. Just like on Ether.

So how does Arbitrum implement these three principles? For example, if someone submits a transaction, the transaction data is stored on the Ethernet chain so that everyone can view the transaction and the content of the transaction is completely public. But the computation and storage involved in the transaction is placed in Arbitrum, i.e. under the Ethernet chain. In this way it is possible to scale and reduce the load on the Ethernet chain.

In addition, Arbitrum periodically, for example every five or 10 minutes, sends a “checkpoint” to Ether, which is a hash containing the complete status of all activities that occur on Arbitrum, and sends this hash as a record on the chain. This allows for massive cost reduction and scalability at the same time.

But again, people can ask. When we send information to the Etherchain, what if we guarantee that the thing itself is correct? This is where the Arbitrum protocol is key. The protocol includes the involvement of the verifier, who needs to record on the chain, will need to send a claim to Ether. At the same time, the verifier needs to deposit a deposit. If the verifier’s claim is false, then the verifying node loses its deposit.

When the verifier sends the claim to the chain, there will be a period of time when anyone can raise their own challenge. If you disagree, there will be a dispute, and the dispute resolution mechanism is the most central and critical part of Arbitrum’s ability to achieve scalability.

We designed the dispute resolution mechanism in such a way that if two parties disagree on something, an effective resolution mechanism is to split it from large to small. Let’s say a transaction involves a billion steps and a dispute arises. Our approach is to split the 1 billion steps into 100 smaller claims, each containing 10 million steps. This reduces the billion-sized dispute to a 10-million-sized one. The disagreeing party then picks out what he disagrees with from the 10 million, and then further reduces it from large to small until the most critical disputed step is found. After finding the key step, then use the Ether contract to decide whether this step is right or wrong. By doing so, we can achieve efficient dispute resolution.

When a node sends a claim, the claim is correct and there is no problem, then a hash is sent every 10 minutes. After the hash is sent to the Ethernet chain, there is no dispute, and the system can run smoothly. If there is a dispute, the dispute can be reduced from big to small by the efficient way just described, and finally get a good arbitration. This is what makes the system so efficient.

For the average user, you may worry whether such a mechanism is too complicated. You don’t have to worry about that either. The dispute resolution mechanism will be handled by a dedicated node to resolve disputes. Of course, ordinary people want to earn more money, you can also choose to do the verification node. But it doesn’t matter if you don’t want to.

Moderator: Layer 2 is also a popular topic of discussion. In addition to Arbitrum, there are also state channels, ZK Rollup and other different solutions.

Fourth question: What are the advantages and disadvantages of Arbitrum compared to other solutions? Especially compared to ZK Rollup.

Steven: First of all, we need to clarify that there is no single best solution yet, it is a collaborative process. The more people who work on it, the better the outcome will be. So we will keep a respectful mindset towards other teams, although we will have to make comparisons.

I would compare it to Plasma first, to the state channel, and then to ZK Rollup.

Plasma will want to achieve more than just execution availability, it also wants to achieve data availability. Availability is defined as putting both execution and data under the chain. For Rollup, the data is still on the chain, just the execution is off the chain. The same is true for Arbitrum, where the data for transactions is on the Etherchain. It just puts the computation and storage off-chain.

Plasma is trying to do more, and therefore faces more problems. At least for now, no team has a complete implementation of Plasma, and many teams have encountered many problems in implementing Plasma. Rollup, on the other hand, is a more viable solution because it has fewer things to implement, and seems to have more potential to solve scalability problems. This is why more and more people are now interested in Rollup, which is at least less difficult.

The difference with stateful channels is described again. A state channel is more like a contract where the counterparty is fixed, like I always open a deal with someone, the two of us, or play a game. But let’s imagine an open world where you don’t know who your counterparty is, it could be random, it could be someone you can’t trust. So there is a big limitation in the state channel.

But now for the team of Stateful Channel, they seem to have found an interesting application, which is to combine Stateful Channel and Rollup, turning Stateful Channel into a cross-chain bridge between Rollup and Rollup, or between Rollup and Ether. By combining them in this way, the ecosystem can be made more complete, forming a more complete, interesting and suitable for all.

For ZK Rollup, immediate proof is therefore required, so the cost is very expensive. Also, it is very inefficient for ZK’s editor to turn a high level language into the underlying language.

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