Arbitrum is the Latest Layer 2 to Join the Ethereum Scaling Race

Arbitrum, the Layer 2 scaling solution for Ethereum using optimistic rollups, will open its mainnet to developers on Friday and it’s already attracting one of DeFi’s biggest fish — Uniswap. That could mean help is on the way for DeFi investors who are freaking out over soaring gas fees.

The launch is the latest sign that competition in Layer 2, the critical upgrade to the Ethereum ecosystem, is heating up. Arbitum is going mano-a-mano with Optimism, the other leading player in the optimistic rollup space. The prize: Bragging rights as the No. 1 provider of a live and open mainnet that doesn’t compromise blockchain security. 

Following Arbitum’s May 28th launch, whitelisted developers who fill out this form will be able to launch on mainnet. Optimism whitelisted Synthetix, the synthetic assets protocol in January, as well as “at least a dozen” early adopter projects as per the Layer 2 solution’s recent blog post.

Developers Weigh Rivals

Now developers will weigh which provider has the edge. For starters, Arbitrum uses multi-round fraud proofs to detect bogus transactions on Layer 2. In contrast, Optimism relies on single-round fraud proofs.

A multi-round fraud proof concentrates on exactly where in the Layer 2 rollup the dispute is and only executes that portion on Ethereum’s Layer 1. A single-round fraud proof necessitates more transactions from the Layer 2 to be processed on Ethereum’s Layer 1.

On a top level, Arbitrum’s multi-round fraud proofs take longer to resolve, while using less gas on the main chain, while Optimism’s single-round proofs, at one week, resolve more quickly, but use more gas when posting to Ethereum’s Layer 1. That potentially pushes up against the blockchain’s per block gas limit.

Major Selling Point

According to a post by Ed Felten, co-founder of Offchain Labs which developed Arbitrum’s solution, “the choice between one-round and multi-round boils down to a tradeoff between on-chain cost and time to resolve a dispute.” 

Other tradeoffs include ease of deployment for projects seeking to alleviate their users of high gas fees.

A major selling point for Arbitrum is that it doesn’t require developers “to change a single line of code,” as MCDEX, a derivatives trading platform building on the solution, said on Twitter

Mariano Conti, former head of smart contracts at the Maker Foundation agreed, telling The Defiant that “being able to deploy the same code to Arbitrum that I would on mainnet is a plus.” Optimism generally requires developers to tweak their code, while Arbitrum’s system allows developers to deploy the same exact code to its Layer 2.

Deep Partnership

Interestingly neither Arbitrum nor Optimism have launched a token for their Layer 2 solutions, leaving some wondering how to speculate on the scaling technologies’ success.

Chainlink has a deep partnership with Arbitrum, which means that the oracle network’s nodes may operate Arbitrum validator nodes. 

More specifically, according to a post from Felten, because Layer 2s mean computation happens off-chain “Dapps can securely outsource expensive computational tasks — tasks that would be prohibitively expensive to do on-chain — to Arbitrum-enabled Chainlink nodes, while remaining anchored to Ethereum to automatically resolve disagreements arising in the arbitration period.”

While the direct impact on Chainlink’s LINK token is unclear, the deep partnership has formed what crypto researcher Hasu called a “speculation vacuum.” As Arbitrum’s mainnet launch has generated substantial interest without a token, it appears that investors looking for the next best thing have found it in LINK, as shown by tweets equating LINK investments to Arbitrum investments.

Uniswap’s Plans

While Arbitrum seemingly popped up overnight to the average crypto enthusiast, the project’s developer launch prompted andy, as he goes by on Twitter, to write a proposal on Uniswap’s governance forum to deploy the automated market maker’s (AMM) V3 to the Layer 2 solution.

The proposal quickly gained steam as Compound Finance founder Robert Leshner then created a Snapshot poll to gauge interest among UNI holders, who were able to vote with their tokens. The results were overwhelmingly in favor of V3’s deployment to Arbitrum with 41.41 million UNI cast in favor and zero against.

In response to the Snapshot, Uniswap founder, Hayden Adams, said that the protocol will “support the community by deploying the v3 smart contracts to Arbitrum!”

Other major DeFi projects like Bancor already have contracts deployed to Arbitrum’s testnet. Sushiswap too, is in preparation to ship to Arbitrum, according to 0xMaki, referred to as the exchange’s Fearless Leader on the project’s website.

In all, with projects looking to ship to Arbitrum, while Uniswap is continuing to work with the Optimism team according to Adams, the competition between the optimism rollup solutions is shaping up to be “one for the ages,” as Larry Cermack, director of research at The Block, put it.