Arbitrum vs Optimism: 2 of the largest layer 2 (L2) optimistic rollup solutions for Ethereum. Launched in 2021, both sit at number one and two, respectively, in terms of total value locked (TVL) for all L2 chains that derive their security from Ethereum.
Given that Arbitrum and Optimism compose significant parts of the broader Ethereum ecosystem, today’s article will offer a deep-dive comparative analysis of both L2s. Specifically:
- What are they;
- How do they work;
- How do they compare in terms of market, performance, and product statistics; and,
- How do they compare in terms of tokenomics and governance?
Let’s get started.
What Are Arbitrum and Optimism
Arbitrum and Optimism are both L2 optimistic rollups for Ethereum.
L2s: L2s are blockchain networks built “on top” of underlying L1 blockchain networks – all for the purpose of improving the L1’s scalability and efficiency. Like a new highway stacked directly above a congested one, L2s execute transactions on separate network infrastructure, and then batch over compressed, synthesized transaction data onto the L1 for validation. Ethereum is the congested highway, and Arbitrum and Optimism are new highways stacked on top.
Optimistic Rollups: Hence the name – optimistic rollups assume that most economic actors, most of the time, are acting with honesty. Thus, optimistic rollups are L2 solutions which assume that the executed transactions on the L2 are valid and correct. This optimism creates efficiency – optimistic rollups do not expend energy resources to prove the validity of every transaction.
How Do Arbitrum and Optimism Work
Arbitrum and Optimism use L2 nodes (referred to as “sequencers”) to send over batched transaction data to Ethereum for validation. One prerequisite for sequencers is the requirement to post a bond on Ethereum. This bond economically disincentivizes sequencers to commit fraud or abuse.
After a sequencer sends transaction data to the L1, that data must first pass through a 7 day challenge “window” before validation. During the challenge window, anyone (referred to as “challengers”) can dispute a transaction they believe to be incorrect. To dispute a transaction, challengers must post a bond onto the L1, and submit a “fraud-proof”. The fraud-proof ultimately indicates the honest party, the liar, and the correct state of the blockchain.
Thus, whenever transaction data is sent from the L2 to the L1, there are three possible outcomes:
- The transaction data is not challenged during the challenge window. Thus, the transactions are deemed accurate and are validated on the L1.
- The transaction data is challenged, and the fraud proof contradicts the sequencer’s submission. Here, the L2 will re-execute the transactions and update the blockchain state accordingly. The sequencer is penalized and the challenger is rewarded.
- The transaction data is challenged, and the fraud proof corroborates the sequencer’s submission. Here, the transactions are deemed accurate and are validated on the L1. The sequencer is rewarded and the challenger is penalized.
The main difference between Arbitrum and Optimism is their respective utilized fraud-proofs. Each uses different types, which in turn has separate implications for each system.
Arbitrum = Multi-Round Fraud…
David learned about bitcoin in 2015 and has closely followed the crypto industry since then. His professional interests center around bitcoin, layer-one blockchain protocols, decentralized finance, and clean energy. An attorney by trade, David has held licenses to practice law in the State of Hawaii and in US federal courts.
