Arbitrum

Arbitrum is a family of layer 2 networks that process transactions off Ethereum and post the results back to it. Its main network, Arbitrum One, is an optimistic rollup: transactions are assumed valid unless someone proves otherwise with a fraud proof during a challenge period. Arbitrum was developed by Offchain Labs and is governed by the Arbitrum DAO through the ARB token.¹

HistoryReport an error

Research origins

Arbitrum began as research at Princeton University. Ed Felten was a professor of computer science there and had served as Deputy US Chief Technology Officer in the Obama White House from 2015 to 2017.² Steven Goldfeder was a co-author of the textbook Bitcoin and Cryptocurrency Technologies,³ and Harry Kalodner was a doctoral student working on blockchain analysis.⁴

The design was published at the USENIX Security Symposium in 2018 by Kalodner, Goldfeder, Xiaoqi Chen, S. Matthew Weinberg, and Felten.⁵ The 2018 paper described a system in which a small set of managers ran a contract off-chain and any one of them could challenge a false claim about its result on-chain.⁶ Felten, Goldfeder, and Kalodner founded Offchain Labs in 2018 to build it. By 2019 they had adapted the design into an optimistic rollup, in which anyone, not only a fixed set of managers, can challenge.⁷

In 2021 Offchain Labs raised US$120 million: a US$20 million Series A in April and a US$100 million Series B led by Lightspeed Venture Partners in August, at a US$1.2 billion valuation.⁸ In October 2022 it acquired Prysmatic Labs, the developer of Prysm, one of Ethereum's main consensus clients.⁹

Launch

After an open public testnet in October 2020,¹⁰ Arbitrum One opened to developers on 28 May 2021 and to the public on 31 August 2021. It was one of the first general-purpose rollups on Ethereum, and because it ran unmodified EVM contracts, many Ethereum applications deployed to it with few changes. Fraud proofs worked from launch, but only an allowlisted set of validators could post them.¹¹

In June 2022 Offchain Labs paused "Arbitrum Odyssey", a promotional campaign, after the traffic it generated pushed up fees on the network.¹²

On 9 August 2022 Offchain Labs launched Arbitrum Nova, a cheaper chain built on AnyTrust technology. Nova stores transaction data with a data availability committee rather than on Ethereum and assumes that at least two committee members are honest.¹³ Reddit used Nova for its Community Points tokens until it ended the programme in 2023.¹⁴

On 31 August 2022 Arbitrum One moved to Nitro, a rewrite that runs a fork of Geth for execution and compiles it to WebAssembly for fraud proofs. Nitro also compressed the transaction data it posted to Ethereum, which lowered fees.¹⁵

Token and DAO

The ARB token was created on 16 March 2023 and airdropped to users on 23 March 2023. Its initial allocation was:¹⁶

The DAO can mint up to 2% of supply per year. Tokens allocated to the team and investors were locked for one year and then unlocked monthly over three years.¹⁶

The DAO took control of Arbitrum One and Nova's upgrade keys at launch.¹⁷ Within weeks its first proposal, AIP-1, became a controversy (see below). The first Security Council election began in September 2023.¹⁸

Incentive programmes and treasury

Much of the DAO's activity has been spending its treasury. The Short-Term Incentive Program (STIP), approved in late 2023, gave 50 million ARB to applications on Arbitrum to attract users.¹⁹ It was followed by further incentive programmes in 2024.²⁰

In June 2024 the DAO approved the Gaming Catalyst Program, a 225 million ARB fund for games on Arbitrum, run by Arbitrum Gaming Ventures.²¹ Members questioned its results, and proposals to recall the funds were made in 2024 and 2025. On 2 July 2026 the DAO voted to wind it down, stopping new investments and returning about 144 million ARB to the treasury.²²

Fees paid to the sequencer on Arbitrum One, minus the cost of posting data to Ethereum, go to the DAO treasury. On Nova, a portion goes to infrastructure operators.²³

Later upgrades

• Atlas (March 2024) let Arbitrum post data to Ethereum as blobs after Ethereum's Dencun upgrade, cutting fees sharply.⁴⁰
• Stylus (3 September 2024) lets developers write contracts in Rust, C, and C++ compiled to WebAssembly, alongside Solidity.⁴¹
• BoLD (12 February 2025) replaced the allowlisted validator set with a permissionless dispute protocol that bounds the delay any challenger can cause.³⁶⁴²
• Timeboost (17 April 2025) introduced an auction for an "express lane" that gave the winner a short time advantage in transaction ordering. In September 2026, after a constitutional AIP, Arbitrum One replaced it with Priority Gas Auctions, which order transactions by the priority fee they pay.⁴³⁴⁴
• ArbOS upgrades continued with ArbOS 40 Callisto (17 June 2025), ArbOS 51 Dia (8 January 2026), and ArbOS 61 Elara (20 August 2026).⁴²

On 2 October 2026 the Security Council paused new Stylus contract activations on Arbitrum One and Nova, citing a denial-of-service risk in WebAssembly handling. Existing Stylus contracts keep running.²⁴

Arbitrum chains

Teams can launch their own chains on Arbitrum's software stack. These were first branded Arbitrum Orbit, announced in March 2023,²⁵ and are now called Arbitrum chains. A chain can settle to Arbitrum One as a layer 3, or directly to Ethereum, and since January 2024 can use its own gas token.²⁶ Under the Arbitrum Expansion Program, launched by the Arbitrum Foundation in January 2024, chains that settle anywhere other than Arbitrum One or Nova pay 10% of their net protocol revenue, most of it to the DAO.²⁷

Examples include Xai, a gaming chain,²⁸ and ApeChain, built for the ApeCoin community.²⁹ On 30 June 2025 Robinhood began issuing tokenized stocks to European customers on Arbitrum One,³⁰ and on 1 July 2026 it launched Robinhood Chain, an Arbitrum chain of its own.³¹

TechnologyReport an error

Transaction flow

A sequencer, run by Offchain Labs, receives transactions, orders them, and publishes the order in a real-time feed, giving users confirmation in well under a second. A batch poster compresses batches of transactions and posts them to Ethereum, as blobs where possible. Once the batch is finalized on Ethereum, its order cannot change, even though its result has not yet been proven.³²

Users can bypass the sequencer by submitting transactions directly to a contract on Ethereum, called the delayed inbox. If the sequencer does not include them within at most about 24 hours, anyone can force them into the chain. This protects users from censorship but not from delay.³²

Messages from Ethereum to Arbitrum, such as deposits, use "retryable tickets", which can be re-executed if they fail the first time.³³ Messages from Arbitrum to Ethereum, such as withdrawals, can be executed on Ethereum only after the challenge period has passed.

Execution

Nitro runs a modified version of Geth, Ethereum's most widely used execution client, so contracts behave as they do on Ethereum. A layer called ArbOS handles what is specific to Arbitrum, such as pricing the cost of posting data to Ethereum and processing cross-chain messages. Gas prices rise when demand exceeds a target throughput, known as the speed limit.³⁴

Stylus adds a second virtual machine that runs WebAssembly. Stylus and EVM contracts can call each other. Programs that do heavy computation can run much more cheaply in Stylus than in the EVM.³⁵

Proving

Validators run the same code and post assertions to Ethereum about the resulting state. Each assertion requires a bond. If an assertion is wrong, another validator can challenge it. The two sides then bisect their disagreement, round by round, until it narrows to a single instruction, which a contract on Ethereum executes to decide who is right. The loser forfeits their bond. Withdrawals wait for the challenge period, about 6.4 days, so that there is time to challenge.³⁶

Before BoLD, an attacker could in principle delay a correct assertion by challenging it repeatedly with different identities. BoLD lets a single honest party defend the correct state against any number of challengers within a fixed time.³⁶

L2Beat classifies Arbitrum One as a Stage 1 rollup: its fraud proofs work, but the Security Council can still override them in an emergency.³⁷

GovernanceReport an error

The Arbitrum DAO votes with ARB on Arbitrum Improvement Proposals (AIPs). Token holders can delegate their votes to delegates, though only a small share of ARB, around a tenth, is delegated.³⁸ Proposals are usually discussed on the DAO forum, tested in an off-chain Snapshot poll, and then put to a binding on-chain vote.

Constitutional proposals, which change the protocol or the constitution, need a higher quorum and pass through delays that give users time to exit before a change takes effect.¹⁷ Non-constitutional proposals, such as treasury grants, need a lower quorum.

The Security Council has 12 members, elected in two cohorts of six, one every six months. It can act immediately with 9 of 12 signatures in an emergency, and can make non-emergency upgrades with 9 of 12 signatures subject to the normal delays.¹⁷³⁷ The Arbitrum Foundation, based in the Cayman Islands, supports the DAO.³⁹

Incidents and controversiesReport an error

• AIP-1 (April 2023). The foundation's first proposal asked the DAO to ratify the whole governance framework, including a 750 million ARB allocation to the foundation. It emerged that the foundation had already moved about 50 million ARB before the vote, lending 40 million and converting 10 million to fiat. About 78% of votes in the Snapshot poll were against. The foundation first called the vote a ratification, then withdrew the proposal and split it into AIP-1.1 and AIP-1.2.⁴⁵
• Bridge bug (2022). In September 2022 a white-hat researcher reported a bug in Nitro's bridge that could have allowed deposits to be stolen. It was fixed before it was exploited, and the researcher received a 400 ETH bounty.⁴⁶
• Sequencer outages. Because a single sequencer orders transactions, outages stop the network. In December 2023 a surge of inscription transactions halted Arbitrum One when its batch poster stopped posting.⁴⁷
• KelpDAO freeze (April 2026). On 21 April 2026 the Security Council used its emergency powers to freeze about 30,766 ETH linked to an exploit of KelpDAO's rsETH token. A DAO vote later backed releasing the funds to victims.⁴⁸ The episode showed both the protective use and the reach of the council's powers.
• Centralization. The sequencer is operated by Offchain Labs, and the Security Council can upgrade contracts without delay in an emergency.
• Token-holder value. ARB gives governance rights but no claim on sequencer revenue, which goes to the DAO treasury.²³ Critics have argued that incentive programmes paid out large amounts of ARB for little lasting activity.

TimelineReport an error

See alsoReport an error

• Ethereum
• Hyperliquid, whose original USDC bridge is deployed on Arbitrum

ReferencesReport an error