What is Arbitrum (ARB)?

Ethereum, the second-largest cryptocurrency and the largest altcoin, is an excellent platform for decentralized applications (dApps) and smart contracts. However, as its popularity has grown, it has begun to face serious scalability issues. Network congestion has led to slower transaction speeds and, in particular, exorbitant transaction fees (known as gas fees). This is where Arbitrum, a Layer-2 (Layer-2) solution for Ethereum, comes into play. Today, we will take a closer look at Arbitrum, which offers an innovative solution to a major problem facing the Ethereum ecosystem. Here are the details…

Definition and Origin of Arbitrum

Arbitrum is a technology package designed to improve Ethereum. Essentially, it is a Layer 2 scaling solution for the Ethereum blockchain. Layer 2 solutions are secondary layers designed to reduce the load on the main blockchain (Layer 1, in this case Ethereum). These solutions process a significant portion of transactions outside of Layer 1 and then send the summary or result of these transactions back to the main chain. This approach both increases transaction speed and reduces costs.

Arbitrum, one of the leading projects in this Layer 2 space, uses rollup technology to increase transaction speed. The specific type of rollup it uses is called “Optimistic Rollup.” Optimistic Rollups assume that all transactions executed off-chain are initially valid. Transactions are batch-processed and sent to the main Ethereum chain. If a transaction is alleged to have violated rules or contained errors, this can be proven on Layer 1 through a “fraud proof” mechanism. The system is secure as long as there is at least one honest validator, and faulty or fraudulent transactions are penalized. This “honest” approach and appeal process is the key feature that allows Arbitrum to leverage Ethereum's security.

You can use Arbitrum chains for the same purposes as Ethereum, such as using Web3 applications and deploying smart contracts. The difference is that your transactions are cheaper and faster. Its main product, Arbitrum Rollup, is an Optimistic Rollup protocol that offers the same security as Ethereum. Arbitrum provides nearly 100% compatibility with the Ethereum Virtual Machine (EVM/the environment where Ethereum smart contracts are executed). By making it easy to use existing Ethereum tools, developers can seamlessly migrate existing smart contracts without rewriting their code. Additionally, any EVM-compatible language like Solidity or Vyper works out of the box on Arbitrum, encouraging developer adoption. Technology updates like Arbitrum Nitro ensure high compatibility by compiling the core code of Ethereum's popular go-ethereum (“Geth”) client.

Arbitrum was developed by Offchain Labs, a startup founded in 2018 by three computer scientists from Princeton University. These founders are Ed Felten, Steven Goldfeder, and Harry Kalodner. So, when was Arbitrum launched? The Arbitrum mainnet was launched in September 2021. Offchain Labs announced that it had raised $120 million in a Series B funding round led by Lightspeed Venture Partners alongside the launch of the Arbitrum One mainnet. Arbitrum AnyTrust (Arbitrum Nova) was launched in July 2022. Arbitrum has gained significant momentum since its launch. For example, in 2023, it surpassed Ethereum in daily transaction volume. As a result, Arbitrum has established itself as a key player among EVM-compatible layer 2 solutions.

Arbitrum's History: Important Milestones

Arbitrum's journey began with a vision to solve Ethereum's scalability issues. Let's take a look at the most important milestones of this journey. It all started with the founding of a company called Offchain Labs. This company became the original developer of Arbitrum technology. After years of research and development, Arbitrum took its first major step.

2021: Arbitrum One mainnet launch

On September 1, 2021, Offchain Labs announced the official launch of the highly anticipated Arbitrum One mainnet. This launch propelled Arbitrum One into a leading position in the Layer 2 world. Arbitrum One is an Optimistic Rollup chain that implements the Arbitrum Rollup protocol and connects to the Ethereum main chain. At the time of the launch, it was noted that over 400 dApps, including leading DeFi protocols such as Aave, Balancer, Curve, SushiSwap, and Uniswap, would use or plan to use Arbitrum.

2022: Introduction of the Arbitrum Nova network

In August 2022, a new chain called Arbitrum Nova was announced, with the mainnet launch taking place in July 2022. Unlike Arbitrum One, Arbitrum Nova uses AnyTrust technology. AnyTrust aims to further reduce costs by introducing an additional trust assumption (Data Availability Committee - DAC). This makes it particularly suitable for applications requiring high transaction volumes and ultra-low costs. The project states that Nova's primary function is to support high-performance dApps, particularly those focused on gaming. While Arbitrum One offers purer reliability, Arbitrum Nova is optimized for scenarios seeking performance and affordability. DAC members include organizations such as ConsenSys, QuickNode, P2P.org, Offchain Labs, Google Cloud, and OpenSea. This distinction forms the fundamental difference between Arbitrum One and Nova. You can also see the difference between Arbitrum One and Nova in the table below:

Feature	Arbitrum One	Arbitrum Nova
TPS	20 times more than Ethereum	Up to 40,000 TPS
Decentralization	Broad level of network decentralization	Reduced decentralization due to off-chain applications
Stablecoin Support	Yes (more than 20 supported)	Yes (limited to USDC, USDT, and DAI)
Application Fit	DeFi and DApps requiring EVM support	Focused on gaming, NFTs, and social projects
Transaction Speed	Instant transaction finality	Instant finality (faster than Arbitrum One)
Architecture	Optimistic Rollup	Layer 2 with AnyTrust Protocol
EVM Support	Yes	Yes
Ecosystem Development	More widely adopted and visible among dApps	Steady, balanced growth

March 2023: ARB token airdrop and the creation of Arbitrum DAO

2023 was a pivotal year for the Arbitrum ecosystem. On March 23, 2023, Arbitrum launched ARB, the answer to the question “What is ARB token?” The ARB token marked the beginning of decentralized governance for the Arbitrum protocol. Arbitrum users who met certain criteria were eligible to receive 1,162,000,000 ARB tokens, representing 12.75% of the total token supply, through an airdrop. This airdrop was conducted to reward early adopters and supporters of the network and to promote decentralization. The airdrop distribution can be viewed in the table below:

Initial Allocation Percentage	Number of Tokens	Allocated To
35.28%	3.528 billion	Arbitrum DAO Treasury
26.94%	2.694 billion	Team and Contributors + Advisors
17.53%	1.753 billion	Investors
11.62%	1.162 billion	Arbitrum Platform Users (airdrop to user wallets)
7.5%	750 million	Arbitrum Foundation
1.13%	113 million	DAOs building on Arbitrum (airdrop to DAO treasuries)

Although the airdrop caused some issues such as temporary congestion and high fees on the token claim website, it signified a major change in Arbitrum's governance model. Following this busy day in 2023, Arbitrum surpassed Ethereum in terms of transaction volume.

Along with the ARB airdrop, Arbitrum DAO (Decentralized Autonomous Organization) was established. The creation of Arbitrum DAO enabled users to influence the network's fundamental decisions through the ARB governance token. The DAO's votes gained the power to directly influence on-chain actions without intermediaries. ARB holders can vote on issues such as protocol changes, proposals, and incentives. Additionally, the DAO elects a 12-member Security Council that can intervene in emergency situations.

2024: TVL surpasses billions of dollars in the ecosystem, with hundreds of dApp integrations

Since the launch of the Arbitrum One mainnet, the Arbitrum ecosystem has experienced meteoric growth. While the number of unique addresses has grown exponentially, over 400 Arbitrum dApps have emerged, with most of them in the DeFi space.

In addition, many projects are competing for users, developers, and TVL in the Ethereum Layer 2 landscape. Arbitrum leads the way in this area, along with other rollup-based Layer 2s such as Optimism. Data shows that Arbitrum is popular in terms of TVL as of May 2025. According to DeFiLlama, Arbitrum's TVL value is currently around $2.25 billion. Optimism is reported to be a close second with a TVL of $408 million and over 117 active protocols. This competition is driving the development of Layer 2 technologies. The Arbitrum vs. Optimism debate typically revolves around the types of rollups they use (Optimistic vs. Zk-Rollups) and data availability mechanisms (full data in Arbitrum One, DAC in Nova). However, it is emphasized that both platforms play a significant role in Ethereum scaling.

Why is Arbitrum valuable?

So, with so many blockchains and Layer 2 solutions on the market, what makes Arbitrum special and valuable? Why do so many users and developers prefer Arbitrum?

High-speed transactions

First and foremost, Arbitrum offers lower costs and high transaction speeds while leveraging Ethereum's security. Without compromising Ethereum's robust and proven security, it offloads most transactions off-chain, reducing the load on the Ethereum mainnet. This significantly lowers gas fees and increases transaction throughput (the number of transactions processed per unit of time). Batching transactions and storing transaction data in compressed form form the foundation of cost savings. Users experience fast transaction confirmations at much lower fees compared to Ethereum. Additionally, the Arbitrum bridge enables the transfer of assets in a decentralized and reliable manner.

EVM compatibility

The second key point is that Arbitrum is 100% compatible with EVM, making it easier for developers to transition. Moreover, this is not just “almost” compatibility but bytecode-level compatibility. This makes it extremely easy for developers to migrate their dApps to Arbitrum using existing Ethereum smart contracts and tools (such as Truffle, Hardhat, and Remix) without the need to learn a new language or environment. This seamless integration encourages more projects to join the Arbitrum ecosystem.

ARB token usage and price

Thirdly, the ARB token is used for protocol governance and DAO decisions. As mentioned earlier, ARB is an ERC-20-based token, which is the answer to the question, “What is Arbitrum's native ARB token?” ARB holders have a say in the project's future through the Arbitrum DAO. Important decisions such as protocol changes, fee adjustments, and ecosystem incentives are determined by ARB holders' votes. This decentralized governance model ensures that the platform is community-driven. Additionally, validator nodes can stake ARB to secure the network and earn rewards. This is just one of the use cases for ARB coin.

Meanwhile, the price of the ARB token and its listing on many exchanges are also among the network's strengths. As of May 2025, ARB is trading around $0.30. The coin reached its latest record high of $2.4 on January 12, 2024. It hit its lowest point in April 2025.

Strong technical structure

Fourth, Arbitrum's technological infrastructure is constantly evolving. The Arbitrum Nitro update has improved transaction compression and performance. Nitro is the technology that forms the foundation of chains such as Arbitrum One, Arbitrum Nova, and Arbitrum Sepolia. Nitro deepens Ethereum compatibility with its “Geth-at-the-core” architecture, offering significant improvements such as advanced calldata compression, separate contexts for execution and error proofing, and Ethereum mainchain gas compatibility. Nitro enhances performance and security by compiling local code (optimized for speed) and WASM (optimized for portability and security) separately for execution and proofing. Arbitrum's AnyTrust technology (a variant of Nitro) is also a significant step toward reducing costs using DAC. Innovations like Stylus enable efficient smart contract creation in popular languages such as Rust, C, and C++, opening new horizons for developers.

A massive ecosystem

Fifth, Arbitrum has a vibrant and growing ecosystem. It offers an active ecosystem for DeFi, NFTs, gaming, and social dApps. Arbitrum's innovative framework has made a significant impact across various sectors, including decentralized finance (DeFi), non-fungible tokens (NFTs), and blockchain-based games. Major DeFi platforms like Uniswap, SushiSwap, GMX, and Aave integrate with Arbitrum to provide users with faster and more cost-effective experiences. NFT marketplaces and games also leverage Arbitrum for low fees and fast interactions. These integrations signal success for Arbitrum's DeFi integrations. Additionally, a wide range of use cases, including cross-chain applications, decentralized exchanges (DEXs), enterprise solutions, and even social applications, demonstrate Arbitrum's potential.

Timeboost is another valuable feature unique to Arbitrum. This is a change in the transaction ordering policy of the Arbitrum sequencer. Timeboost adds a “time boost” to the existing first-come, first-served policy, allowing a transaction to pay a priority fee.

In summary, Arbitrum's value stems from its inheritance of Ethereum's security, the performance and cost advantages it brings with Layer 2 rollup technology, its developer-friendly EVM compatibility, its decentralized governance through the ARB token, its technological advancements such as Nitro, and its vibrant ecosystem. These features make Arbitrum an invaluable solution for the future of the Ethereum ecosystem.

Who founded Arbitrum?

Behind every successful project is a visionary team, and Arbitrum is no exception. The answer to the question “Who founded Arbitrum?” actually points to a developer firm called Offchain Labs and its three founders rather than a single individual. Arbitrum technology was developed by Offchain Labs. Founded in 2018, Offchain Labs is the “brain trust” behind Arbitrum and specializes in Layer 2 scaling solutions. The company has been dedicated to blockchain research and development for over five years.

The founding team of Offchain Labs, and therefore Arbitrum, consists of three individuals: Ed Felten, Steven Goldfeder, and Harry Kalodner. All three are computer scientists from Princeton University. They are individuals with both academic and practical depth in the field of blockchain. One of the prominent members of the team is Ed Felten: a professor of computer science at Princeton University and former White House technology advisor. Felten's academic career and role as a technology advisor have brought important scientific and strategic perspectives to the team. He is also the Co-Founder and Chief Scientist of Offchain Labs. He has shared his optimism about Optimistic Rollups and his role in the development of protocols such as BOLD through blog posts.

Steven Goldfeder is the Co-Founder and CEO of Offchain Labs. He holds a PhD from Princeton. Harry Kalodner serves as Co-Founder and CTO (Chief Technology Officer). He is also a PhD candidate at Princeton.

This team has a strong foundation in both academic and industrial levels. By combining scientific research with practical engineering, they have pioneered the development of Layer 2 solutions like Arbitrum. Offchain Labs continues to innovate and develop products and technologies such as Arbitrum One, Arbitrum Orbit, Stylus, and BOLD. Additionally, they acquired Prysmatic Labs, the creators of Prysm, Ethereum's leading consensus client, in 2022.

Frequently Asked Questions (FAQ)

Finally, you can find answers to your questions about Arbitrum below:

• What is Arbitrum and how does it work? What is the Arbitrum coin? Arbitrum is a Layer 2 scaling solution built on top of Ethereum. It processes transactions faster and at lower costs compared to Ethereum. Transactions are first processed on Arbitrum and then batch-transmitted to the Ethereum mainnet.
• What is the difference between Arbitrum and Ethereum?: Ethereum is a Layer 1 blockchain; Arbitrum is a Layer 2 protocol built on top of it. Arbitrum uses Ethereum's security while offering lower transaction fees and higher speeds.
• What is the ARB token used for?: ARB is the governance token of the Arbitrum ecosystem. It is used to vote in the Arbitrum DAO, influence developments in the protocol, and make certain governance decisions.
• Which dApps are integrated with Arbitrum? Arbitrum is integrated with many popular DeFi applications such as Uniswap, GMX, SushiSwap, Aave, and Curve. These dApps can be used on the Arbitrum network with lower transaction costs.
• How much are transaction fees on Arbitrum? Transaction fees on Arbitrum are significantly lower than on Ethereum. They typically range from a few cents to a few dollars, depending on network congestion and transaction type.
• How does the Arbitrum DAO work? The Arbitrum DAO is a decentralized governance structure guided by the votes of ARB token holders. The community can propose and vote on issues such as network upgrades, grant programs, and budget allocations.

For more information about Arbitrum and Ethereum Layer-2 technologies, don't forget to follow our JR Kripto Guide series!