The Ethereum blockchain has an innate scalability issue, meaning it can only process 30 transactions per second, so post-merging activity has migrated to scaling solutions, which could lower gas fees. Network congestion arising from the sheer volume of transactions results, more often than not, in delays and skyrocketing fees. As a decentralized network, Ethereum can only provide two of three benefits at any given point in time in terms of security, decentralization, and scalability. Layer 2 protocols are an efficient way to overcome challenges, offloading some of the transaction processing and data storage from the main chain.
Ethereum’s existing high gas prices react to the limited number of transactions that can be enabled using a single block. Therefore, miners select the highest-priced transactions as their preference, so the outcome is an increase in gas fees. At present, there’s no single solution that can address the trilemma. Using Layer 2 solutions like Arbitrum or Optimism can address the sustainability aspect, providing a quick fix. Layer 2 is a network that operates along with the underlying blockchain to enhance scalability and efficiency. In spite of similarities, Arbitrum and Optimism are completely different from one another. But which one is the best?
Arbitrum Makes the Ethereum Blockchain Faster and Easier to Use
Arbitrum, an implementation of optimistic rollups, is one of the many solutions to the congestion and high gas prices on the Ethereum network. Transactions are initiated and executed by means of smart contracts; the transaction fee increases if the number of users grows and more transactions need to be processed by the network. Arbitrum executes the smart contract, and Ethereum stores the data. In other words, Arbitrum undertakes transaction processing and batching, achieving scalability by employing optimistic rollups, so it’s capable of achieving 10 to 100 times better results as far as scalability is concerned.
Ethereum transactions are processed off-chain before being settled on-chain, so it’s no longer necessary for the blockchain to validate separate transactions. Users can transfer their assets between both networks without much difficulty via bridging, so they can deposit Ethereum (or any ERC-20 tokens) from Ethereum to Arbitrum One or the other way around. Due to this interoperability, users can leverage Arbitrum’s scalability advantages while still being able to interact with the Ethereum ecosystem. The only prerequisite is to have a Web3 wallet installed and the native currency of the parent chain to bridge digital assets from one destination to another.
Arbitrum Orbit, the eagerly-awaited custom blockchain, is ready for mainnet deployment, so developers can create their own chains using Arbitrum’s scaling solutions, including Arbitrum One, Arbitrum Nova, and testnets Sepolia and Arbitrum Goerli. A crucial feature of Orbit is its integration with a substitute data availability solution, namely AnyTrust, with the purpose of reducing transaction fees. Rather than posting data batches to the Layer 1 chain, the sequences send the batches to the Data Availability Committee, posting the results instead of the full data. Should there be a dispute challenge, it’s mediated on a high replication subnet from the last accepted state using the bisection method.
Optimism Is Designed to Use the Stronger Security Guarantees of Ethereum
As an ever-increasing number of people join the Ethereum network, it becomes more expensive and slower to use. In the meantime, Ethereum has devised a solution: Optimism. Its aim is to help the main network run smoothly by taking some of the transaction load, operating on the principle of impact=profit, where individuals who make a positive contribution are rewarded accordingly. In lieu of processing transactions directly on Ethereum, they’re consolidated and verified in batches, considerably increasing the network’s throughput. Designed to be open source, the Optimism Stack encourages users to explore, modify, extend, and test the code as required.
Optimism uses single-round fraud proofs executed on Layer 1, which involves re-executing the challenged transactions on the Ethereum Mainnet to establish whether a challenge is valid for confirming the legitimacy of a rollup transaction. Indeed, this method can seamlessly detect fraud, but it comes with relatively high costs. The results in Optimism have a Solidity compiler, so before the smart contracts can be deployed, they must be compiled to bytecode for the Ethereum Virtual Machine. Optimism uses token emissions, not to mention the revenue generated, to fund community projects by coordinating volunteers at a large scale.
Optimism supports various DeFi wallets, and even if you can manually configure your wallet for Optimism, you should better use an app like SushiSwap and indicate Optimism as your network. Ethereum is necessary to cover gas fees, so send some coins to your wallet from another chain, such as the Ethereum Mainnet; you can use any of the bridges that support Optimism. The OP Mainnet has undergone the Bedrock upgrade this year, optimizing its technology for modularity and enabling third-party developers to launch custom Layer 2 networks on top of the OP Stack. Optimism is the first Layer 2 to run on a multi-client ecosystem.
Closing Thoughts
As you’ve been able to see, Arbitrum and Optimism are pursuing different approaches to grow their market share, one focusing on minimizing changes to the existing smart contracts, while the other is taking a more opinionated approach by demanding certain code optimizations. Developers and users alike stand to benefit from the increased transaction throughput, reduced gas fees, and enhanced experience these scaling solutions provide. Arbitrum takes the winning position, boasting a significantly higher total value locked, daily active users, and processes. Nevertheless, Optimism is rapidly catching up, and only time will tell if it’ll keep going strong.
For the Ethereum blockchain to be perfect, it must fulfill three fundamental properties – security, decentralization, and scalability. Nonetheless, because of the way it’s designed, it’s difficult, if not impossible, to achieve. The first solution that comes to mind is to use a Layer 2 network, i.e., an off-chain solution to reduce bottlenecks with scaling and data. Arbitrum and Optimism have their unique benefits, so you can choose one based on your needs.
