Arbitrum is a Layer 2 network for Ethereum. It executes transactions on its own chain, then posts compressed transaction data to Ethereum. Users get much lower fees, and the record of what happened is stored on Ethereum, where anyone can check it. Arbitrum was developed by Offchain Labs, a company that grew out of research at Princeton University. Its main chain, Arbitrum One, opened to the public in August 2021 and has been among the largest Layer 2 networks by value held ever since.
How Arbitrum Works
Arbitrum is an optimistic rollup. The ethereum.org optimistic rollup documentation describes the general design.
A component called the sequencer receives transactions, orders them and gives users a near-instant confirmation. It then batches the transactions and posts the data to Ethereum. Validators publish claims about the resulting state of the chain.
"Optimistic" means those claims are assumed correct unless someone disputes them. There is a challenge period of about one week. During that time, any validator who believes a claim is wrong can dispute it, and an interactive fraud proof on Ethereum settles which side is right. The dishonest party loses its stake. Only one honest validator is needed for the system to stay correct.
The challenge period has one visible effect for users. A withdrawal from Arbitrum to Ethereum through the official bridge takes about a week to complete. Third-party bridges offer faster exits for a fee, with their own risks.
Fees and Gas
Fees on Arbitrum are paid in ETH, not in ARB. A fee has two parts: the cost of execution on Arbitrum and the cost of posting data to Ethereum. Ethereum's Dencun upgrade in March 2024 introduced a cheaper way for rollups to post data, and fees on Arbitrum dropped sharply afterward. Simple transactions typically cost a few cents or less.
The network is compatible with the Ethereum Virtual Machine. Contracts written for Ethereum can be deployed with little or no change, and the same wallets work. The Arbitrum documentation covers the technical details.
Arbitrum One and Arbitrum Nova
- Arbitrum One: the main chain. It is a full rollup, with all transaction data posted to Ethereum. Most applications and most value sit here.
- Arbitrum Nova: a second chain aimed at cheap, high-volume uses such as games and social apps. It uses a design called AnyTrust, where a committee stores the transaction data instead of posting all of it to Ethereum. That lowers costs and adds a trust assumption about the committee.
Key Upgrades
- Nitro (2022): a rebuild of the technology stack that raised capacity and cut fees.
- Orbit (2023): a framework that lets teams launch their own chains using Arbitrum technology, settling to Arbitrum or to Ethereum.
- Stylus (2024): lets developers write smart contracts in languages such as Rust and C++, alongside Solidity.
- BoLD (2025): a new dispute protocol that opens validation to anyone, without a permissioned list of validators.
The ARB Token
ARB is the governance token. It launched in March 2023 with an initial supply of 10 billion. A large airdrop sent a share of that supply to wallets that had used the network before a snapshot, and a further portion went to DAOs building on Arbitrum. The rest was allocated to the DAO treasury, the team and investors, with vesting schedules for insiders.
ARB holders vote in the Arbitrum DAO, which controls protocol upgrades, the treasury and the surplus revenue from the sequencer. The Arbitrum DAO governance documentation sets out how votes work. An elected Security Council can act quickly in an emergency.
Two points are often misunderstood. ARB is not used to pay gas. Holding ARB also does not entitle anyone to a share of network fees. Its role is governance.
The Ecosystem
Arbitrum hosts many of the largest DeFi protocols. Uniswap and Aave both have deployments there. GMX, a decentralized perpetuals exchange, grew up on Arbitrum, and Camelot is a DEX built for Arbitrum projects. The network also holds a large amount of stablecoins.
Activity is spread across the main chain and the Orbit chains that settle to it.
Risks to Understand
- Sequencer centralization: a single sequencer currently orders transactions. If it goes offline, the chain can stall until it returns, though users have a slower route to force transactions through Ethereum.
- Upgrade risk: the contracts can be upgraded by governance and, in emergencies, by the Security Council. Users rely on those parties acting properly.
- Bridge risk: assets on Arbitrum are held by bridge contracts on Ethereum. A bug there would affect everything on the network.
- Competition: Base, Optimism, zkSync and other Layer 2 networks compete for the same users and applications.
- Token dilution: vesting releases to insiders and DAO spending add to circulating supply over time.
Common Mistakes
Sending funds from an exchange on the wrong network is the classic error. Arbitrum addresses look identical to Ethereum addresses, so always confirm that both sides support the Arbitrum network. Users also arrive with tokens but no ETH and then cannot pay gas. Others expect an instant withdrawal through the official bridge and are surprised by the one-week wait. Finally, tokens bridged through different bridges can be different assets with the same name.
Nothing in this article is financial advice.
Key Arbitrum Facts
- Type: optimistic rollup on Ethereum
- Developer: Offchain Labs
- Arbitrum One public launch: August 2021
- Gas token: ETH
- Governance token: ARB, launched March 2023
- Initial ARB supply: 10 billion
- Withdrawal time through the official bridge: about one week
Track on CoinMarketGuy
The Arbitrum price page shows the live ARB price, market cap, circulating supply and chart. Since gas is paid in ETH, the Ethereum price page is the other number to watch. The DEX page lists active liquidity pools with volume and liquidity.