Layer-two solutions have been the backbone of the Ethereum network. Most of them have reduced transaction fees and improved scalability. Two of the most popular layer 2 protocols are Arbitrum and Optimism. Both have their pros and cons, but which one is the best? In this article, we shall compare Arbitrum vs Optimism in terms of speed, usability, and fees, among other metrics.
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Layer-2 blockchains sit on top of Ethereum’s mainnet as extensions but are separate from it. L2 blockchains came about from efforts to implement off-chain scaling solutions. Note that L2 solutions still use the security of the Ethereum mainnet but are controlled by individuals, organizations, or communities based on their use case.
The L2 landscape has grown rapidly with Arbitrum, Optimism, and ZkSync taking the lead. The state of Layer-2 development is such that there are now several L2 solutions for Ethereum’s fee and speed problems. They include sidechains, state channels, plasma, and rollups.
As is now clear, rollups are just one of several Ethereum scaling technologies and have been used to build extremely cheap and fast L2 blockchains. The DeFi TVL on L2’s has continued to blow in the recent past, with Arbitrum taking the lead.
In the history of finding solutions to the Ethereum scaling problem, rollups are the latest cutting-edge technology on this front. There are two types of rollups (so far):
- Optimistic rollups
These two were created to solve one specific problem – determining whether the data sent to the Ethereum mainnet from L2s is valid.
What Are Optimistic Rollups?
An Optimistic rollup is an Ethereum scaling technology that works by taking transactions off the main Ethereum network for off-chain computation. After the transactions have been executed, they are returned to the mainnet. The reduced network load on the Ethereum main network allows for faster processing of transactions with cheaper fees.
Optimistic rollups rely on optimism. As the name suggests, they have “faith” that the data sent to the mainnet is correct and valid. However, whenever there is invalid data, there is a mechanism for dispute resolution.
How is the Dispute Resolution Carried Out?
When fraudulent transaction data is detected, the party that detects the faulty data can offer fraud-proof (evidence that a state transition was incorrect) against that particular transaction. Following this, both parties (sender and detector) will stake their ETH, which would be lost if any misconduct from any of them is determined.
The suspicious transaction will be executed again on the mainnet with a manager contract that ensures the transaction is replayed with the exact state when it was initially performed on the rollup chain.
In layman’s language, there are smart contracts (programs) set in place to make sure that a faulty transaction does not go through. Any faulty transaction will be replayed on the main L1 Ethereum network and examined for errors. If fraudulent activity is found, the sender of the transaction will lose their (already staked) ETH.
Arbitrum and Optimism are the most famous L2 blockchains using optimistic rollups.
Optimistic vs. ZK Rollups
As already discussed above, optimistic rollups assume every transaction is correct until proven otherwise. In a way, the network is optimistic about its users
ZK-rollups (short for Zero-Knowledge), on the other hand, use a different system. ZK-rollups do not have any form of mechanism for resolving disputes. Instead, they use ZK-proofs, a form of cryptography where every batch of transactions sent to the mainnet includes a cryptographic proof called a SNARK (Succinct Non-Interactive argument of knowledge). The SNARK is verified by a contract that exists on the mainnet.
In simple terms, ZK rollups use proofs of validity to make sure that the SNARKs in the transaction batches are valid. If they are valid, the proofs are then stored on the Ethereum mainnet instead of bulky tx data. This makes ZK-rollups cheaper and faster than optimistic rollups.
What is Arbitrum?
Arbitrum is a Layer-2 blockchain built on top of the Ethereum mainnet and works using Optimistic rollups. Off-chain Labs, the developers of the Arbitrum One network, have also launched Arbitrum Nitro and Arbitrum Nova, sister networks to Arbitrum One that are adapted to specific use cases.
Currently, Arbitrum is the leading L2 network in terms of protocols and TVL. Arbitrum also does not have a native governance token.
What is Optimism?
Optimism, a product of the Optimism Foundation, is an L2 blockchain similar to Arbitrum. Optimism also uses optimistic rollups, but the dispute resolution mechanism is a bit different. Optimism (OP) is the native token of the Optimism network and has tons of utility on the network. Optimism is the second-largest L2 blockchain in terms of market cap and TVL.
Arbitrum vs. Optimism: The Differences
Both Arbitrum and Optimism are optimistic rollup technologies but have some key differences. Let’s explore some of there differences.
Arbitrum is more scalable than Optimism because of the amount of work and upgrades that have gone into developing this L2. Additionally, Arbitrum has multi-round fraud proofs, while Optimism only has one. The more fraud-proof the network, the more secure it is.
Arbitrum focuses on a single point for transaction disagreement, while optimism is highly reliant on the L1 mainnet to execute L2 transactions. This makes Arbitrum faster and cheaper.
Optimism vs. Arbitrum TVL
Arbitrum is much more robust than optimism, and this can be seen in the total value locked into the ecosystem. According to L2 Beat, Arbitrum TVL sits at $3.15 billion, while optimism has $1.67 billion locked in the network. While the difference is not great, it is good to remember that Arbitrum is pulling off these numbers without a governance token.
There has been speculation about an Arbitrum governance token airdrop. Should it occur, it would push Arbitrum TVL into the billions of dollars.
Number of dApps/Protocols
Arbitrum still continues to tower over-optimism in terms of network usage. People cannot use the network if there are no dApps or protocols built on it. On this front, Arbitrum has over 141 protocols running on its mainnet, while Optimism has 86. Arbitrum has been getting a lot more attention lately, with the number of dApps launched on it rising by the day.
Arbitrum vs. Optimism Fees
Checking the fees paid by network users is one way to determine how successful a network is. In terms of fees, Optimism is dominating Arbitrum. The network generated a total of $36,167 in the last 24 hours, while Arbitrum only got $25,168.
However, this is not entirely a great thing for Optimism users. This is because the higher fees show the network is expensive to use. What this data means is that it is cheaper to use Arbitrum compared to Optimism.
DeFi and Ecosystem Adoption
So far, Arbitrum has more going for it than Optimism. However, looking at the broader L2 ecosystem, adoption is on the rise. In the last 7 days, L2s have scaled Ethereum mainnet by 2.59 times. This means that transactions went 2.5 times faster on L2s than they would on the mainnet. This is a win for blockchain adoption and scalability.
If you made it this far, consider yourself a little more knowledgeable on rollups and Ethereum scaling technologies. Arbitrum appears to be the stronger and more reliable Optimistic rollup. While many anticipate the $ARBI token airdrop (if there is going to be one), the TVL and network usage will only continue to rise.
1. Is Arbitrum optimistic or ZK?
Arbitrum is an Optimistic rollup, even though the fraudulent proof management mechanism is different from that of Optimism.
2. Is Arbitrum better than Optimism?
Arbitrum has emerged on top in all the metrics of comparison covered in this article. Therefore, in the Arbitrum vs Optimism competition, Arbitrum appears to be better (cheaper, faster, and more secure).
3. What is Arbitrum Nova?
Arbitrum Nova is a sister L2 chain to Arbitrum One. Arbitrum Nove was created with the goal of having ultra-low transaction fees (yes, even lower than the current Arbitrum One fees). The main difference with Arbitrum One lies in where the batch transactions are sent. Arbitrum One sends tx data to the Ethereum mainnet, but Arbitrum Nova sends them to the Data Availability Committee.