What is Arbitrum?

Arbitrum is an optimistic rollup layer-2 network for Ethereum developed by Offchain Labs, designed to increase transaction throughput and reduce fees while inheriting Ethereum's security guarantees. Its execution environment, Arbitrum Nitro, is fully EVM-equivalent, meaning Ethereum smart contracts deploy on Arbitrum without modification. ARB is the governance token for the Arbitrum DAO, which controls protocol upgrades and ecosystem grants.

Arbitrum Nitro distinguishes itself technically from other optimistic rollups through its fraud proof system: rather than re-executing entire disputed blocks on Ethereum, it uses multi-round interactive fraud proofs that narrow the dispute to a single execution step before on-chain verification. This is cheaper than single-round systems (used by Optimism's earlier architecture) and enables faster dispute resolution. Arbitrum also launched the AnyTrust protocol as a lower-cost variant (used by Arbitrum Nova) that introduces a trusted data availability committee — a deliberate security trade-off for applications that prioritize low fees over full Ethereum data availability, such as gaming and social apps.

A persistent governance concern is sequencer centralization: like most rollups, Arbitrum currently uses a single sequencer operated by Offchain Labs to order transactions before they are batched to Ethereum. The sequencer cannot steal funds (the fraud proof system prevents that) but it can censor transactions or go offline, and users must rely on a slower fallback path to Ethereum in that scenario. The ARB airdrop in March 2023 — one of the largest in DeFi history — created immediate governance friction when the Arbitrum Foundation attempted to move treasury funds before a governance vote concluded, which resulted in substantial community backlash and a reversal.

Reviewed by the 2Bitcoins Editorial Team · Updated June 2026. Not financial advice.