Arbitrum vs Optimism: Comparing the two most important Layer-2-Solutions for Ethereum
It is widely known that Ethereum is one of the leading blockchains alongside Bitcoin. Unlike Bitcoin, however, Ethereum does not only enable the sending and receiving of crypto – it is rather a platform that enables developers to program decentralized applications (DApps) and run them on-chain. This allows so-called smart contracts to be executed on the blockchain and DApps to run that are based on these smart contracts.
Unfortunately, Ethereum has some limitations that restrict the scalability of the platform. One of the biggest hurdles is the limited number of transactions that can be executed per second on the blockchain. This leads to high transaction fees and slow transaction confirmations. When the network is at capacity, the worst case scenario can result in fees in the triple-digit range.
Layer-2 solutions to help Ethereum scale
This is where Layer-2 solutions are going to help. These are processes that sit on top of Layer-1 of the blockchain (Ethereum main net) to improve the scalability of the platform and reduce the cost of transactions (“Gas fees”). These solutions allow Ethereum to process more transactions per second without requiring a change to its underlying protocol.
Two of the most popular Layer 2 solutions for Ethereum are Optimism and Arbitrum. Both protocols have their pros and cons, and it’s important to understand how they differ from each other so that you choose the right technology for your use case. Therefore, let’s do a little comparison below.
Layer 2 protocol Optimism: established solution with low transaction fees
Optimism is a Layer 2 protocol that enables fast and low-cost transaction processing. The Optimism protocol uses a technology called Optimistic Rollup, which allows thousands of transactions to be bundled together and settled on a single transaction on the Ethereum blockchain. This means that Optimism offers high scalability and low transaction fees, which makes it a perfect fit for microtransactions.
Optimism is one of the oldest L2 solutions and has already grown a solid user base. The platform is developed by an experienced team of developers, including former Ethereum developers.
A pro for the Optimism team is that – even more than Arbitrum – it puts great focus on the decentralization of the protocol and its development.
Transactions and token swaps are currently more affordable on Optimism, and the platform’s promising future plans could lead to Optimism’s rollup innovations dominating the market.
Arbitrum: Layer-2 solution with a rapidly growing community
Arbitrum is another layer-2 solution for Ethereum that is also based on Optimistic Rollup.
Arbitrum differs from Optimism in the mechanism to detect fraud attempts. Arbitrum uses what is called “multi-round fraud detection,” while Optimism uses “single-round detection.”
This means that instead of checking the state of the entire block of transactions on L1, Arbitrum only requires proof of fraud for the specific transactions that are being challenged.
Arbitrum’s team demonstrates a good hand at marketing: it has been able to rapidly expand its social media reach, attracting DApp developers to its network.
Arbitrum’s rollup architecture now surpasses Optimism’s in terms of security and longevity thanks to its superior fraud-proof system and unique virtual machine (VM).
This means that Arbitrum offers greater flexibility and functionality than Optimism, but also has higher transaction fees and lower scalability.
Conclusion: Which L2 chain is better? Optimism or Arbitrum?
Overall, Optimism and Arbitrum are two of the best Layer 2 solutions for Ethereum currently available. Both offer a high level of scalability and an improved user experience compared to the Ethereum blockchain. For more advanced users, the technical differences between Arbitrum and Optimism may matter more. But for the ordinary investor, both solutions will help to serve Web3 or dApps with more joy. The reduced fees will make use cases possible again on Ethereum that the too-high costs on Ethereum Layer 1 have made null and void.
For example, investing according to the dollar-cost-averaging principle: Here, a small amount is invested regularly (e.g., every day, every week, every month) to maintain the average price during the large price fluctuations of the crypto world.
Many small transactions were uneconomical on Ethereum; now thanks to Optimism and Arbitrum, regular investing in ETH & Co. is affordable again. With our DFX Exchange, it’s super easy to set up a standing order for this and get your coins and tokens into your MetaMask wallet in a flash.