Arbitrum — Ethereum's Largest Layer 2
Arbitrum is an Optimistic Rollup on Ethereum and currently the L2 with the most TVL. Transactions are bundled on Arbitrum and verified on Ethereum — cheaper than L1 but backed by Ethereum's security. The Nitro upgrade significantly improved execution speed.
The Sequencer — Achilles' Heel?
Arbitrum's Sequencer orders transactions before they reach Ethereum. Currently run centrally by Offchain Labs. That's a centralization point frequently criticized. Sequencer decentralization is planned but not yet implemented.
ARB Token and Ecosystem
ARB is a governance token — not a gas token. Transaction fees are paid in ETH. That means ARB benefits from ecosystem growth only indirectly. Whether that's enough long-term is one of the open questions in L2 investing.
