Arbitrum Plots Stage 2 Decentralization With Permissionless Transaction Validation

Big upgrades are coming to Arbitrum, with the top Layer 2 network by TVL set to pursue “Stage 2 decentralization” and introduce zero-knowledge proofs.

The Arbitrum community is just a few hours away from passing the preliminary temperature check vote for a proposal to introduce permissionless transaction validation. Voting began seven days ago, with the proposal attracting near unanimous support from ARB holders.

The upgrade would implement the BoLD dispute resolution protocol, paving the way for Arbitrum to achieve what Vitalik Buterin, Ethereum’s chief scientist, has termed Stage 2 decentralization. This means that no centralized entity can unilaterally post state roots for the Layer 2 network, with the task exclusively performed by Arbitrum’s code.

“BoLD is a new dispute resolution protocol that unlocks permissionless validation for Arbitrum chains and enhances their security by mitigating the risk of delay attacks,” the proposal said. “BoLD accomplishes this feat by ensuring that any single honest party can always successfully defend against malicious claims to an Arbitrum chain’s state.”

Withdrawals from Layer 2 rollups are executed through the network posting a Layer 2 state root value to the Ethereum mainnet. The root value allows the Ethereum mainnet to verify that funds have been withdrawn from Layer 2.

Should a follow-up formal proposal to implement BoLD pass in the future, the upgrade would take effect on both Arbitrum One and Arbitrum Nova.

Layer 2 decentralization

At launch, most Layer 2 networks rely on centralized entities such as multisig wallets and security councils to post state roots as a security precaution.

Buterin said Stage 1 rollups must feature an operational fraud or validity proof scheme enabling a project to accept or reject state roots in a decentralized fashion. Security councils may possess the authority to override fraud or validity proofs to protect a network against malicious actors.

Rollups exhibiting Stage 2 decentralization may still maintain a security council tasked with adjudicating state roots only in the event of code bugs or exploits. They must also feature two or more independent implementations of validity or fault proving mechanisms.

On June 11, Arbitrum announced plans to introduce support for zero-knowledge proofs in the future via its forthcoming Stylus MultiVM, setting the stage for the introduction of multiple decentralized proving mechanisms.

According to L2beat, DeGate v1 and Fuel v1 are the only Layer 2 networks that have achieved Stage 2 decentralization. Arbitrum One, OP Mainnet, ZkSync Lite, and dYdX v3 are categorized as boasting Stage 1 decentralization. L2beat currently tracks 106 active and upcoming Layer 2 networks.

Arbitrum is currently the leading Layer 2 network with $18 billion worth of assets on-chain for a 40.7% market share, according to L2beat. Data from DeFiLlama shows Arbitrum-based DeFi protocols hosting $4.44 billion in TVL.

The price of ARB is down 3.4% in the past 24 hours, according to CoinGecko.