The team at Arbitrum Foundation has been following the development of cLabs Proposal for Celo to transition to an Ethereum L2 closely and would like to welcome Celo back to the Ethereum community by proposing the Arbitrum Orbit tech stack as the path forward.
Arbitrum is the leading scaling solution for financial activity across DeFi and CeFi. Leading DeFi protocols across various verticals – Perps, Options, DEXs, Money Market, have deployed and thrived within the Arbitrum ecosystem as a result of superior user experience and a strong ecosystem. Traditional financial institutions have taken notice of Arbitrum’s dominance as a market leader and have explored various pilots and use cases for regulated asset backed securities to be issued natively on Arbitrum. We have been working closely with teams aiming to connect financial institutions and real-world assets through DeFi rails such as Kinto who is building a Layer-2 using the Arbitrum tech stack that is compliant with anti-money-laundering regulatory frameworks.
Beyond financial activity, Arbitrum is a growing leader in the payments infrastructure, gaming, and NFT space. Over 100+ teams are developing their games on Arbitrum One, Nova or Orbit, with top games such as Xai Games doing over 4 million transactions a day with over 300,000 wallets on an Orbit chain. NFTs are a growing segment on Arbitrum with enterprises such as Fiat launching their FIAT® Pass digital collectible on Arbitrum, and ThankYouX collaborating with Sotheby’s on a recent collection.
Celo’s community of dreamers, doers, developers, and designers resonates as we understand the approach to develop not only the best in-class rollup technology but also developer and user experience through advanced developer functionality like Stylus, and a best-in-class user onboarding experience.
The Arbitrum Foundation is aligned with Celo’s mission to build a financial system that creates the conditions for prosperity for everyone. With the largest DeFi ecosystem outside of Ethereum mainnet, we believe that this would be synergistic with Celo’s existing ecosystem goal to become “The Home of Regenerative Finance” aimed at solving the world’s mass-coordination problems such as climate crisis or extreme poverty.
# Technical design and implementation of Arbitrum Orbit (L2)
Arbitrum Orbit is the permissionless path for launching a customizable chain using the Arbitrum technology stack. To achieve the objective of cLab’s proposal to “return home to Ethereum’', we propose leveraging the Arbitrum Nitro architecture to deploy a Celo L2 Orbit chain which allows for greater Ethereum alignment. Arbitrum Orbit allows a high degree of customization to the chain around the following parameters:
- Decentralized sequencer
- Alternative Data Availability layers such as:
- AnyTrust (in-production for > 1 year)
- EigenDA (will be ready early 2024)
- Retaining Celo’s 1-block finality.
- Decentralized validation of Celo’s L2
- Ongoing roles for CELO’s node operator community
- Use CELO as a custom gas token on Orbit
- Trustless bridging and Orbit-Orbit bridging
Using these parameters as a guide, we can explore how Orbit serves the needs of the Celo community and achieve a vision towards prosperity.
With Arbitrum Orbit, Celo will have the opportunity to customize its own sequencer implementation. Ongoing research efforts with Espresso Systems around decentralized sequencing will enable multiple rollups to share a single decentralized platform for cross-chain interoperability, while still allowing individual rollups to optionally choose their own transaction ordering policies.
Off-chain Data Availability Layer
To achieve the aims of a low cost chain, Celo has the opportunity to leverage EigenDA, Celestia or AnyTrust Data Availability layer. Arbitrum AnyTrust technology utilizes a Data Availability Committee to store data and provide it on demand which lowers transaction fees and achieves sub-cent transaction fees that are competitive to Celo’s current gas fees of $0.0005. Using AnyTrust also allows a chain to enable fast confirmations for quick withdrawals to the parent chain that bypasses the typical 7-day challenge period for optimistic rollups.
With an AnyTrust Orbit chain, Celo could build out its own Data Availability Committee to include as many members as required. The Data Availability Committee is trusted to store and provide data, and only 2 of N committee members need to be honest (Celo can also opt for 1 of N depending on your preferences for liveness guarantees). In the event a large majority of committee members collude to be malicious, only 2 (1) members of the Data Availability Committee are required to be honest to deterministically prove the correct state. In practice, the chain owner / DAO can elect reputable parties (including Celo) to be part of this committee. Arbitrum Foundation can share best practices and provide guidance to Celo around building out a Data Availability Committee.
Beyond AnyTrust, Arbitrum Orbit is also compatible with other data availability providers such as EigenLayer and Celestia to achieve the objective of a low-cost chain. Eigenlayer is working on their Arbitrum Orbit integration with EigenDA and they are expecting it to be complete in early 2024. Celestia has also recently announced that they are the first modular data availability network to integrate with Arbitrum Orbit.
Retaining Celo’s 1 block finality
Transactions on Arbitrum Orbit result in two types of finality – sequencer finality and Ethereum finality. Sequencer finality is determined through the sequencer feed that tells you that the sequencer has accepted the transaction. Upon receiving the transactions, the sequencer will order it in its off-chain Inbox and locally execute it using the Arbitrum Nitro Virtual Machine. Sequencer finality on an Orbit chain is faster than Celo’s 1 block finality with Arbitrum Nitro recording an average of 250ms block times.
To achieve Ethereum finality, the Sequencer will post a batch of L2 transactions which includes various L2 transactions onto the underlying L1 as calldata. Ethereum finality occurs when the batch-poster sends a batch containing those transactions to the L1 and the blocks are finalized on the L1. L2 block intervals on Arbitrum are elastic and teams would only submit transactions to L1 when there is activity on the chain. This reduces the fixed cost of running an Orbit chain compared to other solutions which require posting batches in fixed block times regardless of activity on the chain. For reference, Arbitrum One submits a batch to Ethereum every few minutes.
Arbitrum Nitro utilizes a fork of Geth with minimal modifications, an execution-layer client that defines the Ethereum state transition function and handles network-layer logic like transaction memory pooling to implement Arbitrum’s state transition function. This makes Arbitrum Nitro extremely resilient to blockchain reorgs. Arbitrum Foundation have dedicated teams and service providers responsible for maintaining the stability and performance of our core protocol infrastructure and assisting with technical issues faced by applications deployed on the protocol
Decentralized validation of Celo’s L2
Celo validators are responsible for validating the integrity of transactions and posting assertions of the current state of Celo’s Orbit chain to Ethereum which would likely be hosted by a network of validator nodes working together. Celo could maintain the current staking requirements of 10,000 CELO to register a Validator, and 10,000 CELO per member validator to register a Validator Group on an Orbit chain. With Orbit, Celo will have the opportunity to implement features that have not been adopted by the public chains such as the BoLD protocol that enables permissionless validation on the Arbitrum chains.
Ongoing roles for CELO node operator community
As an Orbit chain, the roles of CELO validators will differ from a POS model; however, we believe that there are numerous opportunities for CELO’s node operator community to participate and contribute to a Celo L2 chain.
- Celo validators can secure the chain by verifying the chain’s state and engaging in interactive fraud proofs if there is a dispute between validators on the correct state of the chain.
- Enable Celo validators to stake CELO to participate in fraud proof – This can be achieved by modifying the native stake token for validators, which is in active development but has been proven to be feasible in a research setting.
- Decentralized validation – With the implementation of BoLD protocol, CELO can enable permissionless validation where any party who stakes can secure the chain. For non-stakers, watchtower validators enable them to monitor the chain without taking on-chain actions.
Use of CELO as a custom gas token on Orbit
Orbit chains allow Celo to use any ERC-20 token as the native gas token. For instance, all transactions can be paid for using CELO or even stablecoins such as cUSD or cEUR. Celo could have the opportunity to create a native economy through gas, governance, and staking of CELO tokens. AnyTrust is ideally suited for using CELO as a fee token as AnyTrust significantly reduces the L1 gas costs that need to be paid in ETH. Using AnyTrust would limit the sell pressure of $CELO to cover block posting cost compared to a Rollup chain in which the sell pressure comes from the continuous need to buy ETH to pay for L1 gas fees.
Trustless bridging and fast bridging solutions
We believe interoperability with Ethereum L1 and Arbitrum public chains would be crucial for the success of Celo L2 and ensure greater alignment with Ethereum. Celo’s L2 Orbit chains come with a native trustless bridge to the parent chain out of the box. For bridging to other Orbit chains or other blockchains, Arbitrum is working closely with teams who are building 3rd party fast bridging solutions and have expressed an interest in developing such a solution for Celo.
# Technical benefits of Arbitrum L2
Ongoing Technical Plan support for Celo’s L2 Orbit chain
Arbitrum Orbit allows teams to implement cutting-edge features that may not have been implemented into the Ethereum or Arbitrum One public chains. In addition, Celo will have the opportunity to benefit from Offchain Labs’ current and future technical innovations, including fully functioning fraud proofs, BoLD, and Stylus.
- Arbitrum is the only optimistic rollup that has working interactive, multi-round fraud proof. This ability to adjudicate and prove fraud on L1 is Arbitrum’s key, fundamental feature, and is how and why the system inherits security from Ethereum.
- Offchain Labs is on track to ship permissionless validation with BoLD, a dispute protocol that can enable permissionless validation for Arbitrum chains.
- Stylus enables developers to write smart contracts in programming languages that compile down to WASM, and currently supports Rust, C, and C++, with plans to add many others. On-chain computation and memory are 10-100x cheaper using Stylus due to the superior efficiency of WASM programs. With Stylus, Celo will have the opportunity to onboard more developers to build use cases not feasible in the EVM, while remaining fully EVM-compatible. Stylus is live on testnet with several teams building unique applications in Rust.
- Research collaboration between Offchain Labs and Espresso on shared sequencing and MEV-capturing transaction ordering.
- Fast confirmations are under active development which can reduce withdrawal times to the parent chain from 7 days to less than 15 minutes for AnyTrust chains who choose to enable this feature.
Greater user experience
Security: Arbitrum public chains have been battle tested since inception in 2021 and currently have over $8 billion in TVL. Optimistic Rollup chains that support fraud proofs, such as Arbitrum One and Nova, settle their state to Ethereum. Validators post claims about the L2 state they have verified to be true to a smart contract. During a 7 day period, other validators can challenge these claims, and a dispute resolution process occurs. Once a claim is confirmed, that L2 state is considered correct on Ethereum. This validation process results in a 7 day delay when assets are bridged between Arbitrum chains and Ethereum L1. Similarly, Celo’s Orbit chain is offered the same level of security as existing flagship Arbitrum chains giving teams confidence to securely bridge assets onto Celo’s L2.
Asset bridging: Teams can choose between two of options when bridging funds from L1 to Celo’s Orbit chain – The Native bridge or a Fast bridge. Through the Native bridge, depositing assets would only take minutes while withdrawing assets through the Native bridge results in a 7 day delay period, which can be mitigated by having fast confirmations on an AnyTrust Orbit chain. In addition, the team at Offchain Labs is also working on solutions to lower the challenge period for all chains. Fast bridging solutions also help to circumvent the 7 day delay period and enable L1-L2 bridging in a matter of minutes. The cost associated with bridging assets across L1 to L2 would be determined by the L1 gas price and can be well mitigated through partners such as centralized exchanges.
Gas Price Reliability: As Orbit chains have dedicated block space independent of Arbitrum L2 and Ethereum L1, using Orbit chains means that gas fees on Celo won’t be significantly affected by applications on other chains. When using an alternate DA solution, Celo’s Orbit chain will not be subjected to significant gas price spikes on other chains or delays in transaction finality since the chain is not posting data to Ethereum.
Account Abstraction: With an Orbit chain, Celo can go beyond Ethereum’s account abstraction and support native account abstraction. This is especially helpful for teams building mobile DeFi applications on Celo which can integrate with Account Abstraction wallets and infrastructure and improve the overall user experience. The Arbitrum Foundation would help facilitate introductions to these partners.
# Technical Implementation of Celo L2 on Arbitrum Orbit
Should the Celo community and foundation not want to maintain infrastructure themselves, Arbitrum’s partnerships with various Rollup as-a-Service (RaaS) providers can provide Celo with a one stop solution and can offer best in class capabilities to facilitate seamless deployment of Orbit chains.
- As Celo is an EVM compatible chain, migration to an L2 Orbit chain would involve transferring the existing state database into an Arbitrum Nitro state database. Having previously migrated tech stacks when upgrading Arbitrum One from the Arbitrum Classic stack to Arbitrum Nitro, Offchain Labs and the Arbitrum Foundation are well equipped to assist in this process, and are happy to collaborate with a Rollup as a Service provider to help as well.
- Decentralized applications and wallets that support Celo L1 could automatically support a Celo Orbit L2 chain without requiring changes to their existing code base.
The Arbitrum Foundation may grant the L2 Orbit license to Celo with plans to move towards an open license framework in the near future. As a strategic partner, Arbitrum Foundation would be happy to have the opportunity to work with the Celo Foundation. The strategic partnership would ideally offer something back to the community – development resources, ability to onboard millions of new users, or to share a portion of their revenue back to the Arbitrum DAO.
# Adoption on Arbitrum One and Arbitrum Orbit
In line with Vitalik’s vision of a rollup-centric roadmap, Arbitrum is the only Universal Layer 2 that has advanced to Stage 1 and is the leading Ethereum layer-2 scaling solution. This means that Arbitrum has met the requirements of fraud proof development, permissioned operators, and the establishment of a Security Council. The technological superiority of Arbitrum is reflected by the strong ecosystem across DeFi, NFTs, gaming, and enterprise. Arbitrum is on track to be a stage 2 roll-up with State Validation and Upgradability the remaining items required to achieve a fully decentralized rollup. To address state validation, permissionless validation on the Arbitrum public chains through the BoLD protocol is currently undergoing testing in preparation for a public testnet. Upgradability of the public Arbitrum chains are governed by the Arbitrum DAO where approved proposals are self-executing. A DAO-elected Security Council also exists for time-sensitive situations.
Liquidity and stablecoins on Arbitrum
Arbitrum has the greatest liquidity among layer-2s with over 1.2 million in bridged ETH in the ecosystem and a stablecoin market cap of over $1.8 billion. (https://global.discourse-cdn.com/business7/uploads/celo/original/2X/3/3a16ff95d6b40cfff3719d51587bd805d080d21c.png) Additionally, Arbitrum has the highest native and bridged USDC volume among L2s.
In line with Celo’s focus on enabling access to global ecosystems across 150 countries, Arbitrum has native stablecoin issuance across currencies such as USD, Euro, Japanese Yen, Brazilian Real. A diverse set of stablecoins in the Arbitrum ecosystem not only provides liquidity but also enables financial inclusivity for global teams building on Celo’s Orbit chain.
Arbitrum Orbit ecosystem
Arbitrum Orbit is one of the top technology stacks for teams building their own application specific blockchain with 15 publicly announced teams and over 30 teams building on Orbit. Celo will benefit from a vibrant Orbit ecosystem across verticals such as DeFi, FinTech, Gaming, and Entertainment.
# Synergies between Arbitrum Orbit and Celo
1. Ethereum Alignment
cLab’s proposal to “return home to Ethereum’’ is a welcomed initiative and well aligned with Arbitrum’s technical and ecosystem focus. Several points of note here:
a. Orbit satisfies the following conditions on RoadMap boundary:
- Sub-cent transaction fees.
- Gas fees payable with (select) ERC-20 tokens
- 1-block finality
b. Offchain Labs acquired Prysmatic Labs, the team behind Prysm, Ethereum’s most popular consensus layer client. Offchain Labs believes that it is critical not only for L2 rollups to continue to advance our own technology stacks but also to be deeply involved in the development of Ethereum itself. This tight relationship helps ensure technological alignment between the two teams, remove roadblocks, create better code, and drive faster innovation.
c. Abitrum Nitro is fully compatible with Ethereum, uses Geth as its node, and all tools on Ethereum can be used on Arbitrum.
2. Ecosystem Support
- The Arbitrum Foundation is committed to providing best in-class support to teams developing in the Arbitrum ecosystem. Celo would have access to the highest quality researchers, engineers, product managers, and partnership teams to ensure Celo’s Orbit chain is a success. We will work with Celo to engage with the best infrastructure across RPC providers, bridges, block explorers, bridges, and fiat on-ramps.
- Co-marketing support with Celo orbit chain across social media, news outlets, and within the broader community
- Opportunity for projects on the Arbitrum public chains to seamlessly deploy on Celo’s L2 Orbit chain.
3. Arbitrum governance synergies
Celo Foundation would also have the opportunity to contribute to Arbitrum’s governance process and participate in various initiatives organized by the community and various working groups. The Arbitrum community has demonstrated their ability to quickly and thoughtfully come together to build programs and frameworks such as the recent Short Term Incentive Program (Tally | Arbitrum Proposal). Celo can become a pivotal member of the Arbitrum community and contribute to initiatives such as creating proposals and providing technical expertise to the development of Orbit.
4. Technical collaboration
We recognize the importance for the Celo community to contribute to future Orbit plans roadmaps and the Arbitrum Foundation will work closely with the Celo Foundation to identify potential collaboration opportunities and assist in its related processes. Arbitrum is a strong proponent of open source development and we would be happy to collaborate with teams to scale Ethereum.