You are reading an excerpt from our free but shortened abridged report! While still packed with incredible research and data, for just $40/month you can upgrade to our FULL library of 60+ reports (including this one) and complete industry-leading analysis on the top crypto assets. 

Becoming a Premium member means enjoying all the perks of a Basic membership PLUS:

• Full-length CORE Reports: More technical, in-depth research, actionable insights, and potential market alpha for serious crypto users
• Early access to future CORE ratings: Being early is sometimes just as important as being right!
• Premium Member CORE+ Reports: Coverage on the top issues pertaining to crypto users like bridge security, layer two solutions, DeFi plays, and more
• CORE report Audio playback: Don’t want to read? No problem! Listen on the go.

Intro

Arbitrum Orbit is an Optimistic rollup-based framework designed to empower web3 businesses by enabling them to build custom, use case-specific Layer2 (L2) or Layer3 (L3) chains in a purely permissionless manner. Leveraging the Arbitrum Nitro Tech stack, Orbit chains offer unparalleled scalability, advanced compression, full Ethereum Virtual Machine (EVM) compatibility, and forthcoming cross-chain interoperability. Essentially, Arbitrum Orbit can be viewed as deployable and configurable instances of the Nitro stack, creating an ecosystem of independent chains.

One of the primary benefits of Arbitrum Orbit is its flexibility. Developers and enterprises can choose to build either L2 or L3 chains, selecting Ethereum or any of Arbitrum’s L2 chains, such as Arbitrum One, as their settlement layer. This flexibility allows developers to customize their chains according to project-specific requirements, effortlessly configuring essential components like precompiles, transaction throughput, governance, privacy, sequencer, and data availability (DA) layers. While often compared to application-specific blockchains or “appchains,” Orbit chains offer more than just powering a single application; they can support smart contracts for one or multiple apps, an ecosystem of apps, or no apps at all. Developers can utilize multiple L2/L3 Orbit chains to enable high availability and advanced features within their ecosystem.

High-traction decentralized applications (dApps), such as gaming and crypto trading platforms, demand massive scalability and adjustable throughput capacity. Orbit chains provide dApps with independent chains, eliminating competition for storage or computation resources and ensuring high availability and scalability. This approach helps overcome traditional scalability limitations. Additionally, Orbit chains benefit from Stylus, which introduces multiVM support, allowing developers to write smart contracts in languages like Rust, C++, C, or Solidity while maintaining full compatibility. The Stylus update optimizes fees, compresses contract sizes, enhances tooling support, ensures reliable safety, and introduces new host I/Os, making it 2-4 times cheaper.

L3s

Layer3s built with Arbitrum Orbit can customize various aspects of their network. They can introduce custom ERC-20 tokens, define unique governance protocols, and modify chain logic to meet specific needs, all while retaining the security provided by Ethereum through DAO-governed L2s of Arbitrum. Predictable transaction and gas costs are crucial for dApps that need to forecast business expenses and implement cost-prohibitive strategies like fee subsidization. Orbit chains, isolated from Ethereum or Arbitrum L2s, provide a more reliable environment, ensuring stable gas fees.

Arbitrum Orbit supports diverse data availability choices, enabling L3s to build as either Arbitrum rollup chains or Arbitrum AnyTrust chains. Rollups use Ethereum Layer 1 as the DA layer, while AnyTrust leverages a data availability committee (DAC) for off-chain storage of raw transaction data, offering users significantly lower gas costs. Orbit chains can also use third-party DA layers such as Celestia for off-chain data availability, depending on project requirements. This broad range of options provides flexibility for various use cases, balancing cost, scalability, and security needs.

The ability to quickly launch an Orbit chain enhances time-to-market, lowering overall costs. Arbitrum Orbit allows developers to use the Orbit chain deployment portal or choose from a range of Rollups-as-a-Service (RaaS) providers that offer low-code deployment platforms, pluggable integrations, and innovative developer tools. This approach accelerates the development process and makes it more cost-effective. Furthermore, Orbit chains inherit robust security from Ethereum and Arbitrum Nitro, ensuring that L3s can maintain a high level of security on their chains.

Flexibility in the Arbitrum Orbit stack refers to the ability to choose between building an L2 rollup, AnyTrust chain, or L3 chain, each with specific advantages. L2 rollups are ideal for use cases prioritizing security and reasonable scalability, inheriting security from Layer1 while ensuring scalability through off-chain computation. L3s are suitable for enabling scalability and low computation costs, though with slightly less security than Layer1. AnyTrust chains, preferred for maintaining data privacy through off-chain storage, introduce a slight security trade-off. Orbit chains also have the flexibility to add permissioned access or keep their ecosystem open, depending on privacy requirements.

Arbitrum Orbit's focus on modularity allows for seamless integration of alternative rollup components into Orbit and Arbitrum Layer2 chains. This includes integrating off-chain DA layers, using decentralized sequencers, and customizing wallets and explorers. Different Arbitrum chains can experiment with varying levels of restriction in their execution environments, optimizing their projects by limiting certain smart contract functionalities while maintaining EVM compatibility.

Arbitrum Orbit enables the separation of an L3 chain’s roadmap from that of Layer1 Ethereum or Arbitrum L2s, allowing for the introduction of cutting-edge features such as Account Abstraction (AA) independent of the base chain’s capabilities. Furthermore, the introduction of chain clusters facilitates fast cross-chain communication and resource transfers across standalone L2 and L3s, paving the way for true interoperability within the Arbitrum ecosystem.