Why we chose Arbitrum for SQD
TL;DR
- Subsquid chose Arbitrum because of its solid tech guaranteeing scalability, censorship-resistance, verifiability, and reduced trust assumptions
- Other important factors were minimized costs, meaning lower friction for community members, ecosystem growth, and economic metrics such as TVL.
- Although Subsquid’s token is deployed on Arbitrum, it doesn’t limit the scope of our aspiration to be the go-to data access layer for all of Web3.
With our token live and the mainnet just a few days away, one question that comes up is why we chose Arbitrum to build on when countless other L2s and native L1s exist.
After all, an architecture like Subsquid could probably live on any chain, right?
Well, actually, no, because there are certain requirements we had in mind before picking our home base.
But before getting into all of that…
What is Arbitrum to begin with?
Arbitrum is an Ethereum Layer-2 scaling solution designed to increase the throughput and efficiency of the Ethereum mainchain. Launched in 2021, it’s one of the oldest contenders in the L2 realm and has proven its reliability and resilience over time. They did L2s before everyone and their grandma launched one. A true trendsetter, if you will.
Similar to other rollups, Arbitrum achieves the increase in TPS by batching transactions, executing them on its rollup, and only submitting the final state to the Ethereum mainnet. As an optimistic rollup, the protocol assumes the validity of transactions instead of proving each individually; it can process up to 40,000 transactions per second.
Like all rollups, Arbitrum relies on a sequencer that orders transactions into a sequence and then commits them. However, to further increase censorship-resistance, and reduce trust assumptions in a second step, all transactions are then processed by a state transition function that detects any invalid transfers and removes them.
The state function updates the state and emits new blocks that ultimately settle on the main chain, as depicted in the diagram below. What’s more, anyone can go and verify the state locally by running the state transition function themselves, going a long way in guaranteeing the Web3 value of verifiability.
Arbitrum further enhances censorship resistance by limiting the power sequencers have. One challenge in crypto is censorship by exclusion, where a user's transfer isn’t included in the chain. This won’t happen when interacting on Arbitrum though, as the only power the sequencer has is delaying transactions.
So, in the worst case, it takes longer to execute.
What’s more, if you feel the sequencer is ghosting your transfer, there’s a ”delayed inbox” queue where you can submit it to force inclusion.
While Arbitrum was launched by a centralized entity called Offchain Labs, the team has since handed over control to the Arbitrum DAO, empowering the community to use the ARB token to vote on proposals and guide further development.
That’s Arbitrum, in a nutshell, moving on:
Why is Arbitrum a great place for Subsquid?
As mentioned above, Arbitrum has put in a lot of effort to strike a balance between maintaining usability, scalability, and web3 values such as verifiability and censorship resistance. They stand out among optimistic L2s for their implementation of the state transition function that keeps the sequencer in check.
So what were the benefits for us?
- Trustless security: anyone can ensure correct results on the L2s
- EVM equivalence: as a data lake serving countless EVM chains, this was an added benefit. One can run unmodified Ethereum transactions directly on Arbitrum, which is a very attractive value proposition for any dApp interested in network effects.
- Minimal cost: Thanks to countless updates, Arbitrum has succeeded in minimizing the gas footprint per transaction and, therefore, the cost for end users. This is another beneficial factor for a network like ours, where people will actively move tokens and delegate them. We want to offer Subsquid to anyone at scale, which makes cost a huge contributing factor. Despite high traffic, the average cost for a swap or transfer on Arbitrum remains below $0.0009.
- Scalability: With the introduction of the Arbiturm Nitro Upgrade in late August 2023, Arbitrum has further enhanced its scalability by compressing call data and ensuring efficient use of Blobspace (storage on Ethereum dedicated to L2s). As a scalable data lake it’s only logical for us to go with an L2 able to support our aspirations.
Arbitrum tech is great. But not only the tech. There were other metrics that played an important role in our decision-making.
Ecosystem Metrics
Since its launch in 2021, Arbitrum has grown to become the prime venue for anything DeFi on L2s. It is home to top-performing DEXs and has solidly established its top position in value locked.
Currently, over 18 billion are locked in Arbitrum, far ahead of the second and third spot (~ $7bn).
While total value locked is just an indication of economic activity on a chain, there are more stats speaking for Arbitrum.
As of today, it’s processing roughly 22.29 transactions per second, hinting at solid demand despite a little bearish sentiment (and also once again ahead of the competition). It also features 740,000 daily active addresses.
All these metrics in isolation do not mean much, but in combination, they paint the picture of a solid, developing ecosystem of thriving DeFi and an active community. On top of that, the 2023 Developer report highlighted Arbitrum as the fastest-growing L2 with 50% YoY Growth, aided by its availability of dev tools enabling devs to code smart contracts in Rust, C, and C++.
Subsquid, as a data access layer for all of Web3, requires a solid foundation to build on that’s ideally also going to become a place where developers, as well as casual Subsquid community members, can interact with us at speed and without breaking the bank.
While Arbitrum is the home of our network, it doesn’t mean we’re not serving other native L1s or L2s. We’re constantly pushing for new integrations that will help unify the developer experience across Web3.