The largest Ethereum Layer 2 by total value locked, an optimistic rollup that runs the Ethereum Virtual Machine with much lower fees.
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Arbitrum is an Ethereum Layer 2 network developed by Offchain Labs. It is the largest L2 by total value locked, hosting major DeFi protocols (GMX, Camelot, Aave deployment) and a significant fraction of Ethereum's economic activity in 2026. Arbitrum is an optimistic rollup: it executes transactions off-chain, posts compressed batches to Ethereum L1, and relies on a 7-day fraud-proof window to catch invalid state transitions.
Arbitrum's main chain is Arbitrum One; it also operates Arbitrum Nova (a lower-cost variant for gaming and social applications). Transactions execute on Arbitrum's sequencer, which orders them and posts batches to Ethereum. The execution environment is fully EVM-compatible, so any Ethereum smart contract works on Arbitrum without modification. Withdrawals to L1 take 7 days unless using a third-party "fast bridge" that fronts the funds.
DeFi dominates: GMX for perpetuals, multiple AMMs, lending protocols (Aave, Radiant), liquid staking. Arbitrum has also grown an on-chain gaming ecosystem and hosts significant stablecoin supply (USDC, USDT). The ARB token launched in March 2023 via airdrop and is used for governance of the Arbitrum DAO.
Optimistic rollups have a 7-day withdrawal window unless you use a third-party bridge. Arbitrum's sequencer is currently centralized (Offchain Labs operates it), with decentralization on the roadmap. As an L2, Arbitrum still depends on Ethereum L1 for security and data availability; high L1 fees increase L2 costs.
For deep context, see Layer 2, optimistic rollup, and rollup in the glossary.