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Arbitrum Launches Fraud Proofs In Testnet: Why Is ARB Down?

Arbitrum, the largest Ethereum layer-2 scaling solution by total value locked (TVL), is taking steps towards decentralization. In an update on April 16, Offchain Labs–Arbitrum developers–said they have deployed the permissionless version of their fraud proofs, dubbed Bounded Liquidity Delay (BOLD), to testnet.

Ethereum Layer-2s Are Popular, But There Is A Big Problem

Ethereum layer-2 solutions have been gaining prominence over the years. According to L2Beat data on April 17, these platforms control over $37 billion of assets. Protocol developers and users can send transactions cheaply through Arbitrum, Optimism, Base, and other alternatives. 

Top layer-2 platforms by TVL | Source: L2Beat
Top layer-2 platforms by TVL | Source: L2Beat

However, while they are popular and command billions in TVL, most of these platforms’ fraud proofs are being developed. Typically, when users transact all chains, all transactions must be confirmed by a web of miners or validators, depending on the consensus mechanism. 

This differs in layer-2 options, which must reroute transactions and process them off-chain. There is no way of proving whether queued transactions are valid before being batched and confirmed on-chain.

The fraud proofs, such as those presented by Arbitrum and other optimistic rollup solutions, are designed to address a critical issue in layer-2 solutions. Specifically, once live and integrated into Arbitrum, BOLD will serve as a safety net, ensuring the validity of transactions processed off-chain. This mechanism is crucial in maintaining the integrity of transactions while enabling efficient off-chain processing.

In compliance with blockchain principles, BOLD will be decentralized. As such, the community will run nodes, which differs from the current setup. As it is, transaction validation in Arbitrum is centralized, and only a few validators are tasked with this.

Arbitrum Deploys BOLD In Testnet, ARB Prices Falling

With BOLD in the testnet, Arbitrum is opening up its rails so that anyone can participate in network security and validate withdrawals back to Ethereum. This move will be critical in building a more decentralized ecosystem and making the platform more robust.

Arbitrum becomes the first Ethereum layer-2 to launch its fraud proofs in testnet. In a post on X, Ryan Watts of Optimism also notified the community that plans are underway to create a decentralized fraud-proof system for the second-most largest layer-2 by TVL.

ARB prices trending downward on the daily chart | Source: ARBUSDT on Binance, TradingView
ARB prices trending downward on the daily chart | Source: ARBUSDT on Binance, TradingView

Even with this major milestone, ARB prices are stable and under pressure.

Related Reading: Crypto Analyst Says Don’t Buy Altcoins Just Yet – Here’s Why

The token is down 50% from March 2024 highs at spot rates and remains under immense selling pressure. If buyers reverse the April 12 and 13 sell-off, the token might recover strongly, racing towards $1.5.

Feature image from Canva, chart from TradingView

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