A closer look at Arbitrum Nitro and Orbit Chains

What is Arbitrum Nitro

Arbitrum Nitro is an Optimistic Rollup framework developed by Offchain Labs, the team behind the Arbitrum blockchain. It empowers developers to create customized Layer 2 and Layer 3 chains, referred to as Orbit Chains.

These chains can take two forms: either Layer 2s that settle directly on Ethereum, or Layer 3s that settle on any Ethereum Layer 2 such as Arbitrum One, or even on other Layer 1s.

The introduction of Nitro marked a major improvement in how Arbitrum interacts with Ethereum. By adding compatibility with WebAssembly (WASM)-based code execution, Nitro made it possible for high-performance smart contracts written in Rust, C, or C++ to run alongside traditional EVM contracts.

What this means is that WASM replaced the classic Arbitrum Virtual Machine (AVM) as the low-level instruction set. The Go implementation of Geth (the most widely used Ethereum client) is compiled into WASM and executed inside Nitro, while ArbOS (Arbitrum’s operating system layer) coordinates execution and manages gas accounting, security, and other L2-specific functions. By embedding the core Go code of Geth, Nitro fully supports Ethereum’s data structures, formats, and virtual machines, as using Geth as a library ensures seamless compatibility with Ethereum.

One of Nitro’s main strengths, and a key factor in Arbitrum Orbit’s growth, is its technological flexibility. Orbit Chains are highly customizable and can even deploy beyond the Ethereum ecosystem, onto alternative Layer 1s such as TON (Duck Chain), Berachain (Pretzel Layer), or HyperEVM (Hyperliquid’s L1).

Developers can configure their networks to fit their protocol’s needs: transaction throughput, privacy, custom gas tokens (any ERC-20), governance, precompiles, data availability layers, and more.

The Nitro tech stack also allows developers to choose between building their chains as Rollups or as AnyTrust chains, with the core difference being a trade-off between decentralization and performance.

• Rollups store all raw transaction data directly on Ethereum L1, thereby inheriting its security guarantees.
• AnyTrust chains store this data through a Data Availability Committee (DAC), introducing a third-party trust assumption.

By expediting settlement and reducing costs, AnyTrust chains prioritize performance over strict Ethereum alignment. As such, they function more as application-specific scaling layers (dApps) than as “true” Ethereum Layer 2s.

Another advantage is that, unlike Optimistic Rollups which require a 7-day challenge period before withdrawals, AnyTrust chains enable fast withdrawals through a validator committee. When the committee unanimously approves a transaction, it bypasses the waiting period and reduces withdrawal times to as little as 15 minutes. For reference, Arbitrum One is an example of a Rollup, while Arbitrum Nova is an example of an AnyTrust chain.

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How Arbitrum Nitro Works

Nitro’s architecture can be broken down into several key components, as illustrated in the diagram below and detailed in the following sections.

The Sequencer

The Sequencer is a critical component, responsible for efficiently ordering and processing transactions. It organizes incoming transactions, batches and compresses them, and then posts the resulting data to the parent chain (typically Ethereum for L2 chains, or another chain for L3s). This process optimizes both transaction costs and overall network performance.

In Nitro, transactions are first organized into a single, ordered sequence. Nitro then commits to that sequence, and the transactions are executed in that precise order using a deterministic State Transition Function (STF).

Normally, transaction data flows through a Load Balancer before reaching the Sequencer. However, in the event of a Sequencer outage, users have a fallback option: they can bypass the Sequencer and include their transactions directly on the Arbitrum chain.

This is achieved by sending transactions straight to the Delayed Inbox contract on the parent chain. This mechanism provides additional flexibility, ensuring that transactions can still be processed even if the Sequencer is unavailable, or if users simply prefer not to rely on it.

Execution with the State Transition Function (STF)

At the heart of the system, the State Transition Function (STF) tracks the evolving state of the network. Concretely, it takes the current state of the blockchain (a snapshot of account balances, smart contract data, and other ledger details) and, given an input such as a transaction or batch of transactions, deterministically computes the new state.

This deterministic nature is essential, as it ensures that all nodes in a decentralized network reach the same outcome when processing transactions, thereby preserving consensus across the system.

In Nitro, off-chain transactions are executed in batches via the STF. Periodically, a concise summary of state changes is submitted back to the parent chain. This off-chain computation increases throughput and reduces gas costs, while remaining anchored to Ethereum’s security model.

To guard against incorrect or malicious execution, Arbitrum employs a challenge mechanism known as fraud proofs. If a dispute arises, the STF can be recomputed step by step on-chain, allowing the network to verify the validity of off-chain execution and detect or correct any errors or fraudulent behavior.

Additionally, the Nitro Stack is a slightly modified version of the Ethereum STF, with one key difference being “stylus.”

Validation

The validation and proving mechanisms in Arbitrum Nitro are designed to ensure the integrity of off-chain execution while preserving Ethereum’s security guarantees. As an Optimistic Rollup, Arbitrum assumes transactions are executed correctly unless challenged. In practice, this means transactions are processed optimistically, while state transitions can still be verified on-chain if needed.

Nitro achieves both fast execution and trust-minimized verification by compiling the same source code twice: once into native code, optimized for portability and security in proving, and once into WASM, optimized for speed when executed on a Nitro node.

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Key Upgrades to Arbitrum Nitro

Stylus

Introduced in 2024, Stylus is the upgrade that brought the WASM-based virtual machine. At its core Stylus introduces a MultiVM rollup paradigm, where existing EVM apps run as-is and developers gain access to new tools without losing Ethereum-level compatibility.

Stylus enables non-EVM smart contracts written in languages like Rust, C, and C++ to interact with one another (e.g., a smart contract written in Solidity can call a smart contract written in Rust). By tapping into programming languages already familiar to millions of Web2 developers, Stylus effectively expands developers' toolkits.

However, although this execution is flexible for developers, it is incompatible with Ethereum’s native rollup vision, as WASM-based computations cannot be natively verified by Ethereum’s EVM.

What Stylus Unlocks:

• By running proof verification in WASM rather than Solidity, contracts can verify complex cryptographic proofs more efficiently and with lower cost. (See Renegade’s Stylus case study for a real-world example.)
• Stylus supports custom financial logic such as custom pricing curves for AMMs that would be gas-intensive in Solidity alone.
• Stylus supports building memory and compute-intensive dApps that EVM struggles with. For example, onchain games with compute-heavy AI models, generative art with complex rendering logic and hybrid dApps.

Bounded Liquidity Delay (BoLD)

Arbitrum’s latest introduction is BoLD (Bounded Liquidity Delay). Launched in February 2025, the protocol allows for permissionless validation on its Layer 2 ecosystem chains and improves network decentralization and security.

BoLD essentially enables anyone to participate as a validator without needing approval, aligning with Ethereum’s decentralized ethos.

While interactive fraud proofs were necessary for Arbitrum to achieve stage 1 decentralization as defined by Vitalik’s “Proposed milestones for rollups taking off training wheels,” BoLD modernizes this fraud-proof system. A time-bound dispute resolution mechanism ensures disputes will be resolved within about 12 days for both Arbitrum ecosystem chains

This is useful, as even with fraud proofs in place, chains can still theoretically be vulnerable to denial-of-service attacks, and a malicious validator could repeatedly delay withdrawals and state confirmations. Now a single honest validator could defend a rollup against a malicious sequencer. However, the withdrawal period for bridging assets still remains around 7 days.

Timeboost

Arbitrum introduced Timeboost in mid-April 2025, an optional transaction ordering policy for Arbitrum chains. Arbitrum chains, as well as most rollups, process transactions on a First-Come, First-Served (FCFS) basis, which is susceptible to maximal extractable value (MEV) attacks, Timeboost adds approximately 250 ms of latency to introduce a transaction express lane that is auctioned off.

The system has processed hundreds of thousands of transactions, particularly in high-frequency DeFi trading, with 20-30% of daily DEX volume on Arbitrum using the mechanism. Timeboost works by prioritizing transactions in the express lane for immediate transaction sequencing, in turn reduces network congestion by disincentivizing wasteful latency races.

Timeboost’s innovation of capturing MEV through a fair auction system is considered very successful and has generated $3.63 million so far, according to Entropy Advisors.

DRIP - The DeFi Renaissance Incentie Program

Launched on September 3, 2025, the DeFi Renaissance Incentive Program (DRIP) is designed to incentivize DeFi activity on Arbitrum One in pursuit of the target of bolstering organic liquidity.

DRIP introduces four seasons, each designed to target a specific DeFi vertical at a time. Season one focuses on growing leverage looping, where users earn ARB by borrowing against yield-bearing ETH, Pendle derivatives, and stable assets, such as sUSDC, USDe, weETH, and wstETH, on participating lending platforms.

Powered by Merkl, Entropy Advisors serve as managers of the initiative, which has roughly $40 million (80 million ARB) in user incentives.

To Participate:

• Bridge Assets: Transfer eligible assets to Arbitrum One via your chosen bridge.
• Select a Market: Go to arbitrumdrip.com to explore real-time opportunities across supported lending protocols and assets.
• Deposit Collateral: Provide yield-bearing ETH or stable assets as collateral.
• Borrow and Loop: Borrow ETH or USDC (based on the market) and loop to amplify positions.
• Understand Risks: Looping carries liquidation risks from price fluctuations or rate changes. Monitor Loan-to-Value (LTV) ratios and health factors.
• Claim Rewards: ARB rewards are distributed every 2 weeks (per epoch) based on time-weighted borrow balances, via Merkl on the claim page. Claims are available for 3 months after Season One ends on January 20, 2026.
• Stay Engaged: Regularly review performance, as top-performing markets may receive boosted rewards next epoch, while underperformers get reduced. Use Entropy Advisors’ DRIP dashboards to track metrics and future allocations.

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What is an Orbit Chain ?

Arbitrum Orbit chains are an ecosystem of chains custom built with the Nitro stack and governed by ArbitrumDAO. All Arbitrum chains are eligible to be supported by Arbitrum’s ecosystem investment programs. They are the first step in the pursuit of the “Arbitrum Everywhere” vision, establishing Arbitrum as a core infrastructure layer supporting a broad range of applications.

Arbitrum Orbit launched in October 2023, and Rollup-as-a-Service (RaaS) providers such as Caldera, Gelato, Conduit, Alchemy, and AltLayer were quick to leverage this process, supporting the launch of chains like ApeChain, Proof of Play, and ReyaChain.

A mapping of the ecosystem shows that Arbitrum has achieved measurable adoption across multiple key verticals. It has a diverse list of chains ranging from DeFi, Infra, AI, RWA, and Gaming. The 49 publicly announced Arbitrum chains live on mainnet have totaled $21 billion in bridged assets. Top chains by total value locked (TVL) include:

• Arbitrum One: Launched in 2021, Arbitrum One is a general-purpose optimistic rollup that provides faster and cheaper transactions while maintaining the security of the Ethereum mainnet. Arbitrum One, rich in blue-chip DeFi protocols like Aave, Uniswap, Compound, and GMX, has an impressive TVL of $3.48 billion.
• Plume: Plume is a blockchain network focused on real-world assets (RWA). Launched on June 5, 2025, with a goal to bring tokenized RWA onchain, Plume features over 50 protocols, including major players such as Morpho and Curve.

The chain has $265.64 million in TVL and the top two leading projects on the blockchain, measured by TVL, are the Pell Network and the DeSyn Protocol.

• SX Network: This is the underlying network behind the popular exchange, SX Bet, a peer-to-peer web3 betting exchange that allows all users to both offer and take bets. The network has $57.17 million in TVL and a community fund for direct investments into projects, which is controlled by SX token holder voting.
• Gravity: Launched in August 2024 by Galxe, Gravity is an AnyTrust L2 and omnichannel settlement layer powered by Conduit and the G token. Gravity boasts of 1 Gigagas per second throughput and is the largest onchain credential data network. First launched as part of Arbitrum Orbit, Gravity plans to transition to a high-performance L1 in Q4 2025. The chain currently has $55.17 million in TVL.
• Corn: Corn is an Orbit Stack-based Layer 2 designed to merge Bitcoin's value with Ethereum's smart contract capabilities. Corn has a TVL of $24.7 million, uses Bitcorn (BTCN), a 1:1 tokenized bitcoin, as its gas token, the popCORN System for long-term incentives, and LayerZero for cross-chain asset transfers.

Publicly announced chains that are not live on mainnet yet that are poised to be catalysts for Arbitrum Orbit’s growth include:

• Converge: Pre-testnet and being built by Ethena and Securitize, Converge will be an L2 that aims to be the settlement layer for traditional finance and digital dollars. Converge will implement custom gas tokens like USDe and USDtb, a Converge Validator Network (CVN) secured by sENA, and a Conduit G2 Sequencer.
• Ethereal: Ethereal is a decentralized exchange that supports perpetuals, spot trading, borrowing/lending, real-world asset (RWA) products, and yield strategies. With <20 ms latency and approximately 1 million orders per second, it promises to be fast and secure. It is powered by USDe and Ethena for deep liquidity. Under the hood, Ethereal is an appchain building on Converge
• Robinhood: Expected to be the first Ethereum Layer 2 optimized for real-world assets, with tokenized stocks directly tradeable within their app.

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Conclusion

Arbitrum’s success is a testament to innovation meeting a great economic flywheel. Its technology stack continues to upgrade via Stylus, BoLD, and Timeboost and empowers developers to build niche-based dApps.

With over $14B in value bridged to the Orbit ecosystem, 9,000+ active developers contributing across the ecosystem, and consistently low transaction fees across networks, Orbit is well positioned to capture further momentum.

Together, these chains and Arbitrum One underpin the “Arbitrum Everywhere” vision. Arbitrum’s next evolution is guided by the vision of becoming a self-sustaining “Digital Sovereign Nation.” This concept envisions a decentralized ecosystem with its own economic, governance, and infrastructure layers, empowering communities to operate autonomously within the Arbitrum framework.