State of Scaling Issue 5: Nitro, Metis and dYmension

On September 1, 2022, Arbitrum announced the launch of Nitro, which was also accompanied by a revamp of their documentation. The improvements to Arbitrum’s performance, coupled with the speculation of a potential Arbitrum token airdrop, have fuelled the growth in activity within Arbitrum’s ecosystem, most of which had been captured by GMX, a decentralized perpetuals trading protocol. Before looking at the growth in Arbitrum’s adoption, we will first break down the improvements that Nitro brings.

Nitro introduces calldata compression for the data that Arbitrum posts on Ethereum, which brings transaction costs down significantly. This is because, for rollups, the main contributor to transaction costs is posting L2 transaction data on L1 as calldata. Given that a rollup’s state must be able to be reconstructed from data posted on the underlying L1, it is inevitable that a rollup’s scalability bottleneck will ultimately be the calldata that it posts to L1.