August 9, 2023

A Deep Dive into Arbitrum's Bounded Liquidity Delay

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The blockchain landscape is ever-evolving, with solutions being developed to address existing challenges and push the envelope further. Arbitrum, a prominent L2 scaling solution, has taken a noteworthy step in this direction by introducing the "Bounded Liquidity Delay" protocol, fondly known as BOLD.

In this article, we will delve deep into the intricacies of BOLD and its implications for the Arbitrum ecosystem.

What is BOLD?

At its core, BOLD is a dispute protocol engineered by Offchain Labs. Designed specifically for Arbitrum chains, its primary aim is to bolster permissionless validation, enhance chain safety, minimize latency during state settlements, and shield honest participants from the financial repercussions of dishonest parties.

Why was BOLD Needed?

To understand the significance of BOLD, we must first grasp the limitations of the current Optimistic Rollup chains, such as Arbitrum One and Nova. These chains utilize fraud proofs to settle their state to Ethereum, relying on validators to post claims about the verified L2 state. However, there's a waiting period of seven days during which these claims can be challenged by other validators, culminating in a dispute resolution process.

The challenge with this system is its susceptibility to delay attacks. Dishonest validators could, in theory, continuously expend funds to forestall confirmations, thereby hampering L2 to L1 withdrawals for an indefinite period. This vulnerability posed a threat to the system's robustness and trustworthiness.

How Does BOLD Address These Issues?

BOLD offers a fresh perspective on validation, setting a fixed upper boundary of seven days for any additional delays on confirmations. This effectively neutralizes the threat of delay attacks.

Key features of BOLD include:

Deterministic L2 Execution

Unlike traditional systems where disputes are tied to specific stakers, BOLD links them to the deterministic execution of an L2 state. This means any party concurring with a state can defend it until a disagreement point emerges.

Victory for Honesty

Given the deterministic nature of the L2 state, honest parties are always poised to triumph if they participate, as malicious entities can't fabricate proofs of execution.

Permissionless Validation

BOLD elevates the decentralization quotient of Arbitrum chains, enabling them to operate without the need for permissions and making them immune to adversarial attacks.

The Bigger Picture: Implications and Future Prospects

The introduction of BOLD into the Arbitrum ecosystem is emblematic of the continual efforts being made to refine blockchain systems. Not only does BOLD enhance the security of transactions, but it also paves the way for a more streamlined, efficient, and inclusive decentralized landscape.

As the code and research specifications become publicly available, it's anticipated that the community will have the opportunity to interact with, test, and potentially integrate BOLD into existing chains. Preliminary audits and tooling efforts, such as the Challenge visualizer, suggest a comprehensive approach to ensuring the protocol's efficacy and utility.

In Conclusion

Arbitrum's BOLD is a testament to the boundless possibilities in the realm of the L2 space. By addressing vulnerabilities, reducing latencies, and championing honesty, BOLD sets a new benchmark for Layer 2 solutions. As the protocol undergoes further testing and receives community feedback, it holds the potential to redefine the paradigms of decentralization and trust in the blockchain world.