The source and security of Arbitrum assets

According to official announcements, the security level of assets in Arbitrum and Optimism (including ETH, usdt, uni, etc.) is the same as L1. Although up to now, the result of the actual operation is that Rollup has not reported any asset loss. But in fact, these assets are very complicated, divided into three situations.

On June 1st, Circle announced that they would be releasing an official Arbitrum version of USDC.

On Arbitrum, USDC has already existed for a long time. How did this USDC come about? The original USDC was renamed Bridged USDC after Circle released the official version, and the code name changed from USDC to USDC.e. But this name change is only a modification of the analytical name at the block browser level, and cannot be modified at the contract level.

This USDC.e is bridged from Arbtirum's official bridge and L1. The following is the test I just did.

USDC is sent from L1 to Arbitrum through Arbitrum's official bridge. On L1, USDC is Circle's official USDC contract deployed in L1. When it reaches Arbitrum, it becomes USDC.e, which is deployed by Arbitrum.

With these two versions of USDC, we can figure out the source of assets on Arbitrum.

**1. Assets spanning from L1 to Arbitrum via the official Arbitrum bridge. **

These assets will be stored on L1 in the Arbitrum contract deployed on L1 for recharge and withdrawal. This is the main contract of Rollup in L1, which is used to record the status of all recharge users on L1.

When a user crosses from L1 to Arbitrum through the official Arbitrum bridge, the action that occurs is that the user deposits funds into Arbitrum and deploys it in the main contract of L1, and then Arbitrum mints out an equal amount of assets to the user on the Rollup side. Conversely, it is destroyed at the Rollup end and withdrawn at the L1 end.

The security of these assets recharged to Arbitrum-Rollup through the official Arbitrum bridge is in line with the Rollup design document, and the security is similar to L1. Even if the Rollup operator runs away, users can forcefully withdraw funds in this Rollup contract on L1.

**2. Token assets independently issued by the project party in Arbitrum. **

For example, AiDoge is a coin issued on Arbitrum, which is not available on L1. This kind of asset is to treat Arbitrum as an independent chain.

The official version of USDC released by Circle on Arbitrum falls into this category.

If Arbitrum runs away, the assets released based on Arbitrum's native nature will definitely be reset to zero, and you will not be able to recover them on L1. Because L1 essentially does not have this asset.

**3. There is another type of asset that is crossed to Arbitrum through a third-party cross-chain bridge. **

The mainstream third-party cross-chain bridges, such as multichain, treat Arbitrum as an independent chain, such as bridging BSC and Arbitrum.

Through the locking and release of the chain assets on both sides of the bridge, cross-chain is carried out.

The security of this type of assets crossing to Arbitrum through a third-party bridge is subject to the third-party bridge and Arbitrum at the same time. If any party runs away or has a bug, the assets may be lost.

The situation of third-party bridges is more complicated, because third-party bridges generally work in the way of fund pools.

For example, the bridge of multichain bridges ETH assets from ETH-L1 and Arbitrum, then multichain must have corresponding ETH fund pools at both ends of L1 and Arbitrum to provide users with cross-chain. Of course, when the user crosses from L1 to arbitrum, the user recharges ETH to the L1 fund pool of multichain, and then multichain releases the ETH on arbitrum to the user.

If one end of the third-party bridge runs out of funds, the bridge will only work one way.

For the official Arbitrum bridge, there is no concept of a fund pool, and the actions are recharge and mint, withdrawal and destruction.

Therefore, the security of the funds entering and exiting Rollup through the third-party bridge is also affected by the fund pool of the bridge. The fund pool of most third-party cross-chain bridges is essentially a multi-signature, and these fund pools can be stolen and run away.

If everything is as designed in Rollup’s design document, the recharge contract of Arbiturm’s official bridge in L1 is essentially unable to run away with money.

But now Arbitrum has not implemented fraud proofs, so Arbiturm can essentially shut down the Rollup service and steal money by maliciously modifying the state of both Rollup and L1.