How Arbitrum processes transactions from wallet to Ethereum
Arbitrum processes transactions through a sequencer, then posts data to Ethereum. A fast confirmation is not finality, and records matter for taxes.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- Arbitrum is an optimistic rollup built on Ethereum.
- The sequencer gives a fast receipt before Ethereum settlement.
- Batches face a challenge period, usually about a week.
- Keep records because crypto transactions can be taxable.
Arbitrum is an optimistic rollup. It executes transactions away from Ethereum's main chain and posts the data back. The design aims to reduce fees and increase throughput on Ethereum. That structure keeps activity on Arbitrum while Ethereum holds the record.
What you need before you start
Before you send anything, you need two things. Your wallet must be set to the Arbitrum network, and you need ETH on Arbitrum to pay gas. Many wallets hide the network selector, so check the active network on the screen before you approve a transaction.
How does Arbitrum process a transaction
Arbitrum separates execution from settlement. It runs transactions on its own chain and later posts the data to Ethereum. The steps below follow a transaction from your wallet to Ethereum.
- 1Approve in your walletReview the recipient, the network and the gas estimate, then authorize the transfer.
- 2Send to the sequencerYour signed transaction goes to the sequencer. The sequencer is the node that orders and executes transactions.
- 3Get a fast confirmationThe sequencer returns a receipt quickly, often in seconds. This Arbitrum confirmation is not Ethereum finality.
- 4Wait for Ethereum settlementThe transaction data is batched and posted to Ethereum. A challenge period, usually about a week, allows fraud proofs before settlement is final.
What to do after it confirms
Keep records of every Arbitrum transaction for US tax reporting. The IRS treats crypto as property, so buying crypto with US dollars is not a taxable event, but trading one crypto for another or paying with crypto is. A bridge withdrawal to Ethereum usually waits for the challenge period, so it is not instant.
Frequently asked questions
The sequencer is the node that receives transactions, puts them in order and executes them. For Arbitrum One, the sequencer is run by Offchain Labs, the company that developed Arbitrum.
Your wallet usually shows a receipt within seconds, because the sequencer executes the transaction right away. Ethereum settlement comes later, after the batch posts and the challenge period passes.
Usually you cannot cancel once the sequencer has accepted it. Some wallets let you replace it with a new transaction that pays a higher gas fee, but that is not guaranteed.
New transactions wait in your wallet until the sequencer comes back. Arbitrum also has a force inclusion path that lets users send transactions through Ethereum if the sequencer stalls.
