Arbitrum is a layer 2 scaling solution for Ethereum that utilizes optimistic rollups to improve transaction speed and reduce costs. It acts as an off-chain network that aggregates multiple transactions into a single batch, submitting a compressed proof of the batch to the Ethereum mainnet for verification. This approach significantly enhances Ethereum's scalability by allowing for faster confirmation times and lower gas fees. With its compatibility with existing Ethereum infrastructure, developers can deploy their smart contracts on Arbitrum without major code modifications. It offers a promising solution to address the scalability challenges faced by Ethereum, enabling a more efficient and user-friendly decentralized ecosystem.