Offchain Labs: Growing the capacity of blockchain solutions

Nov. 2, 2021

Forming a startup can be exhilarating for academic researchers who want to see their ideas and innovations become real world solutions. Each year, a number of Princeton researchers become startup founders with assistance and advice from Princeton Innovation, the Office of Technology Licensing and the Princeton Entrepreneurship Council.

Offchain Labs

Co-founded three years ago, Offchain Labs expands the capacity of blockchain technologies to address needs beyond cryptocurrency. Computer science professor Edward Felten started thinking about the idea behind Offchain Labs in 2014. He wanted to use blockchain technology — the same concept that underlies the cryptocurrency bitcoin — to secure online interactions between people.

Blockchain technology can provide secure online transactions in situations where two parties don’t trust each other. Instead of going through a credit card company or bank, parties employ computers to verify blocks of data stored in a chain.

But blockchain smart contracts are inherently slow, processing only a few transactions at a time, said Felten, who is the Robert E. Kahn Professor of Computer Science and Public Affairs, Emeritus. “We asked, how can we substantially increase the capacity while also lowering the cost of these transactions?”

His team started exploring ways to boost the capacity of transactions on a blockchain system called Ethereum, second only to Bitcoin in terms of size. Ethereum’s smart contracts enable developers to create secure apps for games, marketplaces, or financial operations such as currency exchange.

Building a product

By 2018, Felten and two graduate students, Steven Goldfeder and Harry Kalodner, had developed a solution for boosting Ethereum’s capacity. Their software, which they call Arbitrum, uses so-called offchain methods that don’t involve energy intensive “mining” to verify blocks on the chain.

The team licensed the technology from Princeton University, co-founded Offchain Labs and raised seed funding. As the company’s momentum grew, Felten took a leave from the University, and as of July 1, 2021, became professor emeritus to focus full-time on the company as its chief scientific officer.

Arbitrum acts like a layer between the user and Ethereum to give all the security guarantees of the blockchain while using a lot less of the core Ethereum resource, Felten said. This reduces the amount of user activity each person does on Ethereum, leading customers to spend far less on Ethereum fees.

The product, which went live this summer, is easy to use, Felten said. “People who are familiar with Ethereum will just put in a different node address and talk to Arbitrum instead. That compatibility is super important. We really want it to be a ‘drop-in’ replacement.”

“University-founded discoveries can have a huge impact on improving lives, creating jobs and supporting new research discoveries,” said John Ritter, Director of Technology Licensing. "We help connect industry partners, investors and entrepreneurs with Princeton's cutting-edge technologies and researchers to provide solutions to real-world problems."

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