Arbitrum One batches users' transactions and submits them to Ethereum, paying a share of the transaction fees to Ethereum validators (expense).

Arbitrum One is an L2 smart contract platform for decentralized applications on Ethereum. Arbitrum was founded by Offchain Labs and launched in 2021.

ARB tokenholders own and govern the protocol. They currently run the only sequencer and take a cut of the total transaction fees paid by users (revenue). Arbitrum’s investors include Polychain, Alameda Research, Coinbase Ventures, etc.

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Arbitrum One

# Arbitrum One Cost of revenue Methodology

## 1. Overview

Cost of revenue is calculated to measure the expenses incurred by Arbitrum One when settling transaction batches on the Ethereum mainnet. These expenses are represented by the L1 settlement fees paid by designated Arbitrum sequencer addresses to purchase block space and blob space on Ethereum. This metric is utilized to evaluate the operational efficiency and net profitability of the L2 network, as L1 data availability and settlement are classified as the primary operating cost for rollup protocols.

## 2. Data sources

- **Blockchain events**: Transactions initiated by Arbitrum sequencer addresses on Ethereum
- **External data**: End-of-day price feeds for the native gas asset (ETH)

## 3. Step-by-step calculation

### Component A: Sequencer transaction filtering

- **Purpose**: Identify transactions submitted by Arbitrum sequencers to Ethereum
- **Logic**: Transactions are filtered from the Ethereum blockchain where the sender address matches designated Arbitrum sequencer addresses. Specific transactions used to post batch data and state updates to the L1 settlement layer are isolated through this filtering process.
- **Key fields**: `from_address`, `block_timestamp`, `transaction_hash`

### Component B: L1 settlement fee calculation

- **Purpose**: Calculate the total gas and blob fees paid for each settlement transaction
- **Logic**: For each identified sequencer transaction, the gas cost is calculated by multiplying the effective gas price by the gas used. If applicable, blob fees are calculated by multiplying the blob gas used by the blob gas price. The total settlement cost is computed as the sum of the gas cost and blob gas cost, which is then normalized by the decimal precision of the native asset (ETH).
- **Key fields**: `gas_price`, `blob_gas_price`, `gas_used_amount`, `blob_gas_used_amount`

### Component C: Daily aggregation and USD conversion

- **Purpose**: Aggregate settlement costs daily and convert the values to USD
- **Logic**: The calculated settlement costs are aggregated to a daily granularity using UTC day boundaries. These daily native asset amounts are then multiplied by the end-of-day price of the native gas asset, and the final cost of revenue is expressed in USD.
- **Key fields**: `block_timestamp`, `price_usd`

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Expenses paid to third parties to deliver core service output.

Arbitrum OneARB

Cost of revenue

Cost of revenue

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