Offchain Labs introduces BOLD, an innovative protocol named Bounded Liquidity Delay, which revolutionizes the authentication process for Arbitrum chains. The primary goal of BOLD is to ensure the longevity of chains, reduce latency, and deter malicious actors from causing financial setbacks to honest participants.

At present, when it comes to settlement between states on Ethereum for Optimistic Rollup chains like Arbitrum One and Nova, the process is conducted through fraud proofs. Validators submit claims about the validity of Layer 2 (L2) to a smart contract, allowing a seven-day window for potential challenges. Once confirmed, the L2 validity is recorded on the Ethereum network. However, this setup creates a gateway for entities submitting fraud proofs to Ethereum to verify the accuracy of L2 implementation.

The current authentication system on Arbitrum One and Nova is deemed permissioned as it is vulnerable to denial-of-service threats. Hostile validators could potentially disrupt the verification process for fund claims, leading to delays in withdrawing from Layer 2 to Layer 1. Offchain Labs tackles this issue head-on by introducing BOLD, a mechanism that enforces a fixed seven-day delay during the verification process, eradicating delay risks and enabling permissionless authentication for the Arbitrum chains. This move brings the system closer to full decentralization, with a single validator overseeing disputes on the Ethereum network.

BOLD, originating from Arbitrum's dispute resolution mechanism, presents a more efficient way to settle disputes related to the implementation of Layer 2 states without being reliant on specific stakeholders. Offchain Labs showcases the implementation of BOLD, where a challenge manager takes charge of posting opinions on the Layer 2 state, engaging in challenges against multiple adversarial entities, and ultimately providing the correct state. The modular nature of this execution allows seamless integration into existing Arbitrum Orbit chains.

The thorough auditing of BOLD by Trail of Bits aligns with the code base license of Arbitrum Nitro. Offchain Labs is actively working on developing additional tools, such as a challenge visualizer and an API, to aid in comprehending this intricate mechanism.

Prior to the full production of BOLD, suggestions are being sought for running an Arbitrum Nitro development network with active BOLD challenges. It is essential that the formal proofs code for BOLD is made publicly available, followed by the creation of a testnet environment to engage the community in challenge activities. Valuable feedback from these initiatives will guide the formulation of an AIP for further improvements and refinements.