This episode summarizes a research paper introducing Arbitrum, a novel cryptocurrency system designed to support scalable and private smart contracts, overcoming limitations found in earlier platforms like Ethereum. Arbitrum achieves this by using mechanism design to encourage off-chain agreement among contract participants, so that on-chain verifiers primarily handle digital signature verification. In cases of disagreement, Arbitrum employs an efficient challenge-based protocol to identify and penalize dishonest parties. This off-chain focus and specialized virtual machine architecture lead to significant improvements in both scalability and privacy for smart contract execution. The paper also analyzes the Participation Dilemma affecting other scalability attempts and presents an implementation and benchmarks of the Arbitrum system.