No matter how much we like Ethereum, we know there are some issues at hand. Congestion and high transaction fees are top of the list. Ethereum is working on solutions with the Merge and sharding. In the meantime, Layer 2 solutions solved these problems already. Optimism is such a Layer 2 solution.
It offers fast transactions at low costs, and it’s scalable. They do this with optimistic rollups. So, it’s about time that we take a closer look at Optimism.
What Is Optimism?
As Layer 2 solutions tend to do, Optimism built itself on top of Ethereum, the Layer 1. This means that Optimism computes off-chain. However, they publish all data on-chain. Optimism does this with optimistic rollups. This means that transactions take place on Optimism. Now they bundle, or roll up, a big chunk of transactions into one single transaction. They send this single transaction to Ethereum. On Ethereum, the transactions get validated. This results in cheaper transaction costs. It also takes traffic away from the main Ethereum network. The above video gives a good explanation of this.
Optimism is a non-profit organization. This influences the governance of Optimism. So let’s have a look at this.
How Is Optimism Governed?
The Optimism Foundation and Collective will work together. Both will govern Optimism. They established Optimism Collective as two co-equal chambers – the Token House and the Citizens’ House.
Introducing the Optimism Collective: pic.twitter.com/PbQyBU1J6l
— Optimism (✨🔴_🔴✨) (@optimismPBC) April 26, 2022
The task of these houses is to balance on one side short-term incentives. On the other side is the long-term vision.
If you are an OP token holder, you can vote on features such as the distribution of project incentives as a part of a Governance Fund. However, also protocol upgrades, and more are possible. This is the Token House.
In the Citizens’ House, they govern a process for distributing retroactive public goods funding. You qualify for this if you provided value to Optimism’s ecosystem. For instance, projects, communities, or companies. However, they distribute funds after you have proven your value. It’s not a start-up or funding grant. Their governance is rather complex. More explanation is in their governance docs. They also have an in-depth paper on how the Collective works.
In a nutshell, this leads to incentives to build these public goods. They will support a healthy ecosystem. The sequencer generates this revenue. This sequence submits the rollup transactions to Ethereum. Some of this profit goes to the Collective. In turn, this provides the funds for the public good. See the picture below.
The Optimism Ecosystem
There are close to 200 apps and integrations in Optimism’s ecosystem. These are in various fields. Below is a list of fields with some samples of each field.
- DeFi — Synthetix, Aave, Uniswap.
- NFTs — OptiPunks, Optimistic Apes.
- Bridges — Hop Exchange, Celer Bridge, Connext.
- On ramp — Binance, Kucoin, MEXC.
- Wallets — Coin98, MetaMask, Trust Wallet.
- Tools — Chainlink, Dune Analytics, The Graph.
- Portfolio trackers — DeBank, Nansen, Zapper.
- DAOs — Bakery DAO, BoringDAO, Olympus DAO.
Bridges on Optimism and How to Use Them
Although Optimism has its OP token, it’s not used for paying bridging fees. We need to bridge tokens because Optimism is a separate blockchain. For this, you need ETH or other ERC-20 tokens. You can bridge them through the Optimism token bridge. Once you’re done, you can swap tokens back to Ethereum’s mainnet.
You can use the Optimism Gateway to deposit your tokens. There’s the older Legacy version or the V2 option. Below is a picture of the V2 option.
Source: Optimism bridge
To connect to the Gateway, you can use MetaMask or other Web3 wallets. This may take a while, up to 20 minutes. In April 2022, sending 1 ETH set you back for around $18.
If you want to withdraw funds, there’s a waiting period of one week. They offer a challenge time in case you suspect that there is a faulty transaction. The withdrawal fee can cost you up to around $50.
However, once you have your funds on Optimism, you can start using it. For example, you can use Uniswap. This saves on fees. Up to 100x at times. You select Optimism from the network menu in your wallet and that’s it. Now you’re ready to start trading.
The Dune Protocol shows you some interesting stats. For instance, how your Average Gas Fee Savings are vs L1. At the time of writing, it was 80x. Until now, they saved users over $1.1B in gas fees
Source: Dune Analytics
This L2 fees website shows how much the costs are when using Optimism.
Source: L2 fees
However, there are more bridge options available. In total, they list 17 bridges in their ecosystem.
Currently, Optimism has various token airdrops going on. The first, just a few weeks ago, in late May 2022, didn’t go as planned. There were hiccups in the distribution and early receivers sold their tokens quickly. This upset the community quite a bit. However, Optimism still plans more airdrops.
Optimism is a popular Layer 2 solution. They also have good funding behind them. This means that they can keep building in the current bear market. They also have an active roadmap, with some interesting new features to come. For example, sharded rollups in 2023 or a decentralized equalizer in 2024.
The team already deployed their mainnet but still consider themselves in beta. That is because they are not yet fully decentralized. They took the first steps though to solve this. The Collective is their version of a DAO and with the OP token airdrops.
The current price of the OP token is $0.546653, according to CoinGecko. It’s only listed since May 31, 2022. The market cap is $117 million. There are only 214 million tokens in circulation. The max supply is 4.294 billion. The 24-hour trading volume looks good at $48.5 million.
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