Optimism (OP) is one of Ethereum’s most prominent Layer 2 solutions, created to address the blockchain’s scalability and high gas fee challenges. By leveraging the advanced Optimistic Rollup technology and building its modular OP Stack SDK, Optimism is laying the groundwork for a broader vision: the Superchain. Let’s dive into all aspects of Optimism in this comprehensive Coin60s review.
What is the Optimism?
Optimism is a Layer 2 solution built on top of Ethereum, designed to enhance transaction throughput while maintaining the network’s core principles of security and decentralization. Developed by the Optimism Foundation, the project leverages Optimistic Rollups – a bundling technique that significantly reduces gas fees and latency while improving transaction speed.
Specifically, Optimism enables both users and developers to benefit from a smoother experience, with gas costs slashed by up to 100 times compared to Ethereum’s mainnet. Its architecture includes the Optimistic Virtual Machine (OVM), which allows decentralized applications (dApps) to migrate from Layer 1 to Layer 2 with minimal code adjustments.
Why was Optimism created?
Despite being the leading smart contract blockchain, Ethereum suffers from high fees and slow transaction speeds, especially during periods of heavy congestion. These limitations have hindered the adoption of decentralized applications (dApps) among everyday users.
Optimism was developed to solve Ethereum’s scalability problem without compromising on decentralization or security. Instead of processing every transaction directly on-chain, Optimism uses Optimistic Rollups to batch transactions off-chain and then post the results back to Ethereum Layer 1.
This approach drastically reduces costs and latency, enhancing user experience while still benefiting from Ethereum’s robust security infrastructure.
Key Features of Optimism
- Low transaction fees: Thanks to rollup technology, Optimism can cut gas fees by up to 100x compared to traditional Ethereum transactions.
- Fast transaction processing: Batch processing reduces latency and increases throughput.
- Ethereum compatibility: Optimism supports most Ethereum apps and smart contracts with minimal code modifications.
- High security: As final settlement occurs on Ethereum Mainnet, users benefit from Ethereum’s robust security.
- OP Stack developer toolkit: Makes it easy and efficient to build Layer 2 chains, enabling the vision of a Superchain.
- Transparent governance: Through the dual-house model (Token House and Citizens’ House), the community helps shape the protocol’s future.
- Superchain vision: More than just a Layer 2, Optimism aims to unify multiple L2s into a single interoperable ecosystem.
Optimism Ecosystem
- OP Stack: A development toolkit that enables easy creation of Layer 2 chains compatible with Ethereum. It powers the Superchain infrastructure.
- Superchain: A network of OP Chains sharing OP Stack’s infrastructure, enabling seamless cross-chain interactions.
- Base: Coinbase’s Layer 2 blockchain, the first major project built on OP Stack, playing a key role in Superchain expansion.
- Velodrome Finance: The largest DEX on Optimism, using optimized AMM mechanisms to ensure efficient liquidity provision.
- Uniswap V3: Among the first DEX protocols on Optimism, offering low-fee token swaps.
- Beethoven X: A multifunctional AMM supporting staking, farming, and liquidity management.
- Curve Finance: A DEX platform focused on stablecoins, providing low-slippage swaps.
- Gyroscope Protocol: A hybrid DEX and stablecoin protocol that lets users swap stablecoins and mint P-GYD (USD-pegged).
- RetroPGF: A funding initiative rewarding ecosystem contributors with millions of OP tokens across several rounds.
- Optimism Bedrock: A major technical update improving network efficiency, reducing fees, and shortening transaction processing time.
What is the project’s token?
OP is the native token of Optimism, built on the Ethereum blockchain and compliant with the ERC-20 standard. It plays a central role in governance through the Optimism Collective – a DAO model consisting of two branches: Token House and Citizen’s House.
OP holders can vote on protocol upgrades, fund allocation for ecosystem projects, and contribute to decentralized community governance. The token also supports public goods initiatives across the ecosystem.
OP token allocation includes:
- Ecosystem Fund: 25%
- Retroactive Public Goods Funding (RetroPGF): 20%
- Community Airdrop: 19%
- Contributors: 19%
- Investors (Sugar Xaddies): 17%
Technical information:
- Name: Optimism (OP)
- Platform: Ethereum
- Token standard: ERC-20
- Total supply: 4,294,967,296 OP
- Release schedule: 2% annual inflation after the initial period
- Smart contract address: 0x4200000000000000000000000000000000000042
Development Team, Investors, and Partners
Development team:
Optimism is led by the Optimism Foundation, which manages the Optimism Collective and drives the project’s ecosystem and technical evolution. Key members include:
- Jinglan Wang – Co-founder & CEO
- Ben Jones – Co-founder
- Eva Beylin – Board member (formerly at The Graph Foundation)
- Abbey Titcomb – Community lead at Radicle
- Brian Avello – Formerly of Maker Foundation
The development entity Optimism PBC was rebranded as OP Labs PBC, now led by Liam Horne as CEO, formerly the Engineering Director of Optimism.
Investors:
Optimism successfully raised $178.5 million through three funding rounds:
- Seed Round (2020): $3.5 million – Paradigm, IDEO CoLab
- Series A (2021): $25 million – led by Andreessen Horowitz (a16z) and Paradigm
- Series B (2022): $150 million – also led by a16z and Paradigm
The project was valued at approximately $1.65 billion after the Series B round.
Partners:
Optimism has formed strong alliances with key players in the DeFi and Web3 space:
- Uniswap, Velodrome, 1inch, Beethoven X, Curve – major DEXes on Optimism
- Worldcoin – launched World ID and World App on OP Mainnet
- Base (Coinbase), opBNB, Zora, Celo, DeBank – Layer 2 networks built using the OP Stack SDK
Roadmap
Optimism has already completed several major milestones, including the pivotal Bedrock upgrade which significantly reduced transaction fees and enhanced network performance. Looking ahead, the project is focused on completing four key stages:
- Stage 8 – Next-gen Fault Proof: Develop next-generation fraud-proof systems to improve security and reduce transaction confirmation times.
- Stage 9 – Multi Proof: Introduce multiple types of proofs to offer more flexible and robust transaction verification.
- Stage 10 – Decentralized Sequencer: Launch a decentralized sequencing mechanism to eliminate centralization risks in transaction ordering.
- Stage 11 – L1 Governed Fault Proofs: Delegate fault-proof governance to Ethereum Layer 1 to ensure transparency and community-driven control.
In the long term, Optimism envisions building a decentralized and highly scalable Superchain network to serve as the foundational infrastructure for the next generation of Web3 applications.
Strengths and Limitations of Optimism
Strengths:
- Optimism offers a highly efficient Layer 2 scaling solution with low transaction fees, high speed, and Ethereum-grade security.
- The long-term vision of Superchain and the modular OP Stack facilitates easy development of interoperable Layer 2 networks.
- Its dual governance model (Token House and Citizens’ House) enables deep community involvement in the protocol’s evolution.
- Backed by leading investment funds like a16z and Paradigm, ensuring strong financial support and industry credibility.
- A thriving DeFi ecosystem with major protocols like Uniswap, Velodrome, Synthetix, and more.
Limitations:
- Faces intense competition from other Layer 2s such as Arbitrum, zkSync, and Base, which currently offer higher throughput and lower fees.
- The fraud-proof mechanism may lead to longer transaction finality times under certain dispute scenarios.
- Community dissatisfaction over past airdrop distributions has affected the project’s public image and user trust.
- Decentralization of the transaction sequencer is still in progress and not yet fully realized.
Should you invest in Optimism?
Optimism stands out as a leading Layer 2 solution on Ethereum, leveraging Optimistic Rollups to deliver scalable performance with lower transaction costs. The introduction of OP Stack and the long-term Superchain vision reflect the project’s commitment to sustainable development. Backed by major investors like a16z and Paradigm, Optimism has a strong foundation to compete in the Layer 2 landscape.
However, investors should be aware of technical limitations and intense competition from rivals like Arbitrum and zkSync, especially as newer solutions offer better performance.
If you believe in Ethereum’s growth and the potential of Layer 2 scaling, Optimism could be a worthy consideration. Still, as with any investment, make sure to conduct thorough research and manage your capital wisely to mitigate risk.
Conclusion
Optimism is not just a Layer 2 scaling solution for Ethereum, but also a pioneer reshaping interchain connectivity with its Superchain vision. Backed by solid technology, a vibrant development community, and a clear long-term roadmap, Optimism is steadily positioning itself as a key player in the Ethereum ecosystem. While technical challenges and competition remain, this project is certainly worth watching for those interested in Layer 2 trends and the future of scalable blockchain infrastructure.