Optimism: Ethereum v2
By Rayna Ishihara | Crescent City Capital Market Analyst Intern
What is Optimism
Optimism is a layer 2 scaling solution for the Ethereum blockchain. It aims to improve the scalability and usability of Ethereum by reducing transaction costs and increasing the speed of transactions while at the same time, taking the benefits from Ethereum’s strong security guarantees.
Optimism has a design philosophy based on four key principles: simplicity, pragmatism, sustainability, and optimism. These principles heavily influence the overall design of Optimism. Simplicity is a focus on minimal code and engineering overhead, which maximizes security and allows for collaboration with Ethereum. Pragmatism prioritizes user needs over theoretical perfection and is developed iteratively with user feedback. Sustainability aims to ensure long-term competitive operations and is influenced by simplicity. Optimism’s sense of optimism is rooted in its belief in Ethereum’s vision, and it exists as an extension of Ethereum, designed to help it succeed.
Optimism is a platform that aims to look, feel and behave like Ethereum but with faster transaction times and lower costs. Developers can easily transition their Solidity smart contracts from L1 to L2, and off-chain code can interact with L2 contracts with minimal changes. Optimism enables users to participate in DeFi applications, as well as buy, sell, and create NFTs similar to Ethereum, but at a fraction of the cost.
Optimism is built as an Optimistic Rollup, which is basically a blockchain scaling technique that leverages the security and integrity of a “parent” blockchain. Optimistic Rollups employ a consensus mechanism inherited from their parent blockchain, such as Proof-of-Work (PoW) or Proof-of-Stake (PoS), instead of creating their own. In the case of Optimism, Ethereum serves as the parent blockchain.
Optimistic rollups are layer 2 scaling protocols that increase Ethereum’s throughput while maintaining security. They reduce the computation load on the main Ethereum blockchain by facilitating off-chain transaction processing, leading to significant improvements in efficiency. They achieve this by bundling multiple off-chain transactions into large batches before submitting them to Ethereum, spreading fixed costs and reducing end-user fees. Optimistic rollups are optimistic by default, assuming the validity of off-chain transactions without publishing proofs. On the contrary, optimistic rollups follow a fraud-proving mechanism to identify discrepancies, but users must challenge rollup batches within a specific time window. Successful fraud-proofs result in transaction re-execution and a penalty for failing to provide a correct transaction.
The Optimism token (OP) is the native trading token for Optimism. It functions to provide funding for third-party development proposals and integrations on the platform via the Optimism Collective DAO. OP holders can also participate in voting on the future of the network. Although the concept has existed since 2019, the first Optimism airdrop did not occur until May 31, 2022.
The first Optimism airdrop was distributed to those who met specific criteria, including swapping tokens on Optimism’s blockchain and voting on governance proposals, before March 25, 2022. Although most of the wallets claimed their airdrop, the process had some issues. It caused the blockchain to slow down, and some users claimed OP before it was officially announced. The token’s value dropped from $4.57 to $0.79 before recovering to $1.37 by June 3.
The live Optimism price on April 5th is $2.25 USD with a 24-hour trading volume of $83,391,257 USD. It has a circulating supply of 314,844,141 OP tokens.
Optimism is a layer 2 scaling solution for the Ethereum blockchain that aims to improve the scalability and usability of Ethereum by reducing transaction costs and increasing the speed of transactions. It is built as an Optimistic Rollup, a blockchain scaling technique that leverages the security and integrity of a “parent” blockchain, in this case, Ethereum. Optimism follows a design philosophy based on four key principles: simplicity, pragmatism, sustainability, and optimism, and enables users to participate in DeFi applications, as well as buy, sell, and create NFTs similar to Ethereum, but at a fraction of the cost.