What Is Optimism (OP)?

Ethereum, Optimism launches OP governance token - The Cryptonomist

Optimism (OP) is a layer-two blockchain on top of Ethereum. Optimism benefits from the security of the Ethereum mainnet and helps scale the Ethereum ecosystem by using optimistic rollups. That means transactions are trustlessly recorded on Optimism but ultimately secured on Ethereum.

Optimism is one of the biggest scaling solutions for Ethereum with over $500 million in TVL. It is home to 97 protocols, the biggest being Synthetix (SNX), a derivatives exchange, Uniswap (UNI), a DEX, and Velodrome (VELO), an AMM. Users can begin their journey on Optimism by adding the chain on their Metamask and bridging tokens like ETH to the L2. On May 31, 2022, Optimism conducted a highly anticipated airdrop of its OP token.

Who Are the Founders of Optimism?

Optimism is led by the Optimism Foundation, a nonprofit organization dedicated to growing the Optimism ecosystem. Similar to Ethereum, Optimism aims to become a fully decentralized public good that is not profit-oriented. Optimism is completely funded by donations and grants, and pledges to produce infrastructure that promotes the growth and sustainability of public goods.

What Makes Optimism Unique?

Optimism is designed around four core tenets:

  • Simplicity
  • Pragmatism
  • Sustainability
  • Optimism

Optimism aims for the minimum number of moving parts while building a layer-two solution for Ethereum. In practice, this means using proven Ethereum code and infrastructure when possible. Optimism thus aims to keep its code as simple as possible and work directly with existing codebases.

The ecosystem further emphasizes pragmatism and is driven by the real-world needs and constraints of its own team and the users engaging with the ecosystem. Hence, Optimism aims to build iteratively and implement features like EVM equivalence gradually.

Optimism’s design process is built around the idea of long-term sustainability and not taking shortcuts to scalability. That is why it uses optimistic rollups and takes advantage of the consensus mechanism of Ethereum to scale the network. Blocks are constructed and executed on the L2 (Optimism), while user transactions are batched up and submitted to the L1 (Ethereum). The L2 has no mempool, and transactions are immediately accepted or rejected. This guarantees a smooth user experience while ensuring security through the Ethereum consensus mechanism.

Transactions are submitted to Ethereum without direct proof of validity and can be challenged for a certain period of time (currently seven days). After that, a transaction is considered final. That is why withdrawals from Optimism to Ethereum take seven days to complete.

How Many Optimism (OP) Coins Are There in Circulation?

Optimism aims to create an ecosystem, where value is generated for its three constituencies:

  • Token holders receive value through the productive re-deployment of sequencer revenue.
  • Contributors and builders receive value from retroactive public goods funding.
  • Users and community members receive value from ongoing airdrops and project incentives.

In short, demand for OP block space generates revenue, which is distributed to public goods, which drives more demand for blockspace. That is why Optimism’s token allocation looks as follows:

  • Ecosystem fund (25%): split between the governance fund (5.4%), the partner fund (5.4%), the seed fund (5.4%), and unallocated (8.8%).
  • Retroactive Public Goods Funding (20%)
  • User airdrops (19%): split into a first airdrop of 5% and subsequent airdrops yet to be announced.
  • Core contributors (19%): people who help bring the Optimism Collective from concept to reality
  • Investors (17%)

The initial token supply is 4,294,967,296 OP tokens, at an inflation rate of 2% a year. In Year 1, 30% of the initial token supply will be made available to the Foundation for distribution. After the first year, token holders will vote to determine the Foundation’s annual OP distribution budget. The Foundation expects to seek the following annual allocations:

  • Year 2: 15% of the initial token supply
  • Year 3: 10% of the initial token supply
  • Year 4: 4% of the initial token supply

How Is the Optimism Network Secured?

Optimism utilizes optimistic rollups. Optimistic Rollups (ORs) can trustlessly record transactions on the second-layer blockchain and broadcast periodic merkle roots of the transactions to the first-layer blockchain. External validators verify these merkle roots, which delays withdrawing funds from layer-twos running on optimistic rollups (usually by one week).

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