What is Optimism? Guide to Ethereum’s layer-2 Scaling Solution. To address Ethereum’s scalability problems in a way consistent with the Ethereum blockchain, there is an Ethereum-compatible layer-2 project called Optimism. A group of committed communities working toward a more egalitarian internet, Optimism is an Ethereum layer-2 scalability solution spearheaded by The Optimism Collective. The Optimism Foundation, OP Labs, and OP Chains are all part of the same organization.
The project’s architecture is based on Ethereum. Thus, it may provide users with a wide range of decentralized applications (DApps), such as decentralized exchanges and other DeFi apps. The Ethereum Virtual Machine (EVM) is compatible with Optimism. This EVM equivalency makes it easy for Ethereum developers to build decentralized applications (DApps) on the network. But hopeful rollups are the network’s bread and butter.
What are Optimistic Rollups?
Ethereum developers have proposed numerous solutions for scalability, one of which is optimistic rollup technology. Though distinct in important respects, they serve a purpose analogous to zero-knowledge rollups. Optimism can conduct transactions off the mainnet because it exists as a layer-2 solution on top of Ethereum. With data processed outside the Ethereum mainnet, congestion and transaction costs are lowered, and gas fees are reduced. A layer-2 solution, on the other hand, requires a way to communicate with its parent chain between layers. The role of hopeful rollups becomes apparent here.
As Optimism’s way of moving transactions from Ethereum to its layer-2 solution, optimistic rollups are utilized by numerous Ethereum scaling solutions now in existence. Users can participate in an optimistic rollup by funding layer-2 solution-compliant smart contracts. A node called a “sequencer,” which functions similarly to an Ethereum validator, combines all these transactions into a single block after processing them. Once the sequencer satisfies the block’s progress, it commits to the layer-1 solution in a single transaction.
Since all transactions in the rollup are automatically presumed to be genuine, optimistic rollups are named as such. One reason for the high transaction throughput (the number of transactions executed per second) is the absence of validation. On other networks, lengthy transaction times are mostly caused by validation.
A “fault-proof” (or “fraud-proof”) procedure allows users to challenge a state commitment at any moment. A new state commitment is added to the chain whenever a challenge is successful. Users now have a week to contest a state commitment before it takes effect. Although other scaling solutions include optimistic rollups, they are just a small component of Optimism’s extensive software suite, the OP Stack.
What is the OP Stack?
A project’s software stack determines its quality. Optimism is also high, and the group has ambitious plans for future growth. Optimism is built on top of the OP Stack, an open-source and ever-changing collection of applications. Transaction processing and network development are the primary focuses of its several tiers, which include governance, settlement, and derivation. With Ethereum as its consensus and transaction execution layer, Optimism has a solid base on which to grow.
The current version of the OP Stack, Bedrock, provides developers with a suite of tools to create their own layer-2 blockchain. The blockchain above can benefit from optimistic rollups. But Optimism’s community-driven development aspirations transcend beyond Bedrock. Transforming Bedrock into a super chain is the goal of the Optimism organization. A superchain, in the optimistic view, would provide a platform upon which further chains might be built. Layer-2 interoperability allows all blockchains that tap into the superchain to share upgrades, connect, and participate in the same governance.
In theory, developers may use Optimism’s OP stack to create a blockchain that serves their specific needs. That chain may build its answer while utilizing the security of Ethereum, the network on which Optimism’s superchain is founded. The Optimism team’s goal in creating this interconnected blockchain network is to address the scalability problems that are currently affecting numerous blockchain projects.
Superchain plans are still in the conceptual stage as of March 2024. However, the creators of Optimism are very optimistic about the project’s future. Naturally, progress isn’t possible without a group of committed users who drive it. The role of Optimism’s governance becomes apparent in this context.
How does Governance in Optimism Work?
Governance is an essential component of any blockchain ecosystem, which guarantees that advances are appropriately evaluated and implemented. Two houses, the Citizens’ House and the Token House, administer the Optimism Collective.
The Citizens’ House
One way that Optimism finances its network’s many programs is through the Citizens’ House. Retroactive public goods funding (RetroPGF) allows “citizens” to cast ballots on how the project’s funds will be distributed. Nonfungible tokens (NFTs) are given to citizens to identify their position. These unique identifiers are permanently linked to a person’s wallet and are called soulbound tokens. Soulbound tokens offer a comprehensive overview of citizens’ network history and may be confirmed by the public user base.
Users’ transactions on the OP mainnet are the source of funding for the RetroPGF. A portion of the incentives sequencers receive are sent to the PGF every time they complete a transaction. After that, the Citizens’ House decides which OP initiatives will get the money.
The Token House
One of Optimism’s primary means of administration is the Token House. Token House members propose changes to the network and cast votes on them. Members of the Token House community are asked to attend gatherings, offer comments on projects frequently, and take part in downtime between voting sessions. However, Participation involves a significant time commitment; representatives who feel they do not have the time to participate can delegate their tasks.
It is envisaged that delegates will constantly monitor changes in the Optimism network, just like the representatives from Token House. In addition, they need to participate in forum debates and cast votes on suggestions for government. In exchange for their work, delegates will receive OP tokens.
What is the OP Token?
Users can mainly join the Optimism network by purchasing OP tokens. The OP token serves as the principal medium of exchange inside the Optimism ecosystem and is used for network governance. You can usually trade or get airdrops for OP tokens, which are Ethereum-compliant and follow the ERC-20 token standard. In addition to engaging in the network as a sequencer or a member of the project’s governance house, users can earn OP tokens through these means.
At the beginning of the project, there were 4,294,967,296 OP tokens available. With any luck, the OP token will appreciate by 2% annually. Here is how Optimism does out its tokens: Because it is a governance token, the OP token’s supply can continue forever. Participation in DeFi on Optimism also requires the token.
How does DeFi on Optimism work?
Users have many options for what to do with and how to make money off of their tokens on decentralized finance platforms. Many decentralized financial applications are available with Optimism, as with other layer-2 scaling technologies. Utilizing the OP token, users have access to various DeFi features, such as games, decentralized exchange trading, NFT acquisition, and investment in other platforms. To take part, though, users will need to connect their current assets to the Optimism network. They should have speedy withdrawals thanks to Optimism’s utilization of optimistic rollups.