This article explains the hype over Optimism and their new token OP. Optimism is a layer-2 network designed to help increase the efficiency of Ethereum, while maintaining the security Ethereum is famous for.
For a quick introduction to Layer-2, check out our article [here]. If you have used Ethereum in the past during the upward market, you will know that Ethereum is slow and very expensive to use. This has been the downside of Ethereum since its inception, who could have imagined the network would grow to such massive proportions exploding in value the past 2 years. Ethereum was not designed for this much interest, and thus it has to go through a rather large upgrade to keep up with the demand. But what do people do while Ethereum adapts to the times?
Enter Layer-2 networks. Layer 2 networks allow users to bridge assets from Ethereum to the layer 2. Once the assets are bridged, users will have a similar experience to Ethereum applications, except with MUCH faster speeds and MUCH lower costs. Polygon and the MATIC token saw a great uptrend in activity because this increased user experience. The downside of Polygon currently is that it is technically a sidechain which cannot fully benefit from the security of Ethereum. Sidechains have an inherent flaw where exploits are possible since Ethereum is not fully integrated. The other downside of Polygon is that it is expensive to send funds back to Ethereum.
Optimism uses an advanced technology known as a rollup. We won’t go too deep here don’t worry! Optimism takes several transactions and rolls them up in a condensed form, ever extract a file on a computer for a game or application? It then takes this data and posts it to Ethereum inheriting all of the security of Ethereum without worrying about a sidechain. Optimism uses the current consensus mechanism of Ethereum to validate transactions, this is what Ethereum miners do day in and day out. Ethereum miners validate the network using their computers, similar to Bitcoin miners, they both function to secure the network, and they get ETH or Bitcoin as rewards for doing so.
Why all the Hype?
Optimism recently airdropped 5% of their total tokens to the community that used the network before the token was created. Similar to Uniswap’s airdrop, some users got upwards of 30+ thousand dollars for free. Optimism brings security using a process known as “fault proofs”. Each unique commitment or new smart contract interaction with Ethereum and Optimism goes through a 7-day challenge period. If the contract is left unchallenged for 7 days, Ethereum allows the contract to be essentially trusted from there on out. However, the same process can be challenged and invalidated through a specific process known as the “fault proof process” .
Since these commitments only need to prove their good intentions for a 7-day challenge period, validating the transactions does not require proof of validity every time another like contract is executed. This essentially assists with price of fees because Ethereum miners can assume the contract to be non-malicious requiring less computation, and thus lower costs.
The stated purpose of Optimism is to help Ethereum succeed, therefore Optimism takes the goals of Ethereum very seriously. Ethereum aims to be highly decentralized, secure, and permissionless, this is the beauty of the largest smart contract platform today. With layer-2 solutions, Ethereum can bring its strengths forward with some assistance on its weaknesses. Even when Ethereum bridges to proof-of-stake, which will be cheaper and faster, it will still not be cheap enough for everyday transactions. Therefore, networks like Optimism are very important for the future success of Ethereum.
Optimism has helped save over 1 billion dollars in Ethereum fees so far, an amazing feat . Daily transactions have soared to over 100,000 per day with some days seeing over 25 thousand new and unique OP wallet addresses. We will surely keep our eye on Optimism, especially as the market beings to recover. Remember none of this is financial advice, please stay safe out there!