Article

The Bankless Guide to Optimism

Updated September 2023
Bankless Bankless Mar 24, 20237 min read
7
0
The Bankless Guide to Optimism

Optimism is a layer-two (L2) scaling technology for Ethereum that lies at the heart of the OP Stack, which is an open-source blueprint for scalable and interoperable blockchains and is designed to help people build their own chains, rollups or otherwise, easily and efficiently.

In this way, Optimism is at the forefront of work toward the Superchain, a recently proposed emergent structure that won’t be multichain so much as it will be a series of very closely integrated chains. For example, Coinbase’s new Base L2 will be one of these chains.

However, when people talk about Optimism today, most are specifically referring to the popular Optimism “optimistic rollup” that is currently the second-largest L2 in the Ethereum ecosystem, behind only Arbitrum in total value locked (TVL) at the time of writing.

A considerable part of Optimism’s popularity in the contemporary cryptoeconomy stems from how close its design is to Ethereum’s, a.k.a. near-EVM equivalence, although the L2 offers much faster transaction times and much lower gas costs for developers and users.

Indeed, a transition from Ethereum to Optimism is near seamless, as existing Solidity smart contracts can run on the L2 just as they do on L1 with few exceptions. Additionally, offchain apps like UIs and wallets can interact with Optimism contracts with minimal changes required, mainly updating their RPC endpoint.

This UX, in combination with Optimism being the earliest rollup-based L2 to launch and the rise of its DeFi and NFT tooling possibilities, has led to Optimism inspiring the most L2 forks to date. For example, both Metis Andromeda and Boba Network are upstart optimistic rollups that are based off of Optimism’s open-source codebase.

What is Optimism

The architecture of Optimism is based on the rollups model, a type of L2 scaling approach that aggregates many offchain transactions into a single, periodic batched transaction to Ethereum. This batching process is what facilitates the rapid transaction times and low gas costs.

Specifically, Optimism uses the optimistic rollup approach to scaling, which assumes that its offchain transactions are valid unless proven otherwise via “fault proofs.” This structure allows Optimism to keep its transactions quick and cheap, but it does require a challenge period during which anyone can challenge the validity of transactions.

Currently, the team behind Optimism runs the only transaction sequencer for the L2, but over time the goal is to decentralize the sequencer and eliminate the teams’ role entirely, allowing anyone to participate as a block producer for the network.

However, even in these early adolescent days of Optimism, the L2 is already totally non-censorable and performant. For instance, according to L2Fees.info, it’s exponentially cheaper to swap tokens on Optimism compared to Ethereum:


The pulse of Optimism

As of September 2023, Optimism was the second-largest Ethereum L2 with a TVL of $2.61B at the time. Notably, between today and its public launch in July 2021, Optimism is estimated to have saved its users nearly $3B worth of ETH in gas fees and nearly 16 years’ worth of waiting for transactions to complete.

Optimism is also one of the most popular chains for decentralized finance in the cryptoeconomy right now. Per DeFiLlama, Optimism is the 6th-largest DeFi chain at the moment with +100 active DeFi protocols, across which over $655M in user funds are currently deposited.

In comparison, Optimism’s NFT scene is still relatively small, but it is blossoming. The popular OpenSea marketplace has already added support for the L2, and some new projects are choosing to launch directly for and/or on Optimism, like the Zonic marketplace.

via DeFiLlama

Optimism’s OP token

OP is the native token of the Optimism L2. Unlike how Polygon uses its native token MATIC for paying gas fees, bridged ETH rather than OP is used to facilitate transactions on Optimism.

Instead of facilitating transactions, then, OP primarily has a governance role within the Optimism Collective, a digital democratic governance experiment that’s responsible for stewarding the Optimism ecosystem via two houses, the Token House and the Citizens’ House. The Token House is specifically managed by OP token holders and is responsible for voting on project incentives and protocol upgrades.

As of the latest update of this guide, OP was trading around the $1.28 USD mark with a market capitalization of approximately $1B. Its max supply is 4,294,296 tokens, and its present circulating supply is supply +798M.

OP can be purchased or sold on various cryptocurrency exchanges, including large centralized exchanges as well as decentralized exchanges like Uniswap.

🚁 Miss $OP? Never miss another airdrop! Become a Bankless Citizen and gain access to the Airdrop Guide to find strategies for new projects.


What you need to use Optimism

  1. 👛 A wallet — since Optimism is EVM-compatible, you can use any Ethereum wallet (MetaMask, Coinbase Wallet, WalletConnect, etc.) to create an Optimism address
  2. 🌐 Network support — use the Chainlist tool to add the Optimism One network to your wallet, the network ID is 10
  3. 🪙 Starter ETH — like you need ETH for gas on Ethereum, you need ETH to pay for transactions on Optimism; if you have ETH on Ethereum you can then bridge some over to use on Optimism

How to bridge to Optimism

To transfer Ethereum-based assets to or from Optimism, you can consider using the native Optimism Bridge system.

With this app you simply specify the amount you wish to transfer, choose the source chain, confirm the transaction with your wallet, and you're done. However, keep in mind that withdrawals to Ethereum using the official bridge system can take around seven days due to the fraud-proof security mechanism of optimistic rollups.

For a faster bridging experience, you may want to consider using third-party pool-based "fast withdrawal" bridges such as Hop or bridge aggregators like Bungee. It is important to note that each bridge may support unique combinations of chains and assets, so it is important to choose the appropriate bridge for your specific needs.


What to do on Optimism

1. Trade or add liquidity on Velodrome

The Velodrome Pool dashboard

Velodrome is a decentralized exchange (DEX) and liquity marketplace that natively launched on Optimism. It combines elements from Curve, Solidly, and Votium to provide low-fee, low-slippage trades with a vote-escrowed gauge system for directing token emissions to preferred liquidity pools.

At the heart of Velodrome is the protocol’s VELO token, which is emitted on a rolling basis and is used to reward Velodrome’s liquidity providers. Holders can vote-escrow, i.e. lock up, their VELO to receive veVELO and participate in the project’s governance, which entails voting for which liquidity pools should receive VELO rewards.

Currently, Velodrome is the largest project active on Optimism today with a TVL of $313M. If you want to trade through or provide liquidity to the protocol’s Stable Pools, check out this Bankless Tactic on Velodrome to get started.

2. Stake SNX on Synthetix

Synthetix is a derivatives liquidity protocol that enables decentralized and permissionless trading of synthetic assets called “synths.” Notably, Synthetix was one of the first DeFi projects to embrace Optimism, and it’s presently the second-largest app on the L2 with a $150M TVL.

Zooming in, Synthetix’s synths allow traders to gain exposure to assets without owning them directly, with forex synths like sUSD and sEUR being some of the most popular. The protocol uses the staking of its native token SNX to collateralize and provide liquidity for these synths.

Additionally, stakers earn inflationary SNX rewards and a portion of sUSD fees generated by protocols like Kwenta and Lyra that operate on top of Synthetix.

3. Collect NFTs on OpenSea

Optimism is experiencing a blooming NFT scene, and OpenSea is currently the leading marketplace for collecting and trading Optimism NFTs.

When buying or selling such NFTs on OpenSea, the process will be exactly like when using Ethereum except the transaction fees will be much lower and the transactions will be completed faster.


Additional Optimism apps

Interested in exploring the app scene on Optimism? If so, here are some of the most popular projects currently available on Optimism that you can start checking out today:

  1. 👻 Aave — Lending | $71M USD TVL
  2. 🦄 Uniswap V3 — DEX | $40M USD TVL
  3. 🍔 Beefy — Yield aggregator | $29M USD TVL

Additional Optimism resources

If you want to learn more about Optimism and deepen your understanding of the L2, there are many helpful resources available. Some that can you can immediately start with include the following:

  1. 📜 Optimism docs
  2. 🕳️ Optimism Ecosystem portal
  3. 🪙 Optimism NFT explorer
  4. 🔍 Optimism block explorer
  5. 🦙 DeFiLlama’s Optimism DeFi dashboard

Zooming out

In conclusion, Optimism is a promising L2 scaling solution for the Ethereum network that is gaining traction in DeFi and NFTs. Its unique approach to optimistic rollups, combined with its near seamless integration with the Ethereum Virtual Machine, has made it a top choice for developers and users alike.

Additionally, with the Bedrock network upgrade Optimism is set to become even more powerful by reducing transaction costs, increasing transaction speeds, and improving modularity. The approval for the Bedrock upgrade is currently making its way through the L2's governance process, which demonstrates the community's commitment to continually improving the platform.

As the second-largest L2 solution currently, Optimism is an important early player in the growing Ethereum ecosystem. Its fast and low-cost transactions, combined with its ability to support the existing Ethereum infrastructure, make it an amazing resource for decentralized applications. And as the OP Stack continues to be developed, Optimism's influence in the cryptoeconomy is poised to grow that much further.

🚁 Track and claim available airdrops with Earnifi!

Bankless

Written by Bankless

197 Articles View all      

No Responses