Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?
What Is Optimism?
Optimism is a layer-two blockchain for Ethereum using optimistic rollups as scaling technology. It is one of Ethereum’s biggest scaling solutions with over $250 million in TVL at the time of writing. Optimistic rollups outsource the execution of transactions to a L2 solution like Optimism.
The transactions on Optimism are rolled up into batches that get relayed to the Ethereum mainnet, which only records the new chain state. Since their validity is assumed, the rollups are called optimistic. A rollup's validity can be challenged for up to seven days, which is why withdrawals from Optimism to Ethereum take seven days.
The upside to Optimism’s solution is significantly lower gas costs on the L2 and a decrease in gas fees on Ethereum in the long run. Since the Ethereum mainnet will have to record less transaction data, one of Optimism’s externalities is a less clogged Ethereum. Moreover, Optimism operates with the same EVM-compatible smart contracts as Ethereum and is secured by the Ethereum mainnet, providing an ideal solution for new DApps to build on.
Validators are incentivized to behave honestly through staking ETH.
Both employ the identical optimistic rollups as a scaling solution.
Both have full nodes, accumulating layer-one transactions, and validator nodes monitoring the chain state.
Both only relay the calldata with the hashes of confirmed rollup blocks to the mainnet.
Both chains allow DApps to select their own validators. This local validation of transactions compared to transaction validation by all nodes reduces communication between nodes and consequently raises the transaction throughput.
Where Optimism and Arbitrum Are Different
The biggest difference is dispute resolution. Arbitrum resolves disputes off-chain in several rounds and submits the final result as a transaction. Optimism uses single-round fraud proofs and disputes are settled on-chain. That is why gas fees on Optimism are slightly higher than on Arbitrum.
Arbitrum uses multiple-round fraud proofs. Put simply, Optimism executes transaction proof in one round on the layer-one chain, Arbitrum does this in several rounds.
Arbitrum uses an Arbitrum Virtual Machine while Optimism is “only” EVM-compatible.
Optimism has a Solidity compiler, Arbitrum supports all EVM programming languages.
Optimism’s ecosystem is significantly smaller ($1.5 billion vs $300 million in total value locked).
Where Optimism and ZK-rollups Are Different
Optimistic rollups have longer withdrawal periods due to their security model (one week vs minutes).
Optimistic rollups are less technologically complex because they do not employ mathematically complex technology.
Optimism has higher gas costs than ZK-based layer-twos.
EVM execution on Optimism is simpler than on ZK-chains.
Off-chain computation costs are higher on Optimism.
Optimism Investors and Roadmap
Optimism launched its first testnet in 2019 and the first EVM-compatible testnet in 2020. The Optimism mainnet and the EVM-compatible mainnet were launched in 2021. In June 2022, Optimism dropped its OP token via a highly anticipated airdrop. The token allocation is laid out in the Optimism’s community portal. An interesting thing to note is the inclusion of public goods funding, which aims to reward public members that contribute to the Optimism protocol, and is a major part of the Optimism Collective.
Optimism currently has more than 50 decentralized applications running on its chain. As part of the roadmap, Optimism plans to:
Introduce next-gen fault proofs that improve on-chain security.
Sequencer decentralization, so anyone in the network can participate as a block producer.
More decentralization and sharded rollups in 2023.
Optimism has raised a total of $28.5 million across two investment rounds. The first round was a seed round, raising $3.5 million led by Paradigm and IDEO CoLab Ventures. The Series A funding round in February 2021 led by a16z raised $25 million.
How To Use Optimism on Ethereum
You can use the Optimism blockchain from Ethereum with the following steps:
On May 31, 2022, Optimism airdropped its OP token, making it one of the biggest airdrops in history. However, the token price crashed quickly, as users had trouble claiming their promised airdrop. Even though Optimism resolved the issue, OP continues to trade around $0.50, well below its listing price, amidst a broader crypto market meltdown. To learn more about the tokenomics of OP, head to the OP token page.
Uniswap (UNI) is the biggest DEX by TVL on Optimism ($30 million at the time of writing). Uniswap is mainly known for being one of the first DEXes to offer trading with an automated market maker (AMM) model. Uniswap is also available on Arbitrum, Polygon, and, of course, Ethereum.
Curve (CRV) is a stablecoin DEX and one of the most important exchanges for swapping stablecoins. It is one of the biggest decentralized exchanges on Optimism with a TVL of over $23.5 million at the time of writing. Curve became popular through its AMM model and has integrations with all relevant blockchains.
ZipSwap (ZIP) is a more gas-efficient native swap that guarantees the lowest possible fees on token swaps for optimistic rollups. Thanks to technical improvements to the Uniswap V3 AMM, Zipswap can provide better liquidity at lower slippage.
Perpetual Protocol (PERP) is a decentralized exchange for trading perpetuals and futures. Instead of trading on centralized exchanges with an order book model, traders can trade in a non-custodial manner and against an automated market maker. All trades are recorded on-chain, although their execution happens on a gasless sidechain.
This allows Perpetual Protocol to be one of the most efficient and sought-after perp exchanges on the market and helped it attract investments from several backers like Binance Labs. On Optimism, Perpetual Protocol boasts a TVL of over $31.2 million, making it one of the biggest exchanges in the ecosystem.
Hop Exchange: a bridge between layer-twos and Ethereum.
Synapse (SYN) is a cross-chain bridge that connects Optimism to other layer-one blockchains like Ethereum. Synapse is secured by cross-chain multi-party computation validators and powered by the Synapse token SYN, which is used as an incentive for liquidity providers and a gas fee subsidy.
Synapse also expands across other layer-one and layer-two chains and offers token swaps and liquidity pools as well. The total value locked in the Optimism ecosystem is close to $5 million.
Hop Exchange (HOP) connects layer-two networks like Optimism and Arbitrum with Ethereum. Like on Synapse, users can transfer tokens almost instantly by using the Hop Exchange, without having to wait multiple days. This is made possible by Hop’s interconnectivity with other networks, which allows moving assets around to provide the desired asset on layer one.
Hop Exchange also uses automated market makers to swap between each token and the corresponding canonical token on each rollup to rebalance the liquidity across the network. Hop exchange has over $5.7 million in TVL on Optimism, and recently conducted an airdrop of its HOP token.
The Best Lending Protocols on Optimism
The best lending protocols on Optimism are:
Aave: a popular money market.
Stargate Finance: a fully composable liquidity protocol.
dForce: a DeFi infrastructure protocol.
Velodrome: a liquidity incentive protocol.
QiDao: a zero-interest lending protocol.
Aave (AAVE) is a DeFi money market protocol and lending platform that allows users to borrow and lend different crypto assets. Users can deposit their crypto assets in different liquidity pools and earn interest on them or borrow against their existing crypto holdings as collateral.
Aave is massively popular across different blockchain ecosystems and boasts over $8 million in total value locked on Optimism.
Stargate Finance (STG) is a fully composable liquidity protocol, allowing users to transfer assets across blockchains and access the protocol’s unified liquidity pools with instant guaranteed finality.
Stargate’s key products are cross-chain transfers, liquidity provision to its Omnichain protocol, yield farming for STG rewards, and staking to receive veSTG, the protocol’s governance token. Although Stargate Finance is not as popular on Optimism as it is on Arbitrum, it still has over $7 million in TVL to show for itself.
dForce (DF) strives to provide DeFi infrastructure in web3 through lending, trading and staking services. As a community-driven DAO with dForce USD (USX) as a stablecoin at the heart of its protocol matrix, dForce implements a pool-based and vault-based model with a hybrid interest rate policy to scale its algorithmic stablecoin. Furthermore, dForce has protocol-to-protocol integrations and a cross-chain bridge to facilitate its adoption.
As part of its all-in-one DeFi solution, dForce also provides lending, staking, trading and bridge services.
Velodrome Finance (VELO) is a liquidity incentive protocol for Optimism. Velodrome expands on the basis built by Solidly Exchange, a decentralized exchange for protocols. It aims to provide protocols with their own liquidity and ensure better interoperability between DeFi protocols in the Optimism ecosystem.
QiDao (QI) is a zero-interest crypto lending protocol with stablecoin loans at zero percent interest. Users can create a vault, where they deposit their collateral and borrow stablecoins against it.
As a self-sustaining, community-governed, and decentralized stablecoin protocol, loans are secured by having more total value locked than debt issued.
The Best DApps on Optimism
Some of the best DApps on Optimism include:
Synthetix: a synthetic asset protocol.
Lyra: a decentralized options protocol.
Beethoven X: a decentralized investment platform.
Aelin: a decentralized fundraising protocol.
Synthetix (SYN) is a derivatives liquidity protocol that enables the creation of synthetic assets on the blockchain. Synthetic offers exposure to real-world assets like stocks with on-chain tools. Its core products include decentralized perpetual futures and synthetic versions of tech stocks and commodities like gold. The price of the underlying assets is tracked through oracles.
SNX tokens serve as the collateral for the minted synthetic assets and are burned when a position is liquidated. Synthetix is the biggest protocol on Optimism with a TVL of over $100 million.
Lyra (LYRA) is a decentralized options protocol with a skew-adjusted pricing model. Thanks to its dynamic volatility input to price options, Lyra can provide deeper liquidity than competitor protocols, yielding more trading volume for traders and higher fees for the protocol. Lyra is the most popular options protocol on Optimism with a total value locked of over $18 million.
Beethoven X (BEETS) is a one-stop decentralized investment platform offering weighted investment pools. Users can collect fees from traders rebalancing their portfolios by following arbitrage opportunities. Furthermore, new tokens can bootstrap their liquidity through liquidity bootstrapping pools (LBP), which have similar dynamics to crowdfunding.
Aelin (AELIN) is a decentralized fundraising protocol that allows to raise capital and do OTC deals without the involvement of venture capitalists. Sponsors can create pools that investors can deposit funds into for potential deals.
Each deal has an optional vesting schedule and once a sponsor and a suitable investor have agreed on the terms, the protocol acts as a permissionless intermediary providing the infrastructure for the fundraising to happen.
This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators.
This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice.
The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.