Optimism, which was up until recently known as ‘Optimistic Ethereum’, is an Ethereum Layer 2 scaling solution, and more precisely, an Optimistic Rollup. Like any Layer 2 protocol, Optimism aims to be a network that is able to provide the same level of security and decentralisation as the Ethereum Layer 1 network, while also offering users reduced transaction fees and much faster and more efficient transaction times.
An Overview of Layer 2
As we’ve already discussed on these pages, scalability is currently the biggest problem with the Ethereum network. Scaling solutions like rollups aim to improve the overall experience for the end user. In a nutshell, Ethereum is considered as the world’s most secure and decentralised blockchain that utilises smart contracts. However, because there is such a high demand for Ethereum blockspace, the network becomes far too expensive to use for the average user. When the network gets busy, blockspace becomes scarce and users must enter into a bidding war in an attempt to get their transaction included in the next block.
Layer 2 scaling solutions aim to solve this problem by handling the transaction ‘off-chain’, and instead posting a very small ‘proof’ to the Ethereum network in order to prove that the data is correct. By doing this, we save the Ethereum network a lot of work while also making it far more efficient and affordable for the end user.
Optimism has really started to pick up traction following the network’s initial launch in the latter half of last year. Optimism now offers a suite of applications available for public use with over 60 dapps now being offered across the network, including major protocols such as Uniswap, Synthetix and Lyra Finance. The great migration of Ethereum dapps moving onto Layer 2 protocols such as Optimism is expected to really pick up speed over the next six to 12 months.
By the end of 2022 we can expect to see all or most protocols native to Ethereum Layer 1, make the move over to layer Optimism. This process will only accelerate as more and more users begin to migrate from Layer 1 to utilise the efficiency and affordability of the Optimism network.
Gas Fee Reductions
After a string of updates to the network implementing gas reductions, Optimism currently offers the cheapest transaction fees available across all available Optimistic Rollups, including heavy hitters like Arbitrum, and the Boba network. At the time of writing, Optimism currently offers its users token swaps for as little as $0.51, followed closely by Arbitrum at $0.63 and the Boba network at $1.31. Feel free to check out the current gas fee prices for Layer 2’s here.
Going forward, over the next six to 12 months, but also well into the future, we expect these fees to continue decreasing over time to the point where they can essentially offer very close to zero gas token swaps. The method behind this thesis is quite simple. The more people that onboard to Optimism, the more revenue Optimism will receive through protocol fees. This basically gives Optimism a higher budget when paying Layer 1 gas fees, which in turn, further reduces fees for the end user.
Among some of the amazing features that Optimism offers, is that the network is now fully EVM compatible. In short, this means that the existing Ethereum stack will now officially integrate with Optimism’s Layer 2 system. While it doesn’t affect the end user experience, EVM equivalence is a huge win for developers, because it is now far easier to deploy a decentralised application onto Optimism as you won’t need to worry about special compilers etc. You will simply be able to use the tools that you would normally use when deploying onto Ethereum.
NFTs on Optimism
Aside from the slate of available DeFi applications that Optimism currently offers, let’s take a look at how the network is expanding on its current offerings, particularly on the NFT front. Optimism is positioned at the forefront of this effort alongside other solutions such as Immutable X and Polygon. A very new up and coming project known as Quixotic recently deployed their NFT marketplace directly onto the Optimism network, all while completely bypassing Layer 1 Ethereum in the process. Quixotic now marks the first ever NFT marketplace to deploy natively to Optimism giving its users the ability to buy and sell NFTs for a significantly lesser cost than what would normally be experienced on the Ethereum network.
All in all, Optimism is well and truly positioned to continue pioneering the effort on scaling Ethereum well into the future. As we covered above, users can expect to see Optimism continue to get much cheaper and more efficient overtime, as the team will continue to develop this technology further and find ways to significantly implement new gas reduction features as they go along. Optimism do not yet have a native token, however our assumption is that all or most Layer 2 scaling solutions will launch a token in the future, so if you are looking to expose yourself to a future airdrop, using some of the available services on the Optimism network is probably the best way to position yourself for every possibility.
Thanks for reading everyone!