Optimism: Ethereum’s Layer-2 Scaling Explained

Optimism is a layer-2 scalability solution for Ethereum, led by The Optimism Collective. They aim to create a fair internet and have various branches under their organization. Optimism works similarly to Ethereum and offers decentralized applications like decentralized exchanges. It is compatible with the Ethereum Virtual Machine, making it easy for developers to transition and build DApps within the network. One of Optimism’s standout features is optimistic rollups, which process transactions off the Ethereum mainnet, reducing congestion and transaction fees.

Optimistic rollups are a method used by many Ethereum scalability solutions. They allow transactions to be transferred from Ethereum to the layer-2 solution. Users deposit funds into smart contracts compatible with the layer-2 solution, and a “sequencer” processes these transactions into a single block. This block is then sent to the layer-1 solution as a state commitment. Optimistic rollups assume all transactions within the rollup are valid, which increases transaction throughput. Users can challenge a state commitment if they suspect fraud, and if successful, it is replaced.

Optimism’s software set, known as the OP Stack, is an open-source foundation that includes multiple layers for transaction processing and network development. Ethereum serves as the consensus and transaction execution layers for the OP Stack. The current iteration, Bedrock, offers tools for developers to build their own layer-2 blockchain using optimistic rollups. The goal is to evolve Bedrock into a superchain, where developers can build blockchain solutions and participate in the same governance as other chains.

Optimism’s governance is divided into two groups: the Citizens’ House and the Token House. The Citizens’ House is responsible for funding projects on the network through retroactive public goods funding. They vote on the distribution of funding. The Token House is the main governance method, where members submit and vote on proposals to improve the network. Participation requires a time commitment, and delegates can be chosen to participate on behalf of Token House representatives.

The OP token is the network’s governance token and is used to interact with the Optimism ecosystem. It follows Ethereum’s ERC-20 token standard and can be acquired through trading, airdrops, participating in governance houses, or processing transactions as a sequencer. The supply is uncapped, and the token is also used for participating in DeFi on the Optimism network.

DeFi on Optimism offers various ways for users to use and profit from their token holdings. Users can play games, trade on decentralized exchanges, acquire NFTs, and invest in other DeFi platforms using the OP token. Users need to bridge their assets onto the Optimism network to participate, and they can enjoy fast withdrawals due to the use of optimistic rollups.