Optimism: An Ethereum-Compatible Layer-2 Solution Revolutionizing Scalability and Governance
Summary:
Optimism is an Ethereum-compatible layer-2 solution that aims to solve Ethereum's scalability issues. It operates similarly to Ethereum, offering various decentralized applications. The solution, run by The Optimism Collective, includes multiple aspects such as OP Labs, OP Chains, and the Optimism Foundation. The network uses optimistic rollups, which are considered fast and efficient but can be challenged via a "fault proof" process. Optimism's software set is known as the OP Stack, an open-source set of software that works as the project's foundation; its current iteration is Bedrock. The governance in Optimism is handled by the Citizens' House and the Token House, with each playing significant roles in managing the network. The primary way for users to interact with Optimism's ecosystem is through the use of OP tokens.
Explaining Optimism
Optimism is a project compatible with Ethereum, operating as a layer-2 solution. Its main objective revolves around resolving the prevailing scalability issues of Ethereum, while maintaining an operational structure similar to the Ethereum blockchain. Spearheaded by The Optimism Collective, the project encompasses various aspects such as OP Labs, OP Chains and the Optimism Foundation.
Optimism, functioning like Ethereum, features a range of decentralized applications (DApps), encompassing decentralized exchanges and other decentralized finance (DeFi) services. The compatibility of Optimism with the Ethereum Virtual Machine (EVM) ensures an easy transition for Ethereum developers when building DApps within the network. Among its distinctions, the network’s optimistic rollups serve as a standout feature.
Demystifying optimistic rollups
Optimistic rollups are among various scalability solutions proposed by Ethereum developers. Despite their similar functions to zero-knowledge rollups, there are certain discernible differences.
As a layer-2 solution, Optimism handles transactions outside the mainnet, thereby reducing congestion, transaction fees and gas fees. Nevertheless, a cross-layer communication is required for the layer-2 solution and its parent chain, which leads to the necessity of optimistic rollups.
Today, many Ethereum scalability solutions employ optimistic rollups as a method for transmitting transactions from Ethereum to a layer-2 solution. The basic workflow involves a user depositing funds into layer-2 compatible smart contracts. Transactions are processed by a “sequencer” (a node akin to an Ethereum validator), who then rolls them up into a single block. This block is finally sent to the layer-1 solution as a state commitment or a single transaction.
Essentially, optimistic rollups, as the name suggests, presuppose the validity of all transactions within the rollup, which accounts for the swift transaction throughput. On the flip side, users can challenge a state commitment with a “fault proof” process. Overcoming a challenge implies the replacement of the existing state commitment with a new one. A seven-day window is given for users to challenge a state commitment before it is accepted as final.
These rollups, although common in other scalability solutions, form only a fraction of the extensive software set of Optimism, known as the OP Stack.
Unveiling the OP Stack
The software stack is an integral part of a project. Optimism isn’t an exception, resting its functionalities on a comprehensive software stack called the OP Stack. It houses various transaction processing and network development layers such as governance, settlement and derivation, with Ethereum occupying the consensus and transaction execution roles.
Currently, Bedrock, a development toolset, forms the latest version of the OP Stack, facilitating developers to construct their own layer-2 blockchain, with the capability to utilize optimistic rollups.
Looking ahead, Optimism envisions the evolution of Bedrock into a superchain – a foundation for developers to build their chains. In theory, this new structure would not only harness the security of Ethereum, but permit a myriad of blockchains to enact upgrades, create bridges, and facilitate a layer-2 interoperability. As of March 2024, the superchain is a conceptual proposal, with the Optimism organization maintaining a positive outlook.
Achieving these developments requires an efficient governance model, a domain where Optimism has noteworthy arrangements.
Elucidating Optimism's governance
In the Optimism network, governance is handled by two distinct groups: the Citizens’ House and the Token House. The Citizens’ House mainly focuses on disbursing funds through retroactive public goods funding, while the Token House is involved in offering proposals for network improvement.
The workings of these governance houses revolve around engagement in community meetings, providing project feedback, participation in voting sessions and reflection periods, along with potential delegation of responsibilities, if required.
The primary instrument for user interaction within the Optimism ecosystem is the OP token, which complies with Ethereum’s ERC-20 token standard.
It is the network’s major governance token and is generally acquired via trading or airdrops. The project was initiated with a total supply of nearly 4.3 billion OP tokens, and plans to inflate them at 2% per year.
Unpacking DeFi on Optimism
In Optimism, decentralized finance applications provide users with multiple ways to exploit and benefit from their token holdings. Users can engage in gameplay, trade on decentralized exchanges, invest in other DeFi platforms or acquire NFTs using the OP token. However, users need to bridge their assets onto the Optimism network in order to participate. Fortunately, the use of optimistic rollups ensures fast withdrawals.
Published At
4/2/2024 11:16:00 AM
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