Ethereum (ETH), the largest smart contracts blockchain, has a scalability problem. As more users join Ethereum, the network becomes more expensive and slower.
In response to Ethereum's scalability problem, a number of Ethereum alternatives - popularly known as "Ethereum killers" - have emerged. The so-called Ethereum killers, such as Avalanche or Fantom, are separate blockchains or Layer 1s like Ethereum. Meanwhile, the Ethereum ecosystem has developed a scaling solution: Layer 2s, chains built on top of the Ethereum mainnet.
Optimism is one of the Layer 2 scaling solutions. It is based on a technology called Optimistic Rollups, which bundles large amounts of transaction data into digestible batches. Optimism is much cheaper than Ethereum and is gaining popularity along with other Layer 2 solutions like Arbitrum.
Optimism is managed by the token of the same name, or OP. A portion of the OP offering was distributed to early Optimism users in late May 2022 during a turbulent launch period. The developers behind Optimism said they would continue to drop more tokens.
What is Optimism?
Optimism is a Layer 2 chain, which means it operates on the Ethereum mainnet (Layer 1). Transactions take place on Optimism, but data about transactions is sent to the mainnet where it is validated. It's like driving on a less crowded side street while benefiting from the safety of a highway.
Optimism is the second largest Ethereum Layer 2 with a total of $313 million invested in its smart contracts, according to Defi Llama. Arbitrum ranks first with $1.32 billion.
Synthetix, a derivative liquidity protocol, is the largest protocol on Optimism, with a total value of $125 million. Uniswap, a decentralized exchange (DEX), is the second most popular protocol on the chain. At the time of writing, there are 35 protocols on Optimism with at least $1,000 worth of smart contracts completed.
How does Optimism work?
Optimism uses a technology called rollups, or more specifically Optimistic Rollups.
They're called rollups because they store data from hundreds of transactions - non-fungible token (NFT) mints, token swaps ... any transaction! - into a single transaction on the Ethereum mainnet (Layer 1). When so many transactions are bundled into a single transaction, the blockchain transaction or "gas" fee payable is reduced to just one transaction, conveniently distributed among all participants.
And they are called Optimistic Rollups because transactions are assumed to be valid until proven wrong, or in other words, innocent until proven guilty. There is a window of time in which potentially invalid transactions can be challenged by presenting "proof of fraud" and performing transaction calculations by reference to available state data. Optimism refunds the gasoline needed to calculate the proof of fraud. (Here is a more detailed technical explanation of the process).
How do you use Optimism?
For users, Optimism is pretty much the same as the Ethereum mainnet. Your Optimism address is the same as your Ethereum mainnet address, which starts with 0x. Optimism's blockchain explorer is identical to Etherscan, Ethereum Mainnet's blockchain explorer.
Optimism supports a number of decentralized financial (DeFi) wallets, including MetaMask, the most popular choice.
Although you can manually configure your wallet for Optimism, there is a much easier way: simply go to a DeFi app like SushiSwap (SUSHI) and specify Optimism as your network (in the case of Sushi, in the upper right corner). Selecting the site will force your MetaMask to add the network and switch to it. Welcome to Optimism!
But of course, just like the Ethereum mainnet, Optimism requires Ether (ETH) to cover gas fees. So in order to use Optimism, you need to send ETH to your MetaMask from another chain, like the Ethereum Mainnet or other Layer 2s like Avalanche. To send money from another chain, you can use one of the bridges that support Optimism.
You can also use a centralized cryptocurrency exchange to fund your Optimism address with ETH. However, before you try to send funds from your centralized exchange to a Layer 2 address, make sure it can support a payout to that chain. If you send funds to an address that your exchange does not support, your funds may be irretrievably lost. At this time, Binance, Bybit, and Huobi allow withdrawals to Optimism.
What is OP, Optimism's token?
Optimism launched its OP token on May 31. A total of 231,000 addresses were eligible to receive 214 million OP tokens for free (known as an "airdrop"). That's 5% of the total supply of 4.29 billion, which means 95% of the supply has yet to hit the market. On this dashboard from Dune Analytics, you can track how many users took advantage of the first airdrop.
The first airdrop led to widespread frustration in the Optimism "community" after some users claimed tokens prematurely and then threw them away. Optimism acknowledged mistakes and promised a retrospective in a series of tweets:
The OP token gives holders participation rights in The Optimism Collective, a two-tier governance system consisting of Token House and Citizens' House. The Citizens' House will be operational later in 2022. The Token House, which is already active, governs technical decisions related to Optimism, such as software upgrades. The Citizen House governs public goods funding decisions. In the early days, Optimism itself raised funds on Gitcoin, a major platform for funding public goods.
How does one qualify for an OP airdrop?
In its first airdrop, Optimism used the following criteria to award tokens to users:
- Optimism user: use of an OP bridge before June 23, 2021, or more than one use of Optimism projects between June 23, 2021, and March 25, 2022.
- Repeat Optimism user: repeated use of apps on Optimism in four different weeks between June 23, 2021 and March 25, 2022.
- Decentralized autonomous organization (DAO) voter: active participation in decentralized governance.
- Multisignature signers: control over large pools of capital and key protocol functions on Optimism.
- Donating to Gitcoin Grants at Level 1: donating to Optimism on the public goods platform.
- Pricing out Ethereum: using bridges while being a regular active user on Level 1.
The next airdrop may include some, none, or all of these criteria. The exact criteria will not be announced in advance to avoid gaming the system.
When is the next OP airdrop?
In an April 2022 blog post, Optimism said there will be "a full season of airdrops." The Optimism team has not announced the dates for airdrops, and airdrops are typically announced on short notice.
It is likely that Optimism will announce who will be eligible for the drop and how much OP they will receive before the drop. This is done on the basis of a snapshot: a record of the state of Optimism's chain at a given block height. The snapshot data is not disclosed in advance. So, if you want to receive OP tokens, you should join the network and play with the applications. However, remember that your capital is at risk.