What Is Optimism?

Here’s what you need to know about the layer 2 scaling solution and the Optimism token, OP, including the problems with the first OP airdrop.
Updated Aug 19, 2022 at 4:52 p.m. UTC
Crypto Explainer+

Ekin Genç has written for Bloomberg Businessweek, EUobserver, Motherboard, and Decrypt.

Ethereum (ETH), the largest smart-contracts blockchain, has a scalability problem. As more and more users join Ethereum, the network becomes more expensive and slower to use.

In response to Ethereum’s scalability problem, a bunch of Ethereum alternatives – popularly known as "Ethereum killers" – have emerged. So-called Ethereum killers, such as Avalanche or Fantom, are separate blockchains, or layer 1s like Ethereum. Meanwhile, the Ethereum ecosystem has come up with a scaling solution: layer 2s, chains that work on top of Ethereum mainnet.

Optimism is one of the layer 2 scaling solutions. It’s powered by a technology called Optimistic rollups, which bundle large amounts of transaction data into digestible batches. Optimism is much cheaper to use than Ethereum, and it’s increasingly becoming popular along with other layer 2s, such as Arbitrum.

Optimism is governed by its eponymous token, or OP for short. A portion of the OP supply was airdropped to early Optimism users in late May 2022 in a turbulent launch. Developers behind Optimism said it would continue to airdrop more tokens.

What is Optimism?

Optimism is a layer 2 chain, meaning it functions on top of Ethereum mainnet (layer 1). Transactions take place on Optimism, but the data about transactions get posted to mainnet where they are validated. It’s like driving in a less crowded side street while benefiting from the security of a highway.

Optimism is the second-largest Ethereum layer 2 with a total of $313 million locked into its smart contracts, as of this writing, according to Defi Llama. Arbitrum comes first with $1.32 billion.

Synthetix, a derivatives liquidity protocol, is the largest protocol on Optimism, with a total value locked (TVL) of $125 million. Uniswap, a decentralized exchange (DEX), is the second most popular protocol on the chain. As of this writing, there are 35 protocols on Optimism with at least $1,000 locked into their smart contracts.

How does Optimism work?

Optimism uses a technology called rollups, specifically Optimistic rollups.

They’re called rollups because they roll up (or bundle) the data about hundreds of transactions – non-fungible token (NFT) mints, token swaps … any transaction! – into a single transaction on Ethereum mainnet (layer 1). When so many transactions are rolled up into a single transaction, the blockchain transaction, or "gas," fee required to pay comes down to only one transaction, conveniently distributed across everyone involved.

And they’re called Optimistic rollups because transactions are assumed to be valid until they are proven false, or in other words, innocent until proven guilty. There’s a time window during which potentially invalid transactions can be challenged by submitting a “fraud proof” and running the transactions’ computations with reference to available state data. Optimism reimburses the gas needed to run the computation of the fraud proof. (Here’s a more technically detailed explanation of the process.)

How do you use Optimism?

For users, Optimism feels pretty much the same as Ethereum mainnet. Your Optimism address is the same as your Ethereum mainnet address, which begins with 0x. Optimism’s blockchain explorer is identical to Etherscan, Ethereum mainnet’s blockchain explorer.

Optimism supports a bunch of decentralized finance (DeFi) wallets, including MetaMask, the most popular choice.

Although you can manually configure your wallet for Optimism, there’s a much easier way: Just go to a DeFi app like SushiSwap (SUSHI) and indicate Optimism as your network (top-right corner in the case of Sushi). Your website selection will force your MetaMask to add the network and switch to it. Welcome to Optimism!

But, of course, just like Ethereum mainnet, Optimism requires ether (ETH) to cover gas fees. So to begin using Optimism, you’ll need to send ETH to your MetaMask from another chain, such as Ethereum mainnet or other layer 2s like Avalanche. To send funds from another chain, you can use any of the bridges that support Optimism.

You can also use a centralized cryptocurrency exchange to fund your Optimism address with ETH. But before attempting to send funds to a layer 2 from your centralized exchange, always make sure that it can support withdrawal to that chain. If you send funds to an address that your exchange doesn’t support, your funds may be irrecoverably lost. As of this writing, 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 claim 214 million OP tokens for free (known as an “airdrop”). That accounts for 5% of the total 4.29 billion supply, meaning 95% of the supply has yet to hit the market. You can track how many users claimed the first airdrop on this Dune Analytics dashboard.

The initial airdrop was met with “widespread frustration from the Optimism community” after some users claimed tokens early and then dumped those tokens. Optimism admitted there were 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 composed of Token House and Citizens’ House. Citizens’ House will come live later in 2022. Token House, which is already active, governs technical decisions related to Optimism, such as software upgrades. The Citizens’ House governs public-goods funding decisions. In its early days, Optimism itself raised funds on Gitcoin, a major public-goods funding platform.

How do you qualify for an OP airdrop?

In its first airdrop, Optimism used the following criteria to award users with tokens:

  • Optimism user: use of an OP bridge before June 23, 2021, or use of Optimism projects more than once between June 23, 2021, and March 25, 2022.
  • Repeat Optimism user: repeat use 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.
  • Donated to Gitcoin Grants on layer 1: donation to Optimism on the public goods platform.
  • Priced out of Ethereum: use of bridges while being a regularly active user on layer 1.

The next airdrop may include some, none or all of these criteria. The exact criteria aren’t announced in advance to avoid gaming the system.

When is the next OP airdrop?

In a blog post in April 2022, Optimism said there would be “an entire season of airdrops.” The Optimism team did not disclose the dates of the airdrops, and airdrops are generally announced at short notice.

Before the airdrop takes place, Optimism is likely to announce who’s eligible and how much OP they’re due to receive. This will be based on a snapshot: a record of the state of Optimism chain on a particular block height. Snapshot dates aren’t announced in advance. So if you want to receive OP tokens, get on the network and start playing with the apps. Remember, however, your capital is at risk.

This article was originally published on Jun 3, 2022 at 3:27 p.m. UTC

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Ekin Genç has written for Bloomberg Businessweek, EUobserver, Motherboard, and Decrypt.

CoinDesk - Unknown

Ekin Genç has written for Bloomberg Businessweek, EUobserver, Motherboard, and Decrypt.


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