What is optimism? Ethereum Layer-2 scaling solution explained.

Understanding optimism

Optimism is an Ethereum-compatible layer-2 project that hopes to solve Ethereum's scalability issues by working similarly to the Ethereum blockchain.

Optimism is an Ethereum layer-2 matching solution led by The Optimism Collective – an organization of communities dedicated to building a fairer vision of the Internet. The alliance covers all branches of Optimism such as OP Labs, OP Chains and Optimism Foundation.

The project is designed to work similarly to Ethereum by providing users with decentralized applications (DApps) such as decentralized exchanges and other decentralized finance (DeFi) applications.

Optimism is compatible with the Ethereum Virtual Machine (EVM). This EVM parity ensures that Ethereum developers can migrate easily when building DApps within the network. The network's standout function, however, is optimism.

What are optimism?

Bright wrap technology is one of the many scaling solutions offered by Ethereum developers. They work similarly to zero-knowledge scrolls but differ in a few key ways.

Living as a layer-2 solution on top of Ethereum, Optimism processes transactions from the mainnet. Processing data outside of the Ethereum mainnet reduces congestion, lowers transaction fees, and lowers gas fees. However, a layer-2 solution requires some layer communication mechanism with the parent chain. This is where optimistic quotes come in.

Optimistic coils are used in many Ethereum matching solutions today and are a method of transferring Optimistic transactions from Ethereum to a layer-2 solution. The optimistic package involves the user depositing funds in smart contracts compatible with the Layer-2 solution. A “chain”, a node similar to a validator on Ethereum, processes these transactions and spins them into a block. Eventually, the chain sends that block to the Layer-1 solution as a single transaction, also known as a state commit.

All transactions in the package are assumed to be valid, so they are considered optimistic. This lack of authentication is part of what makes the transaction process – the number of transactions per second – so fast. Authentication is one of the key contributors to a long transaction time on other networks.

However, users can challenge state commitment at any time through the “error-proofing” process (formerly known as “fraud-proofing”). If one challenge is successful, the government commitment is removed from the chain and replaced by another. Consumers currently have seven days to challenge a state commitment before it is considered final.

While promising applications are seen in other scalable solutions, these stacks are just one part of OptiStam's extensive software suite, the OP Stack.

What is the OP Stack?

A project is only as good as the software stack. Optimism is no exception, and the team has high development goals.

The OP Stack is an open source, evolving software suite that serves as the foundation of Optimism. It includes several layers such as management, settlement and origination layers, all of which are focused on the transaction process and network development. Ethereum serves as the layers of communication and transaction execution, providing a secure foundation on which to build optimism.

Bedrock is the current iteration of OP Stack, which provides a set of tools for developers to build their own layer-2 blockchain. Blockchain can use optimistic wrappers. However, Bedrock is just the beginning of Optisism's community-based development goals.

Optimism plans to turn Bedrock into a superchain. Optimism about superchains includes a foundation for developers to build their own chains. From there, every blockchain that leverages the power of the superchain can all receive the same updates, bridge between each other and participate in the same governance – a type of layer-2 interaction.

In theory, developers can build a blockchain for whatever purpose they want on top of Optimism's OP stack. That chain could use Ethereum's security — which Network Optimism's superchain is built on top of — while developing its proposed solution. By building this unified blockchain network, the Optism team hopes to solve the scalability issues plaguing many blockchain projects today.

In the year As of March 2024, Superchain is more of a concept than a reality. But the developers of Optimism are tight-lipped about the future of the project. Of course, developments cannot happen without a dedicated group of users pushing them forward. This is where Optimism Management comes in.

How does management work in Optimism?

Governance is one of the most important parts of any blockchain ecosystem, ensuring that developments are properly thought out and implemented.

Optimum Group is managed by two groups: Citizen House and Token House.

House of citizens

Citizens' House is Optimism's approach to funding various projects on the network. It involves “citizens” who vote to distribute funding through the project's Retrograde Public Goods Fund (RetroPGF). Citizens receive non-transferable tokens (NFTs) to represent their position. These accounts are known as soul-linked tokens and are permanently linked to a citizen's wallet. Soulbound tokens can be verified on a public user basis and provide an overview of the citizens' network history.

RetroPGF receives funds through user transactions in the OP mainnet. Each time a follower makes transactions, a portion of the follower's rewards are redistributed to PGF. The Citizens' Council votes on which OP projects will receive that funding.

Token House

Token House is Optimum's main management method. Token House members are responsible for proposing and voting on ideas to improve the network. Token House representatives are expected to attend community meetings, provide regular project feedback, and participate in reflection periods between voting sessions. Participation requires a significant time commitment, and representatives who find themselves without sufficient time to participate may choose to delegate their responsibilities.

Delegates are expected to closely follow Optimum Network developments as Token House representatives. They should also participate in forum discussions and vote on administrative proposals. Delegates are rewarded for their efforts with OP tokens.

What is the OP token?

The Op Token is the primary way users participate in the Optimum network.

The OP Token is the main administrative token of the network and the primary way to interact with the Optisism ecosystem. OP tokens adhere to the Ethereum ERC-20 token standard and are typically available via trade or airdrops. Users can earn OP tokens by participating in one of the project management houses in the network or by processing transactions as a sequence.

The project has launched with a total supply of 4,294,967,296 OP tokens. Optimism aims to increase the OP token by 2% per year.

Optimism distributes its tokens in the following ways.

As the OP token is a management token, the asset has an uncapped supply. The token will also be used to participate in DeFi on Optimism.

How does DeFi work on Optimism?

Decentralized financial solutions offer users a variety of ways to leverage and profit from their token holdings. Similar to other Layer-2 scaling solutions, Optimism offers a variety of decentralized finance applications. Users can play games, trade on decentralized exchanges, earn NFTs, and invest in other DeFi platforms using the OP token.

However, users must connect their existing assets to the Optisism network to participate. Fortunately, they should make quick bucks using the optimistic packages.