Ethereum Scaling Solution Optimism (OP)

This article will explain what Optimism crypto is all about. You will also learn about optimistic rollups such as the OP Mainnet

Ethereum, once the undisputed king of smart contract blockchains, is facing an existential crisis. Its high gas fees and slow transactions have allowed newer performance-focused rivals such as Solana to attract users and capital away from the world’s second most valuable blockchain.

However, blockchain scaling solutions such as Optimism are now helping the Ethereum blockchain offer fast transactions at competitive prices to users.

Optimism is one of the pioneers of the layer two-focused (L2) scaling movement undertaken by Ethereum. The project has earned the reputation of producing reliable products such as the OP Mainnet L2 and an open-source rollup development kit called the OP Stack. But what we are most excited about is Optimism’s bold ambition to unite the fragmented Ethereum L2 ecosystem under a banner that it calls Superchain.

Optimism Crypto Review: Summary

In this article, we will explain what Optimism is all about. You will also learn about optimistic rollups such as the OP Mainnet and other key L2 concepts such as sequencers. For those interested in L2 interoperability, you will find details about Optimism’s Superchain initiative. Additionally, for crypto investors, we have also compiled important on-chain metrics and explained why the OP token has fared poorly in the best cryptocurrency to invest in now.

Key Takeaways

Terms You Need to Know Before Understanding Optimism

Blockchain and cryptocurrency terminology can be difficult to grasp. To help you understand the Optimism Network better, we have compiled key terms that you will frequently come across in this article.

What is Optimism Crypto? A Layer 2 Solution

Optimism, commonly known as OP Mainnet, is a L2 blockchain built on top of Ethereum. Optimism enables the underlying Ethereum L1 to support more transactions by allowing users to execute transaction on a secondary blockchain.

What you have to keep in mind is that many people refer to OP Mainnet simply as Optimism, but in reality, Optimism is the name of the organization behind its development. In addition to the OP Mainnet, the Optimism organization provides L2 building and interoperability solutions.

To understand the OP Mainnet better, let’s learn how a transaction is executed on the L2 blockchain. Imagine that you are using OP Mainnet to swap your ETH coins for USDC Stablecoins. This token swap will occur on the OP Mainnet which means that the changes in account balances and documentation of the transaction history will be be recorded on the OP Mainnet. Your transaction will only become final when the OP Mainnet submits the transaction data to the underlying Ethereum L1.

Now that you have read the gist of it, let’s breakdown the technical details of the L2 blockchain. OP Mainnet gets its name from its design as an “optimistic rollup,” which is a type of L2 scaling solution that assumes that all off-chain transactions are valid. Optimistic rollups, therefore, do not publish proofs of validity for transaction batches posted on the underlying L1 blockchain. Instead, they provide users with a challenge period during which anyone can challenge the validity of a L2 transaction.

The sequencer node is a key component of the OP Mainnet blockchain. Sequencers are special nodes in L2 chains that are responsible for executing transactions, batching them, and posting the transaction data to L1 blockchain. Whenever users conduct a transaction on OP Mainnet, they have to pay gas fees to the sequencer.

Learning how a sequencer carries out its function is arguably the best way to understand how the Optimism layer-2 solution works.

Here is the process followed by sequencer nodes in L2 chains like Optimism when executing and batching transactions.

History of Optimism

Optimism originally launched as the Plasma Group in January 2019. The organization was created to push layer two (L2) scaling on Ethereum through solutions known as plasma chains. Plasma chains were similar to L2 rollups as they enabled faster and cheaper transactions via off-chain computation. However, plasma chains provided limited functionality as it could not run smart contracts and only supported basic token swaps and transfers.

In July 2019, Plasma Group introduced a virtual machine called the Optimistic Virtual Machine (OVM) for L2 protocols. For context, virtual machines are software that emulate the functionality of a physical computer. In January 2020, Plasma Group rebranded itself to the Optimism Public Benefit Corporation. Later that year, Optimism published details about its optimistic rollup. In a blog post, Optimism explained that its optimistic rollup resembles plasma chains but trades off scalability to enable smart contracts.

2020 marked a pivotal year for the company as Optimism open-sourced the Optimistic Virtual Machine in February to allow any developer to use and make changes to the L2 virtual machine. By September, the Optimism testnet was launched. Decentralized finance (DeFi) protocol Synthetix became the first protocol to test the newly launched L2 chain.