About Optimism (OP)

What is Optimism (OP)?

Optimism (OP) is a layer-2 blockchain project that aims to enhance the scalability of the Ethereum ecosystem through the use of optimistic rollups . Optimism utilizes the OP Stack, which is a software framework that underpins the Optimism ecosystem . The OP Stack consists of various modules that form tight, trusted blockchains, and it allows for the development of customizable, modular chains called "op-chains". These op-chains can be app-specific or general-purpose, depending on the needs of their respective communities

History of Optimism (OP)

Founding Team

In 2019, Optimism was founded by Jinglan Wang, Benjamin Jones, Karl Floersch, and Kevin Ho.

Today, the nonprofit Optimism Foundation leads development, expanding the Optimism Collective. They builds software scaling Ethereum's technology and values by enabling impact-driven initiatives without traditional business models. Optimism fosters public benefit projects. Until full decentralization, the Foundation will donate sequencer profits to sustaining public goods, demonstrating Optimism's commitment to the greater good.

Development History

First proposed in June 2019, Optimistic Rollup aimed to bolster Ethereum's capacity for supporting commercial applications. This groundbreaking scalability solution marked Optimism's origins. The Unipig testnet launched in October 2019, an early milestone in Optimism's development journey.

In 2020, Optimism progressed through testnet phases, first launching an EVM-compatible Optimistic Virtual Machine testnet in February. By September, the testnet incorporated the complete Optimism Rollup solution.

2021 saw two mainnet launches - the Alpha in January, then the EVM equivalent in October - introducing Optimism to a broader audience. Meanwhile, Optimism launched a full-fledged blockchain bridge connecting Ethereum and Optimism in August, allowing all ERC-20 token transfers. By December, the crypto community celebrated Optimism's mainnet launch, marking the network's production readiness.

May 2022 brought governance milestones with the OP token launch and Optimism Collective formation, enhancing community participation. October 2023, it introduced the next evolution of Optimism’s scalability architecture: the OP Stack, a modular, open-source blueprint for highly scalable, highly interoperable blockchains of all kinds.

2023 goals include a sharded rollup to incentivize verification and decentralize block production. In June, the Optimism network concluded its “Bedrock” upgrade, paveing the way for further development of the OP Stack in the future, with the ultimate goal of building a multi-network “Superchain".

How Does Optimism (OP) Work?

Optimisim Network

As an "Optimistic Rollup," Optimism piggybacks off the security of the Ethereum blockchain instead of providing its own consensus mechanism. Optimism leverages Ethereum's security by submitting compressed block data to Ethereum addresses, minimizing gas costs. This inherits Ethereum's availability and integrity guarantees.

1.Block Production

The Optimism sequencer manages block production, providing transaction confirmations, state updates, block construction, and transaction submission to Ethereum. The sequencer produces blocks every two seconds regardless of volume. Transactions reach the sequencer via two methods:

• Transactions submitted to Ethereum as deposits are included in the appropriate Optimism block identified by epoch and sequence number. Deposits enable Ethereum's censorship resistance.
• Transactions submitted directly to the sequencer are cheaper but not censorship resistant since only the sequencer knows about them.

Currently, the Optimism Foundation runs the sole sequencer but plans to decentralize block production.

2.Block Execution

The execution engine syncs Optimism's state across nodes like Ethereum clients. This peer-to-peer network rapidly updates execution engines. Alternatively, the rollup node derives L2 blocks from L1. This slower, censorship resistant method ensures validity.

The execution engine receives blocks via two mechanisms: fast peer-to-peer syncing between execution engine nodes, or slower derivation from L1 by the rollup node.

3.Bridging assets between layers

Optimism's bridge allows transferring assets between Ethereum and Optimism by relaying messages between smart contracts. The bridge mechanism differs depending on message direction.

Deposits initiate on Ethereum and relay to Optimism.

Withdrawals move from Optimism to Ethereum via three stages:

• Initialize withdrawal via Optimism transaction
• Submit withdrawal proof after the output root publishes to Ethereum
• Finalize withdrawal after the fault challenge periodThis new withdrawal mechanism enhances security.

4.Fault Proof

In an Optimistic Rollup, state commitments publish to Ethereum without direct validity proof, only pending for the challenge window. If unchallenged, commitments finalize. Challenges invoke fault proofs, removing invalid commitments without rolling back Optimism's state. A redevelopment aims to improve the fault proof process.

OP Stack

The OP Stack is a set of software components for building L2 blockchain ecosystems, built by the Optimism Collective to power Optimism. Because the OP Stack is a work in progress, the landscape of the different layers and modules is still evolving. The current landscapre is as below:

1. Data Availability: The Data Availability Layer defines where raw inputs are published for an OP Stack chain. Chains can use one or more modules to source input data, impacting security. For instance, lost data may prevent chain syncing.
2. SequencingThe Sequencing Layer collects and publishes user transactions to the Data Availability Layer. The default Rollup configuration uses a Single Sequencer. Rules in the Derivation Layer restrict sequencer behavior. Future versions will enable modular sequencers.
3. Derivation:The Derivation Layer processes raw Data Availability Layer data into inputs sent to the Execution Layer. It may use current system state. Modules can derive inputs from various sources.
4. ExecutionL: The Execution Layer defines state structure and state transitions when inputs are received. It enables EVM modifications or new VMs.
5. Settlement The Settlement Layer is a mechanism that establish read-only views of a chain's state. It enables external decisions based on chain state and Often handles withdrawals.
6. Governance:The Governance Layer manages system configuration, upgrades, design choices through various mechanisms. Governance tokens enable token holders to vote on subset of decisions.

Token Economics

What is Optimism (OP) used for？

The OP token enables governance and funding for the Optimism ecosystem.

As the native governance token, OP provides voting rights to token holders and delegates on proposals and changes to the network. Through a delegated voting system, OP holders can participate in key decisions related to software upgrades, public-goods funding, and other aspects of Optimism.

OP also serves as a reward and funding mechanism. It is airdropped to users and projects supporting Optimism, incentivizing participation. Furthermore, the OP Governance Fund utilizes OP to distribute grants to builders, funding new innovations on Optimism.

Token Distribution

• Ecosystem Fund: 25%
• Retroactive Public Goods Funding (RetroPGF): 20%
• User airdrops: 19%
• Core contributors: 19%
• Sugar xaddies: 17%

The initial total supply of OP tokens is 4,294,967,296. This inflates 2% annually to incentivize participation. 64% goes to the community via airdrops, ecosystem funds, and rewards distributed over time. After year 1, token holders vote on the Foundation's annual distribution budget. If authorized expenditures fall below 10% initially, the Foundation can request more allocation.

Why Is Optimism (OP) Valuable?

Ethereum Scalability Solution

Ethereum faces congestion and high fees, impairing scalability. Optimism offers relief by processing transactions off-chain while leveraging Ethereum's infrastructure.During a transaction, Optimism communicates with Ethereum's Layer 1, retaining its security and decentralization. Layer 1 handles security, while Optimism's Layer 2 enables scaling.Optimism removes transaction burden from Ethereum, eliminating congestion.

Benefits include:

- Scalability: Optimism achieves 10-100x higher scalability depending on the transaction.

- Reduced Fees: Rollup technology batches transactions, reducing costs.

- Security: Transactions settle on Ethereum Mainnet, benefiting from its security.

- User Experience: Lower fees, faster transactions, better experience for new Optimism projects.

Creating Value for Tokenholders, Builders, and Users

The Optimism Collective aims to create a thriving ecosystem through funding public goods. This generates value for three constituencie:

- Tokenholders benefit as sequencer revenue funds public goods, creating ecosystem value and driving demand for blockspace.

- Contributors and builders receive direct funding through retroactive public goods funding, enabling new markets. They also benefit from well-funded tools, education, apps and infrastructure.

- Users and community members gain value through airdrops, project incentives funded by the OP ecosystem, and usage of public goods.

Highlights

By October 2023, Optimism had already achieved the following milestones:

- Introduced Optimistic Rollup

- Launched Unipig Optimistic Rollup Testnet

- Deployed an EVM Compatible Testnet, enabling Ethereum dApp compatibility

- Released the Alpha Mainnet

- Upgraded to an EVM Equivalent Mainnet, delivering full EVM feature parity

- Opened the Mainnet

- Shipped Bedrock

Optimism remains focused on decentralization, security, and performance by targeting the following upcoming milestones:

- Next gen fault proof

- Multi Proof

- Decentralized sequencer

- L1 governed fault proofs