What is Optimism Cryptocurrency
Published September 5th, 2022
Published September 5th, 2022
Optimism is a blockchain technology that has been designed to address the growing need for scalability and affordability in the Ethereum network. As a layer 2 optimistic roll-up solution, it is built on top of Ethereum, providing a cost-effective way to handle transactions.
Optimism is a layer 2 scaling solution for Ethereum that aims to reduce the load on the network and make transactions more affordable. With Optimism, users can send transactions at a fraction of the cost and at a much faster rate.
Optimism is also the cryptocurrency from the Optimism blockchain. The Optimism protocol is a layer 2 optimistic roll-up solution for Ethereum. Hence why it is called Optimism.
It is built on top of Ethereum, with Ethereum being the layer 1 protocol. Ethereum still handles all of the security checking to make sure that transactions aren’t fraudulent or so that there aren’t 51% attacks on the network.
Optimism is a layer that packages up transactions and submits them to Ethereum at a fraction of a cost. We go over this much later.
A layer 1 blockchain is a blockchain which handles all of the security concerns by itself and is not dependent on another network to exist. Examples of layer one blockchains are Bitcoin, Ethereum, Solana, Binance Smart Chain etc.
The objective of Optimism is to reduce the transaction load on the Ethereum network and reduce transaction fees. Ethereum can get congested and then become expensive to utilize.
This can be so extreme that transactions could cost more than 200$ just to swap tokens on Uniswap. Optimism is a scaling solution for Ethereum. This means that Ethereum and Optimism together, will be easy and affordable to use even when more and more users are using the protocols.
Ethereum currently can handle about 40 transactions per second. With Optimism as a layer 2 scaling solution, both Ethereum and Optimism can handle much more.
Instead of using Ethereum, people can use Optimism to send transactions and use different applications. The transaction fees cost a fraction of what they would cost on Ethereum and are faster.
We explain how this works in the next section.
Optimism runs its own blockchain which runs as an extension of Ethereum. Optimism doesn’t validate transactions. Transactions get executed on Optimism and validated on Ethereum.
As such, Optimism doesn’t need a consensus mechanism to make sure that transactions are valid.
As previously mentioned, Optimism is an optimistic rollup solution for Ethereum. During the process, many transactions get packaged up and then get submitted to Ethereum as calldata.
When the transactions are posted on Ethereum, they are also compressed to minimize the amount of data space that they use, reducing gas fees. Bundling up transactions and submitting them to Ethereum as one transaction allows us to split the gas fees between all of the initial transactors.
By splitting the fee amongst many people, it lessens the transaction fee that each person has to pay.
Optimism, since it is its own blockchain, connects with Ethereum via sets of smart contracts. Optimistic rollups, the type of rollup that Optimism is, assume that all transactions are valid.
Once transactions are posted on Ethereum, anyone can challenge them by submitting a fraud proof. People have a time window in which they can do this before the transactions are considered valid and permanent.
Optimism also has access to the data availability feature of Ethereum. This means that all of the state data can be seen by everyone. The data consists of the calldata in Ethereum which is submitted by Optimism.
This calldata has the transaction information submitted through Optimism. Data availability allows everyone to potentially challenge transactions In real time, lowering the risk of fraudulent transactions.
Similar to Ethereum, Optimism has its own virtual machine that holds state data and executes smart contracts. In the next paragraph, we go over this in detail.
Optimism is EVM compatible. Since Optimism is built directly on top of Ethereum, it inherits many of the features of Ethereum, such as EVM compatibility. Optimism has its own virtual machine which is similar to Ethereum's, but not identical.
EVM compatibility means that the blockchain carries the same rules and regulations that the Ethereum virtual machine does. This allows the subsequent blockchain to run much like how Ethereum runs.
EVM compatibility is also a set of rules for how the blockchains virtual machine acts and how it moves dynamically every time each block is added. RPCs for example, are uniquely defined by the EVM.
Transaction data, smart contract interactions and account data are stored via Merkle trees. EVM compatibility gives a blockchain network guidelines for how this data is stored and accessed.
EVM compatible blockchains behave much like Ethereum. Examples of these are BSC, Avalanche, Polygon, MetisDAO, Fantom, Arbitrum etc. Developers and users can interact with EVM compatible chains much like they would interact with Ethereum.
As such, the same DApps can be integrated from one network to another with little modification. Take 1Inch (A DEX) for example, it is accessible through more than 3 EVM compatible chains.
Using Optimism requires that we have Ethereum in a wallet. The Ethereum will be used to pay for transaction fees on Optimism. Ethereum is acquired by buying it on a centralized exchange such as Coinbase, Binance, Kraken. Coinmarketcap lists plenty of exchanges to choose from.
We also need access to a wallet that allows us to switch between networks such as Metamask. Metamask allows us to access both Ethereum and Optimism as well as many other EVM compatible chains.
Metamask is one of the most popular and trusted wallets in the world. interact with all EVM compatible chains and ecosystems like Metis, Ethereum, BSC, Fantom and of course, Optimism.
1inch is another popular exchange on Optimism. It has many available tokens to trade from. There is plenty of liquidity with this exchange.
Optimism was founded by Jinglan Wang, Karl Floersch and Kevin Ho. Optimism raised 150 Million dollars in a series B financing round. This financing round raised the valuation of Optimism to 1.65 Billion dollars.
The team behind Optimism pledged to use the funds to drive innovation and adoption of the platform. The founders had lots of influence on the direction in which Optimism as an organization went.
Recently, the founders and the team behind Optimism network have shifted from a company type of organization to a more decentralized type of organization.
Optimism has shifted towards a structure whereby it is community governed. People with Optimism tokens can use them to participate in governance. By owning OP tokens, the owners have special voting privileges.
Delegating these powers to anyone can be possible. Delegates get to vote for governance decisions, proposals, and ideas. As such, they get to decide on the future of Optimism.
Optimism has published their roadmap online. By the End of 2022, they expect to finish next generation fault proofs. In 2023, the team plans to transform the Optimism protocol into a sharded rollup. They also have much more planned for 2023, as well as for 2024.
The next table summarizes what the team has planned for the future.
|Optimism Development Roadmap|
|2022||Next Gen Fault Proof|
|2024||L1 Governed Fault Proofs|
Optimism network is used for increasing the scalability of the Ethereum blockchain. People can bridge assets from Ethereum to Optimism to take advantage of lower fees and quicker transaction times. Transaction fees on Optimism are as much as 100 times less than the fees on Ethereum.
Congestion on Ethereum can cause the network to become expensive to use. As a result, various types of layer 2 protocols have been developed. Optimism, Arbitrum and ZKSync are 3 protocols that aim to increase the scalability of Ethereum.
Instead of using Ethereum to use Uniswap or various other applications, users can bridge their Ethereum to Optimism and use the application in the Optimism ecosystem. They can mint new NFTs, take out crypto loans and participate in lending.
Optimism is part of the Ethereum ecosystem. Optimism is part of Ethereum in that it relies on Ethereum for security. However, it is not an integral part of Ethereum in that Ethereum can live and thrive without Optimism existing.
Optimism is to Ethereum like a turbocharger is to a car. A car doesn’t need a turbocharger, but it does help the car run faster. Similarly, Optimism helps Ethereum by taking some of the transaction load.
Optimism relies on Ethereum to validate and finalize the transactions that Optimism executes. It relies on Ethereum as the main blockchain that people use.
Ethereum on the other hand, relies on Optimism for decongesting the Ethereum network. During busy days of network usage, Ethereum can get congested and become difficult to use.
When this happens, transactions become expensive to execute, and may take a lot of time to finalize. Optimism relives the congestion on Ethereum by providing a layer through which many transactions can be bundled up and share a single transaction cost. Optimism is a secondary blockchain that reports outputs to the blockchain of Ethereum.
Optimism relives the congestion on Ethereum by providing a layer through which many transactions can be bundled up and share a single transaction cost.
Optimism is a secondary blockchain that reports outputs to the blockchain of Ethereum.
To use Optimism, you need Ethereum. Luckily, the transaction costs on Optimism are much less than in the Ethereum network. We have compiled a table where we illustrate all of the costs of executing transactions in Optimism.
We have used Optimism, to test how much each type of transaction costs and we have recorded what we found out in the table below! Transactions vary because the total gas used can vary.
They also vary because of how quickly people want the transactions to be executed. Priority is given to transactions which use more gas.
|Optimism Crypto Transaction Fees|
|Sending Ethereum||0.00002 to 0.00007 ETH|
|Sending Tokens||0.00004 to 0.00009 ETH|
|Swap Tokens using a Decentralized Exchange||0.00007 to 0.00015 ETH|
|Add or Remove Liquidity||0.00004 to 0.0001 ETH|
|Mint NFTs||0.00003 to 0.00007 ETH|
|Smart Contract Execution / Creation||0.00015 to 0.005 ETH|
|Bridging from Ethereum to Optimism||0.001 ETH to 0.002 ETH|
|Bridging from Optimism to Ethereum||0.00004 to 0.00007 ETH|