What is Optimism?
TL;DR: Optimism is the team behind the development of Optimistic Rollup (OR). OR is an Ethereum L2 scaling solution that promises an order of magnitude improvement in transaction throughput while preserving the L1 smart contract developer experience.
How does OR work? OR increases the network throughput by allowing staked validators to compute state updates (latest activity) off-chain and post state roots (minimum viable data of the updates) on-chain. The validity of OR blocks can be challenged by anyone.
The OVM translates OR smart contracts for the EVM; The Optimistic Virtual Machine (OVM) makes sure that the L2 contracts can be correctly interpreted and executed on L1 by the Ethereum Virtual Machine (EVM).
Why is now the time for OR? Ethereum needs to scale to support the growth of its application ecosystem. Unipig and the Synthetix demo showcased the promise of OR as a scaling solution for Ethereum.
Unipig demo The demo was built in collaboration with Uniswap and included custom-built components. Unipig got to ~250 TPS. The team calculated that an optimized production version would be capable of ~2000 TPS.
Synthetix demoSynthetix organized a trading competition, where DeFi users got to experience the near-instant and cheap Ethereum transactions of the OVM. Unlike Unipig, the demo ran on a generalized system meant to work for any Ethereum dApp.
Synthetix Exchange Demo results.
History of Optimistic Rollup and Plasma: OR has much in common with Plasma. Both use staked validators that commit blocks on-chain. Tradeoffs:
- Plasma can achieve near-infinite scalability with a limited validator set.
- OR improves scale while enabling anyone to dispute a block’s validity.
What is Optimism’s business model? Miners on L1 make money on transaction fees, block rewards, and transaction ordering (this applies to block proposers on L2 as well).
Optimism has presented a proposal where the right to reorder transactions within a block would go to the highest bidder.
Token Terminal provides financial and business metrics on crypto protocols — metrics we’re used to seeing applied to traditional companies, e.g the P/E ratio. Crypto protocols operate like traditional businesses, only they do it directly on the Internet.
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