In this article, we'll examine the ecosystem of Optimism, one of fastest growing layer-2 protocols on Ethereum.
Over the last couple of years, a number of layer-2 chains - operating on top of the Ethereum mainnet - have emerged to address Ethereum's scalability problem.
One of the most rapidly growing chains among L2s is Optimism.
Optimism grew out of Plasma Group, a non-profit research organization. In September 2020, a preliminary mainnet with a limited test network was launched, followed by a proper mainnet release in January 2021.
In February 2021, Optimism raised a $25 mln Series A funding round led by Andreessen Horowitz. Another $150 mln was raised in a Series B in April 2022, which put the project's valuation at $1.65 bln.
Also in April 2022, Optimism announced that its decentralized autonomous organization, or DAO, dubbed the Optimism Collective. The DAO enables token holders to vote on changes to the protocol with Optimism's governance token, OP.
Recently, the Optimism team reported several major milestones for the past 12 months, including a $17.4 bln worth of transaction volume, a $24.5 mln worth of revenue and saving users $1.1 bln in gas fees.
Meanwhile, Optimism has integrations with over 100 projects and supports about a dozen of DeFi wallets, including MetaMask, Coinbase Wallet and Trust Wallet.
The Optimism protocol is based on a tech called Optimistic Rollups, which bundles large amounts of transaction data into batches. Each of those batches - called rollups as they basically "roll up" data for hundreds of transactions - is executed as a single transaction on the Ethereum mainnet.
As a result, transactions are processed much faster and are much cheaper, as Ethereum gas fees are distributed between all the transactions. Optimism claims that its transactions are 50- to 500-times cheaper than those executed on Ethereum’s layer 1.
The successful deployment and operation of Optimistic Rollups led to the protocol's increasing popularity.
Other Optimism advantages include composability, as Optimism can quickly communicate with the Ethereum mainnet; scalability thanks to enabling Ethereum dApps' migration to Optimism with just minor modifications; and security provided by Ethereum’s decentralized nodes.
Optimism's business model is focused on collecting revenue from two sources - transaction fees and miner/maximal extractable value (MEV).
To put it simply, Optimism purchases block space on Ethereum, uses it more efficiently and then charges users transaction fees. The spread between the costs of buying Ethereum block space and transaction fees paid by users is Optimism's profit.
Using a dynamic extra fee charged on each transaction - referred to as "fee scalar" - Optimism targets a 10% margin for transaction fee profits.
MEV is sort of a "rent," extracted by validators who can specifically reorder transactions. As opposed to some chains' intent to fight MEVA, Optimism plans to redirect MEVs and introduce what it calls MEV auctions (MEVA). As a result, validators will have to bid for the right to extract MEV, paying fees that will create another stream of income for Optimism.
In the longer run, Optimism plans to allocate revenues earned from MEVA to fund public goods. That is expected to help build a self-sustaining ecosystem.
The number of projects launching on Optimism increased considerably in early 2022, as projects looked to take advantage of the protocol's higher scalability and lower fees. Currently, more than 40 protocols are deployed on Optimism.
In addition to Optimism-native protocols, many popular DeFi protocols have expanded to Optimism, including UniSwap and Curve. Automated market maker Balancer and unsecured lending protocol TrueFi are among the most recent additions.
Synthetix, a derivatives liquidity protocol, is the largest protocol deployed on Optimism, with a total value locked (TVL) of $125 mln.
It's followed by the Optimism-native protocol Velodrome Finance, a trading and liquidity marketplace. According to its developers, Velodrome Finance aims to incentivize liquidity for various use cases.
A few other Optimism native protocols are also worth mentioning.
Lyra is a DeFi platform focused on options trading. In July 2021, it raised $3.3 mln in a seed funding round led by ParaFi Capital and Framework Ventures.
Perpetual Protocol, launched on Optimism in December 2021, is a DEX for perpetual contracts. At one point, it emerged as the sixth-largest DEX by weekly trade volume.
Pika is a perpetual trading platform that offers up to 50x leverage for various crypto assets. The Pika mainnet was launched in early 2022 and reached a $400 mln trading volume with over 10,000 unique user addresses in the first three months of operation.
Another native protocol powered by Optimism is Rubicon, leveraging Optimistic Rollups to build a DEX for ERC-20 crypto assets.
As of early June, over three dozen protocols with at least $1,000 locked into their smart contracts ran on Optimism, of which 18 have over $1 mln locked, according to DeFiLlama.
Optimism's total TVL is $355 mln, which makes it the second-largest Ethereum layer 2 after Arbitrum.
⚜️GTON Capital builds infrastructure to advance digital capital, and GTON Network is the primary part of it. GTON Network is an Ethereum L2 rollup, fork on Optimism, where user assets are stored in revenue-generating vaults and can be redeemed at any time. Native token for GTON Network will be $GCD - a multi-collateralized stablecoin with a real use case as a native currency for L2.
GTON Capital builds GTON Network, an Ethereum L2 rollup with a multi-collateralized stablecoin GTON Capital Dollar as its native currency, that enables an ecosystem of mutually reinforcing products.