Tokenomics

The above page is the official documentation about the Economics of the OP ecosystem. It also has a nice diagram (see below) to demonstrate the economics.

However, it does not clearly picture where the token holders fit in. The only thing mentioned in the page is:

• Value accrues to tokenholders through the productive re-deployment of sequencer revenue. Sequencer revenue is primarily directed to fund public goods, which creates ecosystem value and drives demand for blockspace.

This part is a bit vague to me as I cannot see a link between the distribution of sequence revenue and how value accrues to token holders. In the diagram above, the revenue is distributed to the retroactive Public Good Funding (RetroPGF), which goes to the builders, not the token holders.

As far as I know, the token right now does not have any other use cases other than governance.

However, there are some discussion happening in the official discord. The screenshot below implies that when the sequencer is decentralized, the revenue could be allocated to places other than the RetroPGF. So maybe they will have a staking system by then to distribute some revenue to the token holders.

Token Distribution

Overall, it looks healthy to me.

Valuation

The above dashboard has some statistics for the Optimism fees. The sequencer fee margin section is the actual profit (i.e. revenue - cost). In the below screenshot, we can see that the 30-day average profit is 13.63 ETH.

Given a 100x PE ratio, with the current ETH price being $1605, we can do a raw estimation of the valuation of the ecosystem to be:

13.63 * 365 * 1605 * 100 ~= $800 million

The market cap implies by the current token price is $532 million while the fully diluted valuation is at $1 billion.

Discussions

The token price of OP is too high even considering my raw estimation with a very generous PE ratio.

More importantly, the token itself is just a governance token with no other utilities, at least at the moment. In general, I don’t recommend to invest in any governance tokens.

However, I am bullish on the Optimism ecosystem for the following reasons:

• Ethereum community has the consensus on the rollup-centric roadmap

• Optimism is one of the first rollup projects that are deployed and has a large market share

• The upcoming Optimism Bedrock upgrade and the OP stack release are very exciting!

• I sense a growing trend of the mind share of the OP ecosystem among developers (probably related to the OP stack!)

In summary, I think a good timing to invest in the OP token is when:

• the token has more utilities

• the sequencer model changes to decentralized and distribute revenue to token holders directly

• the token price drops to a point where the derived market cap is much lower comparing to the valuation derived from the revenue

So my advice is to look out for the governance proposals and follow closely with the community updates if you want to find some alphas in the market.