In this photo illustration an Ethereum logo seen displayed on a smartphone screen in Athens, Greece … [+]
Optimism, an Ethereum scaling solution that raised a $150 million Series B in 2022, co-led by Andreessen Horowitz and Paradigm at a $1.65 billion valuation, is working toward a future where a single tech stack can power multiple blockchains. Optimism’s ‘Superchain’ vision has attracted a community of developers and devout contributors, known as the Optimism Collective, who are eagerly awaiting the Bedrock upgrade, which will enhance usability on Optimism and its upcoming network of chains.
Imagine a world where sending emails was limited to specific email providers. Gmail users could only communicate with other Gmail users, while those with Yahoo or Hotmail accounts were restricted to their respective domains. Sending emails across domains was risky and didn’t always work. This is analogous to the current state of affairs for crypto, where communicating between blockchains is inefficient. Coinbase and Worldcoin are leading the charge in developing decentralized alternatives on Optimism’s infrastructure, paving the way for other companies to address this ongoing fragmentation problem.
The Lowdown On Rollups And Appchains
Layer-2 blockchains, or rollups, uptake the function of transaction processing from its underlying Layer-1 to make it faster and cheaper. Ethereum has several live rollups that have become competitive with some L1 blockchains in value and users, such as Arbitrum and Optimism. Unlike an L1, an L2 inherits the security properties of the underlying L1; with an established chain like Ethereum, there is ample economic security that its rollups can benefit from. Depending on the rollup’s configuration, it can also tap into Ethereum’s battle-tested set of infrastructure and tooling.
Daily active users for top L1 and L2 chains on June 5, 2023.
Rollups are en route to cheaper transactions, but most had to be built from scratch, which is no easy feat. Each rollup team had to also bootstrap a validator, developer, and community-base. Despite all the growth work, there’s no guarantee that once live, a user base will follow.
In the world of blockchain technology, an app team is often forced to decide between a building on a rollup or becoming an appchain. An appchain is a blockchain dedicated to a single app – for example, the exchange dYdX
DYDX
Optimism’s Bedrock Upgrade
Optimism, developed by a group of Ethereum developers, launched in 2021. The team has conducted two airdrops to date, the latest distributed $30 million worth of OP to 300,000 unique users. On May 31, 9% of total OP supply worth more than $580 million was unlocked. This event led to a 10% price decline three days before the event.
Like the other rollups, Optimism has experienced quite a bit of volatility in usage and price. Part of this phenomenon can be attributed, at least in part, to speculative user actions. To capture sustainable revenue via loyal users, the tech in question has to actually address some need and be accessible.
Optimism’s Bedrock Upgrade will take place on June 6 and will be a crucial step towards realizing the Superchain vision through:
- An improved data compression algorithm that will reduce protocol fees by 47%.
- A two-step withdrawal process as a safety mechanism for network participants. Invalid withdrawals will hopefully be caught, a vulnerability that has been exploited in various bridge hacks.
- Improved network node performance will reduce deposit confirmation times on Optimism down to 3 minutes from 10.
Coinbase And Worldcoin Paving The Way
The Superchain network of chains will be built with the OP Stack, the same software stack that powers Optimism. With a shared infrastructure base, it will become easy to bridge over assets between participating chains and finally allow for user experiences where, for example, the user does not have to manually pick between networks to achieve the cheapest, safest transaction. Eventually, the Superchain will merge Optimism into this network of chains.
It appears that OP Stack has started to successfully attract established brands and companies to consider a blockchain, starting with Fortune 500 company Coinbase, which will be the first company to launch an OP Stack L2, Base. The hope is to incubate the L2 within Coinbase as it attracts builders. Coinbase will not be issuing a Base token, which is important because that signals low speculation and that the unwavering focus will be on achieving interconnected blockchains on Ethereum.
Following in Coinbase’s footsteps, Worldcoin, Sam Altman’s AI-resistant identity protocol which recently closed $115 million in a Series C, recently revealed plans to develop an OP Stack chain, migrating from its previous homebase, Polygon
MATIC
Potential Challenges For OP Stack
Though this harmonious future sounds like the master solution to fragmentation within crypto, there’s potential for it to go south. There have been multiple attempts at interconnected ecosystems, like Cosmos, which haven’t held a candle to the volume that Ethereum chains see. This also means that the Superchain flourishes only if Ethereum does – which is a safe enough bet considering the economic backing that Ethereum offers.
Since May 1, OP has tumbled over 40%. Following a successful upgrade, Optimism may regain its appeal to users, potentially recovering transaction volume from earlier in the year. It’s important to note that the Superchain vision extends beyond Optimism itself, thus is not a competitive endeavor. As more builders choose to develop appchains on the OP Stack, we move closer to solving the blockchain communication problem that is holding back proper adoption.
