Optimism (OP) is a Layer2 protocol built on the Ethereum blockchain. It was designed to solve the challenges faced by the blockchain in its transactions. Optimism aims to enhance the network while maintaining its decentralized nature and security. This article will shed light on the functions and strengths of Optimism and the challenges it faces amid stiff competition.
History Of the Optimism Network
The Optimism Foundation, a non-profit organization, created Optimism in 2019. It was created to run on Ethereum’s network and process transactions efficiently by shifting the bulk of the data processing off-chain. Earlier, many decentralized applications (dApps) operated on Ethereum. This affected its operations, and transactions were not only expensive but took longer periods.
In 2021, the first version was launched, which reduced Ethereum’s slow processing time and high transaction fees. With Optimism, developers were able to operate the dApps directly on the Ethereum Layer 1 network without laying any pressure on it.
By enhancing the Rollup technology, multiple transactions were processed, and the final data was stored on Ethereum. This technique reduced costs and enhanced venture processing rates by a large margin.
After its launch, Optimism was sought by many platforms, projects, and investors. By late 2022, Optimism was adopted by two major dApps, Uniswap and Synthetix, to increase transaction speed in their networks. By adding new features to the platform, Optimism has increased Ethereum’s security.
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The Optimism network is designed to improve the efficiency and user experience of Ethereum-based projects. Here are some of the functions of the network:
Scalability: By using Rollup technology, Ethereum’s ability to process transactions has significantly improved. This has further increased its users and the number of dApps developers in the network.
Data Storage Security: After processing transactions, Optimism saves the final details on Ethereum. This implies that all transactions are safe on the blockchain without harming the system.
Smart Contracts: Optimism is built to seamlessly integrate with Ethereum’s smart contracts. This is because the developers can integrate any Ethereum dApps by slightly changing the code. This will maintain Ethereum’s developer environment and not compromise on its performance.
Strength of Optimism
By engaging the Layer 2 protocol on its blockchain, Ethereum has enhanced the operations for users and developers. Here are some strengths of the network that position it as a valuable tool in the crypto landscape.
Increased Transactions: The network enabled Ethereum to process more transactions per second (TPS). This was possible by grouping together the transactions through rollups. This reduced the burden on the main Ethereum chain and improved transaction speed at a low cost.
Affordable Price: By using Optimism on Ethereum, high transaction (gas) fees can be reduced to affordable prices, increasing traction among users. This enabled everyday users to access the blockchain easily.
Security: The network provides a high level of security. It saves all transaction details on Ethereum’s main chain. This will prevent potential phishing attacks.
Easier for Developers: Optimism allows Ethereum developers to move or change the dApps easily by slightly changing its code. This feature enables developers to adapt their projects to the network without compromise.
Decentralized Control: It gives users authority over the future developments of the platform and its governance system. Users can provide their opinions on the governance policies or updates and keep them aligned with the community.
Environment-friendly: Optimism is more eco-friendly in its transactions, especially in its off-chain transfers. This approach has positioned it as a sustainable industry within the cryptocurrency market.
Handling Stiff Competition
Optimism faces stiff competition from various networks, some of which provide similar features. Arbitrum (ARB) is built on Ethereum and focuses on smart contract security and scalability, while Solana (SOL) is mostly used for NFTs and DeFi. As a high-performance contender, it is used to process quick transactions at low prices. Polygon (MATIC) is a layer 2 scaling solution like Optimism, operated on Ethereum to enhance transaction speed and reduce costs. Although Polygon and Optimism enhance its scalability, they have their own differences. They are:
Transactions: While Optimism transactions throughput is limited, Polygon processes thousands per second.
Transaction fees: Polygon is connected to Ethereum via a separate network and is designed to be cheaper than the mainnet. However, Optimism is directly connected to the blockchain. So, even though it is less costly than Ethereum, prices can vary if more users operate it simultaneously.
Technology: Optimism uses advanced Rollups technology and Polygon uses Plasma chains and zk-Rollups.
Compatibility: Polygon exchanges information with other blockchains. However, Optimism is allowed to be compatible with Ethereum’s smart contracts.
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Apart from facing stiff competition from Polygon, the network also faces other challenges. They are:
Complexity in the protocol: Many users are not aware of Optimism’s Layer 2 network and mostly focus on Ethereum’s Layer 1 network. If awareness is created, this challenge can be reduced to a great extent.
Dependent on Ethereum: Since Optimism is built on Ethereum, it is on par with the blockchain. However, by being associated with Ethereum, future activities in regulatory or technical issues could impact the network.
Technical issues: Rollups were designed to aid transactions. However, they required advanced technologies for implementation. This implied that Optimism must consistently improve its technologies to enhance its scalability. This will reduce the wastage of resources.
User Experience: Compared to Ethereum’s mainnet, Optimism is quick and affordable, but shifting users to its network takes time. If the situation continues, it could reduce the leverage of the system.
Conclusion
Overall, the Optimism network enhances Ethereum by providing quick and affordable transactions. Using rollups and Layer 2 technology, Optimism enables Ethereum to handle large transactions without compromising on security. Further, being of a decentralized nature, it can enhance projects focused on gaming, DeFi, and NFTs.
Although it faces challenges among its peers and user adoption, its scalability, security, and cost efficiency make it an ideal choice. As Ethereum grows, Optimism’s role in addressing its limitations becomes increasingly significant. Further, if Optimism enhances its operations, it could be a key player in the future of dApps and blockchain technology.
