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Ethereum has been in dire need for scaling solutions throughout 2021 but some of them are slowly starting to become a reality and Optimism is one of them. During last year funds have slowly started pouring into Optimism eventually hitting an ATH of roughly $500M in bridged funds.
To understand Optimism, we must first understand how Optimistic Rollups work, because this Layer 2 solution is completely based on this model. In short, Optimism is an EVM compatible optimistic rollup chain that aims to provide fast transactions and simplicity to Ethereum users while being secured by Ethereum’s Layer 1 security.
To make transactions fast and cheap, optimistic rollups do not use any computational power from the ETH network. Instead they assume that every transaction is valid and only need computation when they need to run a fraud-proof in the event of a challenge.
A challenge occurs when validators or someone else notice that there’s a chance of fraud in a certain transaction. In this situation a fraud-proof will be submitted, and the challenger will need to lock up a certain amount of ETH virtually signalling that they guarantee that they are telling the truth. If the transaction turns out to be valid, the locked ETH will be slashed and some of it will be spent to cover the costs of submitting the fraud-proof to the main chain.
Speed and simplicity are achieved by “rolling up” many transactions and submitting them in batches to the Mainnet. To use as little as possible computing power Optimism simply proposes a new state to the L1 instead of submitting the data to be processed entirely on the Mainnet.
It is worth noting that this is the current state of things and that Optimistic Rollups are prone to frequent changes in the future. New and more efficient ways to submit rolled up data to Layer 1 are discovered almost every day and transaction fees have been slashed at least 3 times in 2021 thanks to these innovations.
It is expected that transaction cost and speed will drastically be improved with the introduction of sharding chains. In the current state Optimism improves the ETH experience by 10-100x but with sharding this number will continue increasing.
Scaling problems of Ethereum are more than evident. Transaction costs are unbearable for small investors and the network costs only get worse with the growing number of users.
Optimism is trying to constantly improve the concept of Optimistic Rollups and enable ETH users to have the same experience on Layer 2 with faster and cheaper transactions while keeping the same security that Layer 1 has.
Over time and with the introduction of sharing the benefits of Layer 2 Rollups will become more and more recognizable.
High transaction fees are drastically slowing up the adoption of cryptocurrency worldwide as many Layer 1 chains are struggling to keep them low. Ethereum is certainly the most popular of them all but users are rarely inclined to pay 20 or 30 dollars just to submit a data entry on the blockchain.
With Optimism and Optimistic Rollups there is hope that this problem will get resolved by redirecting ETH users to these Layer 2 solutions where they can enjoy fast and cheap transactions at a fraction of L1 costs. They may need more time to become more efficient but even at this stage they are a big improvement to the Ethereum user experience.
References:Ethereum. (n.d.). Ethereum Glossary. Ethereum.Org. Retrieved January 22, 2022, from Ethereum Glossary | ethereum.org
Ethereum Glossary. (n.d.). Ethereum.Org. Retrieved January 22, 2022, from Ethereum Glossary | ethereum.org
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