Is Investing in Optimism (OP) Worth It? 

Optimism originated from the Plasma Group, a collective of researchers dedicated to addressing one of Ethereum’s most pressing issues: scalability.

Drawing inspiration from Ethereum co-founder Vitalik Buterin and Joseph Poon, the visionary behind Bitcoin’s Lightning Network, the Plasma Group embarked on an ambitious quest to develop Plasma chains. This innovative approach aimed to significantly enhance transaction speeds on the Ethereum network.

However, the team soon realized that while Plasma offered immense potential, it was not easily implemented. Faced with this challenge, they pivoted to a new approach: optimistic rollups.

Optimism was poised to lead the way in developing optimistic rollup protocols, with the crypto community eagerly awaiting its launch. However, an unexpected delay in its release allowed a competitor, Arbitrum, to capture attention and debut first. In May 2022, Optimism carried out its inaugural airdrop, distributing OP tokens to early adopters and contributors. For much of its existence, Optimism ranked just behind Arbitrum in total value locked (TVL). However, it has since been overtaken by other Layer 2 solutions, including Base, Blast, and Scroll.

Optimism’s Key Fundamental Figures

Daily Active Users (DAU):  Optimism currently records about 90,000 daily active users, up from around 60,000 a year ago, marking a substantial 50% increase over that period. Despite this growth, the platform’s DAU numbers remain relatively modest compared to its competitors. For example, Polygon has 1.4 million DAU, while Arbitrum boasts 476,000 DAU.

Fees and Revenues: Optimism primarily generates revenue through transaction fees on the OP Mainnet. These fees are collected by the network’s sequencers, who handle the ordering and batching of transactions before submitting them to the Ethereum mainnet. Optimism’s transaction fees are notably lower than those on Ethereum’s mainnet, making them both reasonable and sustainable.

Market Cap: Currently, OP has a market capitalization of $1.55 billion, reflecting a 70% increase from the previous year. However, OP still trails behind competitors like MATIC, with a market cap of $4.15 billion, and ARB, valued at $1.89 billion.

An Analysis of Optimism’s Market

Problem it Solves: Optimism tackles Ethereum’s scalability challenges by functioning as a layer-2 solution. Through roll-up technology, it executes transactions off-chain, alleviating congestion on the Ethereum network and reducing transaction fees for users, all while maintaining the robust security features of Ethereum.

Value Creation: By using Optimism, users enjoy a similar experience to that on the Ethereum network, but with the added benefits of faster transaction speeds and lower costs.

Optimism Competitive Advantage Over Other Competitors

Technology/Blockchain Platform: Optimism is a layer-2 solution built on the Ethereum network, utilizing the industry-standard ERC-20 token format for its OP token.

Lead Time Advantage: Optimism lacks a lead time advantage in optimistic rollups since Arbitrum was the first to launch.

Contacts and Networks: Optimism appears to have a strong network in place. In 2023, they strengthened their team by bringing on Ryan Watts, the seasoned former president of Polygon Labs, as their chief growth lead.
How Well Users Have Come to Adopt Optimism

Technical Simplicity: Optimism appeals to users by offering much lower transaction fees than Ethereum, enabling them to enjoy the “Ethereum experience” more affordably while leveraging Ethereum’s security.

Investor Support: The project is supported by prominent investors like Andreessen Horowitz and Paradigm, who have collectively raised over $178 million in funding for Optimism.

Public Awareness: Optimism has generated considerable attention on social media, with an active presence and more than 689,000 Twitter followers, though it trails competitors like Arbitrum. Additionally, it has a strong community with 164,000 members on Discord.

Conclusion

Optimism has shown a strong growth trend, continuing to attract users and developers with its effective scaling solution for Ethereum. Over the past year, the platform has seen a 50% rise in daily active users and an 80% increase in market capitalization, reflecting greater user engagement and market confidence. Moreover, the blockchain has expanded its role beyond being a mere layer-2 solution, offering infrastructure for other projects like Base, underscoring its commitment to remaining a leading player in Ethereum scaling.

Nonetheless, Optimism faces significant challenges. The layer-2 sector is fiercely competitive, with rivals like Arbitrum and newer players such as Base and Scroll gaining substantial market share, surpassing Optimism in total value locked (TVL) and user engagement. To stay relevant, Optimism must navigate this competitive landscape and close the gap with these competitors.