How to unlock Ethereum's potential: the complete guide to Optimism

Ethereum is a dynamic platform that caters to many transactions and applications, from Decentralized Finance (DeFi) to gaming, and even Non-Fungible Tokens (NFTs). But, a prominent challenge it faces is scalability. As it stands, Ethereum can handle about 30 transactions every second.

The reason for this limitation is rooted in Ethereum's foundational values, because it prioritizes decentralization and security. While these principles bolster the network's trustworthiness and resilience, they also impose constraints on its transactional speed or throughput. When the network demand is higher, so are the gas fees for transactions, which can be astronomical — especially for new blockchain adopters.

Layer 2 (L2) can offer some tangible solutions to help enhance blockchain scalability and speed by processing transactions off the main chain (layer 1) and then periodically consolidating them. This reduces congestion and fees, allowing faster transactions without sacrificing security or decentralization. Their adoption is vital for blockchains to accommodate more users and applications.

What is Optimism (OP)?

Ethereum L2 represents a suite of solutions crafted to augment Ethereum's capacity. These solutions process transactions away from the primary Ethereum blockchain, known as Layer 1 or L1.

While these transactions are handled off the main blockchain, they still enjoy the robust security and decentralization features that Ethereum inherently offers. Think of L2 as an auxiliary system meticulously designed to expand Ethereum's transactional capabilities.

Layer 2's primary mission is scalability. It adeptly manages multiple transactions, ensuring Ethereum's ecosystem is not overwhelmed. On the flip side, Ethereum's L1 has its plate full of pivotal responsibilities; it's the bastion of the system's security, data accessibility, and, crucially, decentralization.

This dynamic partnership between L1 and L2 makes sure that while the system scales up its transactional might, it doesn't compromise on its foundational security principles.

Optimism as a layer 2

Optimism serves as a L2 solution constructed atop the foundational Ethereum blockchain. Its inception addresses two pressing concerns for Ethereum users: exorbitant transaction fees and occasional sluggishness in transaction processing times.

How does Optimism achieve this?

Instead of processing every transaction directly on the Ethereum mainnet (L1), Optimism acts as an intermediary layer where most of the transactional activity occurs. Optimism can expedite these processes by shifting much of the transactional workload off the main chain, offering users a quicker transactional experience.

However, it's essential to understand that while the bulk of the transaction activity happens on Optimism, it doesn't operate in isolation. To ensure security and integrity, the data from these transactions is relayed back to the Ethereum mainnet.

The data undergoes validation, benefiting from Ethereum's robust security protocols. This dual-layer mechanism helps to make sure that while users enjoy swifter and more cost-effective transactions on Optimism, they can remain confident in the integrity and security of their operations, thanks to the validation on the Ethereum mainnet.

How does Optimism work?

In the traditional Ethereum network, every transaction is processed on the main chain, preserving security but sometimes leading to congestion and high fees. Optimistic Rollups is a technology to shift most of the transaction processing away from the main Ethereum chain.

When a user initiates a transaction on Optimism, it takes place on this L2 solution instead of directly on the Ethereum mainnet. This L2 is a separate blockchain running alongside Ethereum.Here's what the flow looks like:

• User intent:

  A user initiates a transaction using Optimism on an app or platform.

• Transaction processing:

  Instead of directly broadcasting the transaction to the Ethereum mainnet, it's first processed on the Optimistic L2. This allows for faster and cheaper transactions because L2 is designed for high throughput.

• Submission to Ethereum:

  Once processed, these transactions are then sent to the Ethereum mainnet in batches, instead of individually, reducing the overall load on the mainnet.

Ethereum as a data availability layer

While Optimism deals with the bulk of transaction processing, Ethereum’s mainnet still plays a vital role. It acts as the final source of truth and as a data availability layer.

What does this mean?

Every transaction processed on Optimism is eventually recorded on the Ethereum mainnet. This is done by sending a cryptographic proof (a sort of summary) of all the transactions that occurred on Optimism. Even though the mainnet doesn’t need to process each transaction individually, it still stores this proof, guaranteeing the data is available and verifiable by anyone.

This system makes sure that if Optimism faced an issue (like downtime), users could still retrieve and verify their transactions using the Ethereum mainnet. In short, it offers a robust security guarantee.

Introduction to Optimized batch compression

One of the standout features of Optimism is its ability to handle a large volume of transactions efficiently. This is achieved through a process called optimized batch compression.

Imagine you had to move a library's worth of books from one building to another. Instead of moving each book individually, you'd pack them into boxes, making the process faster and more efficient. Similarly, instead of submitting each transaction from Optimism to Ethereum one by one, they're bundled together in 'batches'.

These batches are then 'compressed' using cryptographic techniques. This means taking a large set of transaction data and converting it into a much smaller yet verifiable format.By doing this, Optimism can significantly reduce the amount of data that needs to be stored on the Ethereum mainnet, saving on fees and maintaining the efficient use of Ethereum's resources.

What's Optimism's bedrock upgrade?

Bedrock is a pivotal upgrade to the Optimism protocol. It brings several performance improvements, primarily focusing on reduced transaction fees, shorter deposit times, improved proof modularity, enhanced node performance, and a more Ethereum-equivalent architecture.

Here's a breakdown of these features:

Lower fees

Bedrock has implemented innovative methods to reduce transaction costs:

• Optimized data compression:

  Bedrock adopts a new data compression strategy, targeting minimal data costs. Initial benchmarks suggest this change can significantly reduce fees.

• Elimination of L1 execution gas:

  By eliminating all L1 execution gas, Bedrock further drops L1 data fees to its bare minimum, offering a 10% fee reduction over its predecessor.

Shorter deposit times

Depositing funds into the rollup system can be a time-consuming process. Earlier versions had a wait time of up to 10 minutes for deposit confirmation. However, Bedrock will help improve the speed and efficiency of deposits.

• Handles L1 re-organization:

  By introducing support for L1 reorganizations in the node software, Bedrock cuts down the confirmation time for deposits, targeting around 3 minutes.

Improved proof modularity

A key aspect of rollups is the proof system that guarantees correct transaction execution. Bedrock enhances this by:

• Separating proof system from OP stack:

  This abstraction lets a rollup employ fault or validity proofs, like zk-SNARKs. Systems like Cannon can use this modularity to prove any discrepancies.

Improved node performance

Nodes play a crucial role in maintaining and validating the rollup. Bedrock offers significant improvements in node performance:

• Multiple transactions in one block:

  Unlike the older one-transaction-per-block model, Bedrock allows the bundling of several transactions in one roll-up block. This approach amortizes the cost of Merkle tree updates over multiple transactions, reducing state growth by an estimated 15GB/year.

• Technical debt removal:

  Technical debt can hinder performance and scalability. Bedrock addresses this by removing the requirement for a separate data transport layer node to index L1 and ensures efficient querying for transaction data from L1.

Improved Ethereum equivalence

For seamless interaction and integration, Optimism must be as analogous to Ethereum as possible. Bedrock makes strides towards this through the following:

• Removal of protocol deviations:

  Bedrock removes various deviations from Ethereum that existed in previous versions, such as the one-transaction-per-block model, custom opcodes for L1 block information, separate L1/L2 fee fields in the JSON-RPC API, and a unique ERC20 representation for ETH balances.

• Incorporation of Ethereum features:

  To stay aligned with Ethereum's ecosystem, Bedrock supports features like EIP-1559 and chain re-orgs in Ethereum's L1.

Bedrock represents a significant leap for the Optimism protocol. By focusing on user experience (reduced fees and shorter deposit times), technical robustness (proof modularity and enhanced node performance), and Ethereum compatibility, Bedrock provides a more efficient and seamless L2 solution for Ethereum applications.

What's Optimism's Superchain?

The future of the decentralized web is advancing rapidly, and at its forefront is the Optimism Superchain, an innovative development poised to transform blockchain scalability and interoperability.Here's why the Superchain concept is transformative:

• The essence of Superchain:

  The Superchain is a groundbreaking approach to horizontal scalability. It's a network of multiple chains (L2 chains), but these are not just any chains — they're chains that share unified security, a cohesive communication layer, and a holistic open-source development stack. Think of it as a cooperative web of chains, each bringing unique capabilities yet functioning cohesively as one unit.

• Merging Optimism Mainnet with other chains:

  The real magic happens when discussing how Superchain joins Optimism mainnet with other chains. Instead of each chain operating in isolation, the Superchain allows them to share a central truth source: the L1 chain. This eliminates the need for every new chain deployment to establish its own set of validators, making the entire system more efficient and streamlined.

• Significance for the decentralized web:

  The decentralized web is all about providing robustness, security, and scalability. The Superchain, with its ability to treat multiple chains as interchangeable computational resources, paves the way for developers to craft cross-chain applications. This reduces systemic risks and significantly cuts overheads, allowing for a more efficient and cohesive decentralized ecosystem.

The revenue model of Superchain rewards both application and protocol developers. The OP Stack, the backbone on which Superchain is built, sees that revenue is reinvested into public goods, making the ecosystem sustainable, robust, and forward-looking.

The Superchain is a game-changer, ushering in a new era where multiple chains can coexist, interoperate, and benefit from shared security and resources. It's a testament to the spirit of collaboration, innovation, and the boundless possibilities of the decentralized web.

How does Optimism compare with other Ethereum layer 2 solutions?

When diving into Ethereum's L2 scaling solutions, Polygon has also been making headlines. Here's a breakdown to grasp their differences more clearly:

Polygon

Originally christened as Matic Network, Polygon has etched its identity with a versatile multi-chain approach. This means it masterfully interweaves the characteristics of both L1 and L2 solutions.

At its heart, Polygon operates through a Proof of Stake blockchain network, which serves a dual purpose: it accelerates Ethereum transactions and simultaneously slashes the transaction costs. Delving into its architectural blueprint, Polygon showcases a twin-layer setup named Heimdall and Bor.This dynamic duo streamlines the validation of transactions and enables the swift production of blocks.

Unlike its counterparts, Polygon has a direct line to Ethereum through smart contracts, allowing it to function independently.Polygon offers an intricate yet efficient framework, setting itself apart with its unique integration of features to elevate Ethereum's performance.

Optimism

Alternatively dubbed "Optimistic Ethereum", Optimism is best known for harnessing the Optimistic Rollups technology. Its main aim is to amplify Ethereum's scalability. Unlike Polygon, which directly interacts with Ethereum and stands robustly on its own, Optimism takes a different route.

It groups multiple transactions together and then confirms their validity on the Ethereum network. This approach does make individual transactions on Optimism cheaper. However, it's crucial to remember that Ethereum still shoulders the broader validation costs.

An intriguing aspect of Optimism is its inherent trust in transactions, deeming them valid by default. But, if any transaction raises eyebrows, there's a 7-day challenge window to make sure everything's as it should be.

Unique features of Optimism

• Optimistic Rollups:

  The major technology behind Optimism is the Optimistic Rollup. Rollups are a way of increasing the throughput of the Ethereum network without requiring each node to process every transaction. Instead, most transaction processing is done off-chain, and only the final state or a summary of transactions is committed to the main Ethereum chain.

• Fraud proofs:

  Optimism uses a system where transactions are presumed valid unless proven otherwise. If someone thinks a transaction is fraudulent, they can challenge it. The transaction is rolled back if the challenge is valid, and the malicious actor is penalized. The term "optimistic" comes from this, as the system optimistically assumes transactions are valid.

• Compatibility with Ethereum:

  Optimism is designed to be highly compatible with Ethereum. This means that developers can easily port their existing Ethereum smart contracts to Optimism with minimal changes.

• Sequencer:

  Optimism has introduced the sequencer concept to optimize the user experience. The sequencer is responsible for ordering transactions and provides a consistent transaction history. This allows for faster confirmation times than waiting for Ethereum mainnet confirmation.

• Decentralization with security:

  Despite being a L2 solution, Optimism leans heavily on the security of the Ethereum mainnet. While it processes transactions off-chain for speed and efficiency, it still uses Ethereum for the finality and security of those transactions.

Compared to Polygon, Optimism's primary focus is enhancing Ethereum's scalability using the Optimistic Rollup technology. While both solutions offer increased throughput and reduced transaction costs, they achieve this using different architectures and technologies. Optimism’s emphasis on compatibility and its optimistic approach to transaction validation make it a unique addition to the Ethereum scaling ecosystem.

The final word

The development of L2 solutions, like Optimism, seek to enhance Ethereum's efficiency without diluting its inherent security and decentralization strengths. Optimism operates as an intermediary, processing transactions swiftly and cost-effectively.

However, it doesn't function in isolation. After processing, transaction data is relayed and validated on the primary Ethereum blockchain (L1). As a result, users of Optimism gain both speed and the assurance of Ethereum's robust security, enjoying the best of both worlds in Ethereum's layered approach.

Superchain's innovative approach to horizontal scalability encapsulated within Optimism can potentially revolutionize the decentralized web. Fostering a network of interconnected chains with unified security and communication heralds a future where chains don't function in silos.

The capacity for chains to share a core truth, eliminating redundant validations, suggests a streamlined and efficient future for blockchain networks. This could propel Superchain to be a cornerstone in the evolving decentralized digital landscape.