This Layer 2 Token can give Incredible Gains in Upcoming Time
Innovation | Technology | proposal | Negative Points | Token
Everyone is excited to see how the Optimism and Arbitrum projects develop. Today, in our article we will discuss about the fundamentals and also how much potential the Optimism Project has in detail.
Optimism has invented a unique technology called optimistic rollup tech. Layer 2 chain has been started in Optimism while waiting for this technology. After Arbitrum, Optimism is the second largest Layer 2 project.
The project is very good and interesting in comparison to other projects, people like Optimsm a lot and are using their chain.
OP
The token of Optimism is OP and it is the governance token of the project. OP Token governs the DAO of the project. Whatever decisions are made in Optimisum’s DAO, it’s decided by their major token holders. There is a voting system in place to choose what changes to make to the project, what Grants have to be given, and which projects must be entered.
Optimism launched its own Layer 2 by developing a new technology optimistic rollup, although these tech kits were kept open source. SKD of this tech has been made and launched so that anyone who wants to make his own layer 2 chain can make it and launch it, it is called OP Stack.
OP Token Status
Currently, the price of OP tokens is running around $1.54. Even at such a low price, the market cap of OP is around $1 billion.
Whether the market cap is low or whether the project is making a profit or not, is important. In the last 30 days, they have generated a revenue of $1.3 million, which is 80% more than the previous month. There has also been a growth of 64% in the fees which is around $1.45 million. According to the demand, the revenue is very well.
Due to the high demand of Layer 2 in the market, Layer 2 projects are earning more revenue than Layer 1. The revenue of both Arbitrum and Optimism Layer 2 projects is more than the big Layer 1 projects like Solana, and BNB. Ethereum, the parent of these layer 1 or 2 layers, earns the most money.
Arbitrum and Optimum Layer 2 are generating an annual revenue of $15 million comfortably due to their large size.
Business Model
Layer 2’s business concept is quite interesting. When I initially understood their business model, I realized that they’d get Layer 1 out of the way.
People are doing more transactions in the layer 2 network because gas fees are being charged here less.
- In the past, when any coin had to be swapped on DeFi, people generally used the Ethereum network and a gas price of $ 5 or $ 6 was usually charged. The issue of high gas fees arose during the NFT hype.
- Now, the user has to pay just $ 0.2 or $ 0.4 in gas fees while using Optimism. Since layer 2 is 10 times cheaper than layer 1, people are using layer 2 more than layer 1.
How Cheap
I know a question must have come to your mind, ‘How are they allowing transactions to be done in $0.4 when it is very high in the layer?’ In the Layer 2 model, as soon as a sale of 1000 transactions is made, it is sent to Layer 1 for settlement. Security is the most important factor in any network, therefore settling in the security of a Layer 1 will increase the value of a Layer 2 network.
Layer 1 shares the security and charges fees in return for this security. These fees are taken from the transaction fee. Transaction fees are paid in Ethereum after making lots of 1000 transactions and settling them in Layer 1. This fee is paid by the sequencer.
The sequencer’s job is to make a transaction and pay the fee. Optimism has its own centralized sequencer and keeps all of the revenue generated by it. In this case, Optimism pays $1 to Ethereum and costs us $1.2 in gas fees. This payment runs according to the premium.
Their income per transaction is between 15% and 20%. The premium they charge us is the revenue of the Layer 2 project.
Supply
The total supply of op tokens is 4.2 Billion and this entire supply will be unloaded in the market by June 2027. Their vesting schedule will run till 2027.
Every year, 42% of their supply will be unloaded on the market, but after four years, it will be reduced to 18%. After 2027, 2% of the remaining supply will be unloaded in the market.
In the first four years, we will experience inflation owing to selling pressure on OP tokens.
OP Stack
Using the Op Stack kit, anybody can create a custom blockchain. Binance released opBNB using Op Stack, which supports several custom JSON options. Complete the opBNB transaction on Binance. Settle the transaction of opBNB on Binance. In customization, you can create the desired architecture with multiple options like consensus layer, data availability, and data store. This is the biggest feature of Op Stack.
This technology has also been used by BASE. Optimism has collaborated with several projects, including Worldcoin, mental, and opBNB.
The DeFi ecosystem is performing well on Optimism. In this, Velodrome DEX has the highest TVL which is 200 million. Velodrome returns 100% of the fee as in incentive for locking the tokens in the DEX.
Lots of people are doing activities in Velodrome I think this DEX can become very big in the future. I do not know if you already have known or heard anywhere that the main project of Optimism is Velodrome.
Achievement
Recently there has been a bedrock upgrade of optimism. This upgrade has made the transaction fee more affordable and the performance has gone up a lot.
Token Growth
Op Stack will contribute to the growth of Op Token. Op Stack released a protocol called Law of Chains sometime ago. The idea for the Law of Chains has not yet been adopted; nonetheless, discussion is going on. It was decided internally that whichever chain had been launched making use of Op Stack might join the superchain ecosystem if they were interested. This superchain ecosystem is creating optimism.
There are 3 advantages in the superchain ecosystem.
- Op Rollup tag will be used.
- Security of Ethereum will be available.
- Share liquidity will be available.
Cross-chain transactions will be easier with the superchain ecosystem integrating all of the chains within.
According to the Law of Chains, everyone must first participate in op governance. A minimum amount of op tokens must be kept in order to participate in governance.
Example
If BASE becomes a part of the superchain ecosystem, OP will govern over it. In this op may be the governance token of BASE.
Many layer 2 projects will not create their own governance token and will instead rely on the OP token for governance. All of this will occur if the Law of Chains plan is approved.
Negative Points
The utility of Op Token is limited due to its use only in governance. The proposal of Law of Chains is being brought only to increase the utility. If this proposal is not passed, it will be a bit negative for the future.
The tool kit that Optimism has made, similar to Polygon and Arbitrum have also made it.
It is very important to increase the demand for governance, even then the demand for tokens like OP may increase in the future.
If the proposal of Law of Chains is passed, then believe that it can become a Amazing Gem.
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Disclaimer
I am not a Financial advisor. I am not affiliated with any websites or coins mentioned in this article and also this is not financial and Investment advice. This article is meant only for educational purposes. I am just sharing my thoughts and analysis based on my many years of experience.
