What is Optimism (OP)?

The Optimism token (OP) can be defined as an ERC-20 token that allows its holder to participate in the governance of the Optimism protocol and public goods funding. The Optimism coin (OP) is a token on the Optimism network, a Layer 2 platform compatible with the Ethereum network. It is important to point out that Optimism (OP) is a governance token and not the native token on the Optimism platform.

The OP token gives certain abilities to its holders. Namely, it allows users to participate in the Optimism Collective, the governance system of the Optimism protocol, and public good investment. At the moment, the specific governance features and resource allocation are experimental and hence, likely to develop over time.

The governance structure created by optimism consists of two groups, namely the token house and the citizens' house. Both these groups contribute in their own way to the optimism governance by aiding to determine how the revenue generated by the optimism platform is distributed to drive further growth.

The op token is designed for use in the token house that can be defined as part of the governance mechanism regarding the optimism layer two scaling solution for the Ethereum network. In the token house, OP token holders can vote on matters such as incentive distribution, protocol upgrades, and the handling of treasury funds.

OP tokens are a novel type of cryptocurrency since they were formally announced in 2020.

Overview of Optimism

According to the developers of Optimism, the blockchain network is built to be as simple as possible. The strong design philosophy stands on four main pillars:

Simplicity: Optimism features a minimum number of moving components required for a secure, scalable, and flexible layer two solution system. The simplicity feature reduces engineering overhead since optimism uses existing battle-tested Ethereum code and infrastructure where possible.
Pragmatism: The design of the Optimism ecosystem is driven by pragmatism. Many important Optimism features such as the EVM Equivalence were made possible by such a pragmatic approach to protocol development.
Sustainability: The Optimism design process is created around the idea of long-term sustainability and not taking shortcuts to scalability. The developers held that a scalable system has no meaning without an ecosystem that is capable of sustaining it.
Optimism: The last feature is about keeping the Ethereum vision moving forward. Even though Optimism may look like a standalone and independent blockchain, it is designed to be an extension of the Ethereum network.

Optimism consists of layer two networks, namely an alternative blockchain structure that runs on top of an existing blockchain (layer 1) for faster transactions and lower costs. Hence, Ethereum users no longer have to deal with congestion issues and high transaction fees.

From a technical point of view, Optimism can be defined as a layer two scaling solution on the Ethereum network. Its main perks are linked to the reduction of gas fees, faster transaction of data, and a smoother experience overall while maintaining security from the Ethereum ecosystem.

Optimism is a roll-up project that uses fraud proofs, namely a fraud-proof security mechanism.

How does Optimism work?

The Optimism ecosystem uses roll-up processing for transactions, reducing traffic congestion and transaction fees. The Optimism blockchain includes some notable characteristics such as security, scalability, and an efficient transaction experience.

The optimistic rollup expression refers to the separation of transactions from the main chain that is then wrapped into a single transaction, thereby creating proof.

Optimistic rollups assume that all transactions are valid so there are no heavy calculations on layer 2. However, the rollup moves the batch to layer 1 without the need to validate transactions, which leads to a severe improvement in scalability. Further, if anyone suspects a fraudulent transaction, they can challenge the validity of the batch within a week.

The Optimism construction is made of three main components:

Ethereum mainnet: The Ethereum mainnet is the layer 1 native security platform.
Optimistic rollup: The optimistic rollups assume the core of the optimism's scalability.
Optimistic virtual machine: The OVM is a virtual machine compatible with Ethereum that makes projects work like they are on layer 1 Ethereum. It refers to an environment where developers are allowed to run smart contracts using only a few lines of code. As a virtual machine with an improved scaling solution, it aids in processing a broad number of smart contracts at the same time.

What is the Optimism OP airdrop?

Optimism launched the OP token and announced an airdrop for those that have been included as early adopters and active users of projects in the Optimism ecosystem.

Airdrops are marketing methods usually employed by project management teams to raise awareness of a novel cryptocurrency in the crypto market. After the announced airdrop, the tokens are deposited into the wallets of token holders.

The total amount that is to be given to a wallet depends on several criteria. The optimism op airdrop included six sets of criteria. Nevertheless, airdrop events gained popularity among the crypto community.

The first airdrop accounted for only 3% of all OP token sales amounting to 429 billion in total.

Overview of the Optimism governance system

The Optimism governance system differs from those that are usually used by decentralized blockchain applications. Most decentralized blockchains include a governance structure with voting rights, yet the optimism structure is divergent.

The optimism governance structure, the Optimism Collective, is similar to the structure of the National Congress. The Optimism Collective is divided into two houses:

Token House: The house of the op token was established when airdrop 1 was launched to empower early adopters and active users.
Citizens house: The main objective of this house is to manage the process of distributing public good funding. Citizenship will be conferred by non-transferable NFTs.

OP economics and OP token price prediction

The OP token allocations have been divided into five distinct categories:

Ecosystem fund - 25%: The ecosystem fund can be defined as a proactive program meant to stimulate development in the ecosystem by funding projects and empowering the crypto community.
Retroactive public goods funding - 20%: The RetroPGF is the Collective's primary structure to reward public goods.
User airdrops - 19%: It refers to a series of future airdrops to reward active users.
Core contributors - 19%: This percentage goes to the people who have been working on bringing the optimism collective into existence.
Sugar xaddies - 17%: This percentage goes to investors.

The initial total supply amounts to 4,294,967,296 OP tokens. The total token supply will inflate at a rate of 2% per year.

As for the optimism coin price prediction at the time of writing, the value of Optimism is predicted to rise by 1.39 % and reach $ 0.918632 by 25 September 2022. According to CoinIndex, the Optimism coin (OP) reached its highest price on 4 August 2022 when it was trading at $ 2.21 and the lowest price was $ 0.889239 (cycle low). The highest OP price since the last cycle low was $ 0.979561 (cycle high). In terms of market cap, optimism is currently ranked #19 in the Layer 2 sector.

Is Optimism (OP) a good investment?

To examine whether Optimism is a good investment or give any investment advice, the price history mentioned above is the place to start. However, you should be aware that past performance is not a valid indicator of future results, taking into account that the OP token has been around and traded on an open market for a short period.

Cryptocurrency exchanges and crypto markets overall are known as extremely volatile, and thereby, it is difficult to accurately predict the price of a token in the future, especially in the light of long-term estimates. Answering the question of whether you should invest in Optimism or similar technologies is never an easy one.

Taking into account that the Ethereum ecosystem is using Optimism, there could be a significant future role that Optimism and OP tokens are going to play in the Ethereum development. With greater advancements in the Optimism ecosystem, crypto enthusiasts might continue to invest in Optimism (OP) for the years to come and drive significant price rallies for the project.