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If the data was indeed fraudulent, the verifier runs the computation on-chain and the smart contract will verify the data. Since computation is resource-intensive, moving it off Ethereum allows it to scale by orders of magnitude.īut what if sequencers are malicious and send fraudulent data? When the sequencer publishes transaction data, there is a window of time where anyone can run their own computation to determine if the transaction data is fraudulent. Sequencers on Optimism are responsible for executing computation off-chain and publishing compressed transaction data onto a smart contract on Ethereum at regular checkpoints. If that is not you, you could skip to the conclusion. In this section we dive into the technical details for interested readers. We have covered the main gist of how Optimism works and its potential impact. BSC has shown us the potential for Ethereum’s growth once we have achieved cheap and fast transactions: in 6 weeks, the number of unique addresses on BSC has grown from approximately 1 million to 60 million.Īlthough the growth of BSC should not be extrapolated to Ethereum, it gives us a rough idea of what we might see once Optimism launches.
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The missing piece to onboard millions of users is scaling. A thriving ecosystem of financial applications.Asset managers and yield aggregators like Yearn.Finance.Exchanges like Uniswap that allow peer to peer trading and users to provide liquidity, earning yield on their assets.Money markets that yield much higher rates than banks.User-friendly wallets like Argent and Dharma.We believe that with Optimism, usage of Ethereum will increase accordingly the volume of transactions will offset the reduction in fees. What does this mean for ETH the asset?Īt first glance, you may question, “since there is a large reduction in transaction fees, would this mean that the requirement for ETH drops, reducing demand for ETH?” Since transaction data still stays on the Ethereum network, this scaling solution does not sacrifice Ethereum’s decentralisation or security for scalability. Tests have shown a 143x decrease in transaction fees on Synthetix Exchange and up to a 100x decrease on Uniswap. Instead of running all computation and data on the Ethereum network, Optimism puts all transaction data on-chain and runs computation off-chain, increasing Ethereum’s transactions per second and decreasing transaction fees. Optimism is a Layer 2 scaling solution for Ethereum that can support all of Ethereum’s Dapps. So how does Ethereum solve this? Through Optimistic Rollups. This goes against the ethos of Ethereum, which wants to build a credibly neutral platform capable of supporting a global ecosystem of finance and other applications. Binance was able to thwart the efforts of malicious actors but has shown that they have the power to decide which transactions get approved. In response, Binance announced that it will freeze these funds if it makes it onto their exchange, the only way to withdraw from BSC at the moment. There was an exploit on a protocol in BSC, stealing $31 million of users’ funds. However, this solution comes with its own issues.
OPTIMISM CRYPTO CODE
The Binance Smart Chain (BSC) took this approach by forking Ethereum’s code and relying on a set of 21 validators to support the network, successfully creating a thriving ecosystem. This reduces the number of individuals that can run a node as not everyone can afford a high spec computer, reducing Ethereum’s decentralisation and censorship-resistance.
OPTIMISM CRYPTO UPGRADE
We could increase the amount of data Ethereum processes, but nodes would have to upgrade accordingly. Each node has to store and process data that goes through the Ethereum network, hence there is a limited amount of data that can be processed at any one time. Why are there issues in the Ethereum network?Įthereum is a decentralised computer powered by nodes all over the world.
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We would like to address these issues as Optimism launches this month. We have seen how alternate high throughput versions of Ethereum like Binance Smart Chain have grown (see charts below), which makes this scaling solution an undeniably positive catalyst for ETH and the applications built on the network.Įthereum’s scaling issues have been a hot topic for debate over the past few months, and has become an attack vector for other blockchains. By helping Ethereum run computations off-chain and only publishing transaction data on-chain, testing has shown that Optimism can reduce Ethereum’s current fees by 100x or more. A highly anticipated scaling solution for Ethereum network, called Optimism, is slated to launch this month.