MetalSwap is releasing its smart contracts on the Optimism blockchain, reaching an incredible milestone for this dApp. In this article, we will make an introduction to the Optimism Layer2 blockchain, unveiling what is the problem it tends to solve, what is the technology behind and what is the state of the ecosystem.
In this article we will see:
The scalability problem of Ethereum
Ethereum is the blockchain that currently has the most developed ecosystem in the world of DeFi and MetalSwap was also born within this blockchain. The TVL (Total Value Locked) locked within this blockchain is over $27 billion, and more than 350,000 addresses interact daily with the smart contracts written on it.
However, the main problem affecting Ethereum is scalability. Given its incredible success, sending a transaction within a block can become very expensive because the mechanism regulating transaction costs is similar to any other market: the higher the demand, the higher the price. Especially when the blockchain is congested during moments of hype, peak costs can reach $200-300 to complete a single transaction.
ETH Gas price
To solve this problem, two main approaches are being pursued. The first is being directly pursued by the Ethereum team, who are seeking to upgrade the blockchain with improvements that increase scalability. The most significant update in this direction will be the famous "sharding" which is expected to be completed between 2023 and 2024 and should significantly increase the scalability of this blockchain.
The second approach being taken is to offload some transactions to what are called Layer 2 solutions. These are blockchains built on top of the main Ethereum blockchain and are designed to improve scalability, efficiency, and speed.
A Layer 2 solution involves shifting a portion of the transactional burden from the main blockchain to an adjacent blockchain. Layer 2 aims to handle the processing load and then return the data to the main blockchain to finalize the transaction.
The advantage of using Layer 2 solutions is that they rely on the security of the main network, making them highly cost-effective to use.
There are different types of Layer 2 solutions, and Optimism belongs to the family of optimistic rollups, let's see in detail what this means.
Optimistic rollups solution
The Optimism blockchain aims to address the scalability limitations of the Ethereum network by utilizing a technology called optimistic rollup. This approach allows for faster and more cost-effective transactions, making it an attractive solution for dApps like MetalSwap that require high throughput and low fees.
Rollups are regular smart contracts on the Ethereum Mainnet that serve as the relay between the mainchain and Layer 2, where computations occur. Rollups can be either Optimistic or Zk; Optimism is a leading blockchain in the Optimistic rollup category and today we will go deeply on it.
We call them optimistic because they assume off-chain transactions are valid and don't publish proofs of validity for transaction batches posted on-chain. They rely on a fraud-proving scheme to detect cases where transactions are not calculated correctly. After a rollup batch is submitted on Ethereum, there's a time window called a challenge period during which anyone can challenge the results of a rollup transaction by computing a fraud proof.
Optimism is not the only Layer 2 solution for Ethereum; there are others like Arbitrum. However, the MetalSwap DAO decided to deploy the smart contracts on the Optimism blockchain after an interesting discussion on the MetalSwap forum, also thanks to the grant received from the Optimism team that consist on 30k OP tokens that will be distributed to the users of the MetalSwap dApp.
An upcoming upgrade planned for 2023, known as EIP-4844, will further improve the efficiency of Layer 2 solutions on the Ethereum blockchain. This upgrade will make all Layer 2 solutions more efficient.
Optimism ecosystem
According to DefiLlama, Optimism is currently the 6th blockchain in terms of TVL, reaching $884 million at the time of writing this article. Within this blockchain, 141 protocols have been released, among which the most important ones are Velodrome, Uniswap, Synthetix, and Aave.
The average number of active users per day is over 60,000 addresses, and this number continues to increase as the blockchain develops. Among all possible Layer 2 solutions, Optimism is one of the most chosen by protocols.
Optimism dashboard on DefiLlama
Speaking more precisely about the derivatives world, there are many dApps on Optimism that fall into this category. First and foremost is Synthetix, and if you have read the article Focus On Digital Assets, you know that the team is looking for this kind of solution to bring new assets to the dApp. Other important derivatives dApps in the Optimism blockchain are Perpetual protocol, Pika protocol and Lyra.
However, MetalSwap, being the only dApp in the DeFi ecosystem that offers hedging swaps, will be the first dApp to bring this financial primitive to the Optimism blockchain.
Preview MetalSwap dApp on Optimism
Conclusion
MetalSwap, thanks to the Optimism blockchain, will be able to be a more efficient and less expensive tool, making it an even more competitive solution in the world of hedging swaps. In this article, we have seen the basics of this protocol, and in an upcoming article, we will explore the operations and tools to know in order to practically operate within this blockchain.
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