Arbitrum and Optimism are two outstanding Optimistic Rollup Chains built and developed to solve the scaling problem on Ethereum. However, the development strategies of the two projects have differences leading to the current positions of the two platforms being relatively different when Arbitrum is still firmly in the throne and Optimism is still standing as a challenger. .
So why did Arbitrum quickly win the throne and what opportunities can help Optimism get back on track? Let’s find out in this article.
To better understand this article, people can refer to some of the documents below:
- The Difference Between Validity Proofs and Fraud Proofs
- The Difference Between Optimistic Rollup And Zk Rollup
Advantages of Optimistic Rollup
Of all Layer solutions such as State Channel, Plasma, Validum, Volition,… Rollup is considered the best and most suitable solution to build Layer 2 platforms on Ethereum. In Rollup, we have 2 solutions: Optimistic Rollup and Zk Rollup. The main difference between these two solutions lies in the transaction proof: Fraud Proof and Validity Proof.
Due to the ease and greater technical convenience, Optimistic Rollup has made faster, earlier advances and achieved a leading position in a short time as evidenced by Arbitrum and Optimism. Up to now, Arbitrum’s TVL is leading the Layer 2 market and Optimism is ranked 2nd in the market.
So what is the cause? Everyone can come with me to the next content!
Development Strategy
EVM compatibility
Both AVM (Arbitrum Vitural Machine) and OVM (Optimism Vitural Machine) make it easy for developers on Ethereum to extend their projects to Arbitrum, Optimism, or both. However, Arbitrum’s EVM execution environment has The advantage is that developers can transfer code from Ethereum to Arbitrum without editing.
In addition, Arbitrum is also compatible and supports more development tools than Ethereum.
Security and transaction costs
Arbitrum tends to put less transaction data on Layer 1 than Optimism. This will lead to two results: Arbitrum will have an advantage in transaction speed and transaction fees, and Optimism will have an advantage in security because it posts more transaction data to Layer 1 than Arbitrum. .
Strategy when mainet
Right from the moment of launch, Arbitrum welcomes and warmly welcomes all developers regardless of who they are, where they come from, what they have done, whether anonymous or unmasked. On the contrary, projects that want to develop on Optimism need to register, and the development team needs to KYC.
One thing is obvious, in 2021 developers do not have too many choices in developing on Layer 2, so whichever side is more open will receive an extremely large number of developers. It can be said that this is Arbitrum’s first winning move compared to Optimism. Optimism was right to choose a slow approach, limiting risks, but because they were quite cautious, they missed the opportunity.
Exchange integration
It can be said that if you normally want to transfer money to be able to skin in the game on Layer 2, you must transfer money from the exchange to Ethereum and then from Ethereum to Layer 2. This leads to high travel costs. and not everyone can do it themselves. As a result, if Layer 2 has the support of early exchanges, the cash flow will flow directly from the exchange to the ecosystem easily and conveniently.
This is not only a highlight in the development of Layer 2 but also a highlight in the development of all Layer 1 in the crypto market at present and in the future.
- November 19, 2021: Binance supports direct deposits and withdrawals with Arbitrum One.
- May 22, 2022: Binance integrates and supports deposits and withdrawals with Optimism.
I only use Binance as a representative because this is the exchange with the most liquidity and users. It can be said that Arbitrum has been faster in integrating exchanges, thereby quickly attracting users to its ecosystem.
Spiked Development
Arbitrum has its own development spearhead, especially focusing on the Derivatives segment with 2 projects: GMX (Perpetual) and Dopex (Option) and they build an entire ecosystem below such as Rage Trade, Phutus, Jones DAO , Vovo Finance,… to support liquidity for 2 industry-leading projects. In addition, Arbitrum is full of different DeFi pieces AMM, Lending & Borrowing, Yield Farming, Liquid Staking,… to help users have a full experience when coming to the Arbitrum ecosystem, especially for those who want to Long – Short has GMX.
Unlike Arbitrum, Optimism does not have a specific point or the points of Optimism are not pointed and sharp. From my perspective, Optimism has bet a lot on Perpetual and its relatives Synthetix, but the most needed factor for these two projects is liquidity, which Optimism has not had a thorough way to handle.
Optimism attracts liquidity by creating an incentive program from its own OP tokens. Optimism will give $OP tokens to projects so that they can implement the Liquidity Mining program, but if users come for money, they will also leave for money because when incentives run out, there is nothing left to hold them back. . Typically, Perpetual is one of the projects that receives the most OP tokens but is not really implemented effectively.
In this aspect, Optimism needs to learn a lot more from Arbitrum with the stories of GMX and GLP. GMX retains LPs by sharing a portion of revenue with them and returning GLP as a token representing the liquidity provided by LPs. With GLP, LPs have many strategies such as Yield Farming, Staking, Lending & Borrowing,… to create more profits. Therefore, liquidity on Arbitrum tends to be more sustainable than on Optimism.
With the above development strategies, Arbitrum can master the Optimistic Rollup game in particular and the entire Layer 2 war in general.
What Chance Does Optimism Have To Gain The Leading Position?
Quickly update the network
As of now, Arbitrum has upgraded its network from Arbitrum One to Arbitrum Nitro, making the network speed faster and transaction fees also becoming cheaper than Arbitrum One. Besides, with the Arbitrum Nitro update, both speed and transaction fees, Arbitrum is also performing better than Optimism.
In Optimism’s development roadmap, their next update, Optimism Bedrock, will take place at the end of Q4/2022. However, at the time of writing, Optimissm has not officially announced when the network upgrade will take place. Therefore, to catch up with Arbitrum, Optimism needs to quickly upgrade its network to be faster and cheaper.
The difference between Optimism and Arbitrum is that in the BedRock update, Optimism also supports compatibility with any type of transaction proof, including zk – proof. This opens up an open path for Optimism to progress from Optimistic Rollup to Zk Rollup. If Optimism can do this, this can be considered a bigger and further step forward than Arbitrum.
Choose a spearhead to develop the ecosystem
It can be said that Optimism’s ecosystem does not have many unique features and is mostly multichain projects. Therefore, Optimism needs to increase the number of native projects and choose an industry to focus on development. In my opinion, Optimism can choose Derivatives or NFT – Gaming to be able to develop to compete directly with Arbitrum.
OVM is not enough, Optimism has lost steam in the race to get developers compared to Arbitrum. Therefore, Optimism needs to organize a global hackathon event to attract developers.
Attract users
According to Delphi Digital, Optimism’s first airdrop event was not really as successful as they expected. And recently Optimism also announced the next retroactive event to thank old users as well as attract new users to its Eco system.
However, Optimism’s skin in the game program is much more difficult than Arbitrum’s. There are NFTs that require users to stake 10k Synthetix to obtain. It can be said that this is almost impossible for a regular user.
But with Arbitrum, it’s different. Arbitrum’s quests are relatively simple, have low participation costs and are easy to complete. In my opinion, this is the purpose for users to be able to skin in the game with Arbitrum’s ecosystem. From my perspective, Optimism should also change to be more suitable for the majority of users.
Incentive program to attract sustainable liquidity
Liquidity is one of the most important elements of an ecosystem. Therefore, attracting liquidity is not enough, we must keep it in our ecosystem, thereby providing a smooth experience for users.
In fact, during the first implementation of the incentive program, the liquidity source as well as the large TVL of the Optimism ecosystem was pulled by AAVE and when the incentive source dries up, users will also leave the platform. So how can we coordinate liquidity to the right places and keep that liquidity on Optimism for as long as possible?
In my opinion, DEX is the place that is most thirsty for liquidity, including regular DEXs with the Uniswap V2 model and DEXs for stable swaps. For DEX platforms to retain LPs, they must first attract LPs to provide liquidity through the incentive program organized by OP.
Besides, DEXs themselves must create more games such as:
When LPs participate in providing liquidity, they will receive LP tokens representing the liquidity provided. LPs can use LP tokens in Yield Farming, Lending & Borrowing platforms,… to optimize profits for LPs. To implement this strategy, the ecosystem needs projects to be built on top of each other and use each other’s liquidity effectively.
Or using the POL (Protocol Own Liquidity) mechanism, users can lock liquidity from a few weeks to a few months to be able to share project revenue. The longer the key, the more it is shared and has voting rights equivalent to token holders. To implement this strategy, the projects themselves need to design extremely smart and effective tokenomics models.
In addition, to maintain liquidity and Optimism users need to build a diverse and cohesive ecosystem instead of fragmented, unconnected projects.
Create trends
We can look back at specific examples such as Arbitrum trying to build the Real Yield movement with the Delta Neutral strategy, Optimism also needs to create a trend for its ecosystem which can be in any industry in or outside of DeFi.
And above are some of my personal perspectives with strategies so that Optimism can compete more fairly with Arbiturm. Optimism still has a lot of work to do if it wants to take Arbitrum’s throne.
Summary
There are still many things that need to be improved to help Optimism regain the advantage from Arbitrum and thereby gain the upper hand in the Optimistic Rollup race in particular and Layer 2 in general.
