From messari by Nicholas Garcia

Key Insights

Primer

Optimism (OP) is a Layer-2 Ethereum scaling protocol. It aims to increase Ethereum’s transaction throughput while decreasing transaction costs via Optimistic Rollups.

When Optimism users sign a transaction and pay a gas fee in ETH, the pending transaction is stored in a private mempool before being executed by the sequencer. Blocks of executed transactions on OP Mainnet are created every two seconds and periodically batch-submitted as transaction call data to Ethereum by the sequencer.

The Optimism Foundation controls the lone sequencer. Since its mainnet inception, the Optimism Foundation has allocated all sequencer revenues, denominated in ETH, to support Retroactive Public Goods Funding. Plans are underway for sequencer decentralization, with new sequencers expected to receive a portion of the network's sequencer transaction fees.

Optimism’s long-term strategy stems from its vision for a Superchain. The Optimism Superchain is envisioned as a unified network of OP Chains built using the OP Stack. The ultimate goal of the Superchain is to bring seamless interoperability between OP Chains that share security, bridging, governance, upgrades, and a communication layer. Notable networks that have created or are creating networks using the OP Stack include Base, Zora Network, Mode Network, Fraxtal, and Redstone.

Key Metrics

Analysis

In Q1 2024, OP's circulating market cap increased to $3.7 billion (+11% QoQ), while the fully diluted market cap rose to $15.7 billion (+1% QoQ). OP's market cap ranking fell from 26 to 39 among all networks. Within the Ethereum ecosystem, OP is among the top four rollups by market cap. For comparison, BTC increased 69% and ETH increased 53% QoQ.

OP is the native token of the OP Mainnet. It serves multiple functions including governing and incentives for fostering the growth of the Optimism ecosystem. By the close of Q1 2024, 1 billion OP tokens, or 23.4% were in circulation. The total supply stands at 4,294,967,296 OP.

On Feb. 20, 2024, the Optimism Collective announced Optimism Drop #4, distributing 10,343,757.81 OP tokens to 22,998 unique addresses. This airdrop aims to acknowledge the contributions of "artists, creators, and pioneers" within the Superchain. On March 7, 2024, the Optimism Foundation disclosed the sale of approximately 19.5 million OP tokens, then worth nearly $90 million, to a16z.

In Q1 2024, OP Mainnet’s revenue (USD) increased to $16 million (+78% QoQ) due to higher network activity and a rise in the average transaction fee. The average transaction fee increased to $0.42 (+48% QoQ). However, the average transaction fee saw a significant reduction in the second half of March due to EIP-4844. Optimism adopted EIP-4844 on March 14th in the Ecotone Upgrade, leading to a significant drop in L1 submission costs. The daily L1 submission cost average fell to approximately $830 per day from an average of $420,000 per day in the weeks prior, a 99% reduction.

The onchain profit for OP Mainnet in Q1 2024 was $2 million (+14% QoQ). Additionally, the Canyon and Delta Upgrades also contributed to the reduction in transaction fees. This significant cost reduction will impact the Superchian’s finances moving forward.

Activity on OP Mainnet increased in Q1 2024. Daily active addresses reached 89,000 (+23% QoQ) and daily transactions rose to 470,000 (+39% QoQ). These metrics were both slightly off their all-time highs in Q3 2023.

According to Electric Capital, Optimism was the 9th largest developer ecosystem at the end of 2023. Artemis data shows that Optimism averaged approximately 175 weekly active developers in Q1 2024, while the Optimism ecosystem averaged approximately 400 weekly active developers.

On OP Mainnet, within the four primary consumer-focused sectors, which include DeFi, Gaming, NFTs, and Social, DeFi dominates by accounting for 86% of the active addresses in Q1 2024. NFT applications and Gaming followed with 6.9% and 6.7%, respectively.

Additional key ecosystem events for Q1 2024 include:

OP Mainnet’s Total Value Locked (TVL) increased by 18% QoQ, concluding the quarter at $1.2 billion. Despite this increase, OP Mainnet’s TVL ranking among networks fell to eleventh.

Synthetix was the leading protocol by TVL on OP Mainnet with $307 million TVL (+4% QoQ), which constituted 26% of the aggregate TVL. Aave was the largest gainer on a relative basis finishing second with $270 million TVL (+52% QoQ), representing 23% of the aggregate TVL. Velodrome followed with a TVL of $171 million (+10% QoQ), representing 14%. The "Other" category, which aggregates protocols outside of the top ten by TVL, held a TVL of $141 million (+3% QoQ), or 12% of the total value.

DeFi Diversity denotes the number of protocols comprising the top 90% of DeFi TVL. A wider spread of TVL across protocols can mitigate potential systemic risks from negative events. OP Mainnet concluded Q1 2024 with a DeFi Diversity score of 11.

OP Mainnet recorded an average daily DEX trading volume of $78 million (+18% QoQ). Uniswap was responsible for 66% of the total DEX trading volume. Velodrome followed with 13%, and Curve with 5%.

By the close of Q1 2024, OP Mainnet’s stablecoin market capitalization stood at $809 million (+32% QoQ), placing it ninth among networks. USDC's market capitalization was $211 million (+18% QoQ), or 26% of the total on OP Mainnet. USDT's market capitalization reached $512 million (+64% QoQ), making up 63% of OP Mainnet’s stablecoin market cap. USDT has seen a surge and has become the dominant stablecoin over the past six months.

Closing Summary

In the first quarter of 2024, Optimism developed various aspects of its ecosystem. Network activity increased and was barely off of all-time highs, with daily active addresses reaching 89,000 (+23% QoQ) and daily transactions rising to 470,000 (+39% QoQ). At the end of March, EIP-4844 was implemented, showing an immediate 99% decrease in L1 submission costs, which translated to a comparable decrease in the average transaction fee.

Q1 2024 also saw the fourth OP airdrop, a sale of 19.5 million OP OTC to a16z, and DeFi remaining the dominant sector. Notable adopters of the Superchain included Worldcoin, planning to launch World Chain. Optimism released an updated roadmap for RetroPGF. Four rounds of RetroPGF are planned for the year, each with a specific focus, and for the first time, funding will extend outside of OP Mainnet and into various OP Chains.