What is Optimism ?

Fast, stable, scalable Ethereum.

Optimism is a fast, stable, and scalable L2 blockchain built by Ethereum developers, for Ethereum developers. Built as a minimal extension to existing Ethereum software, Optimism’s EVM-equivalent architecture scales your Ethereum apps without surprises. If it works on Ethereum, it works on Optimism at a fraction of the cost.

The Optimism Foundation is a nonprofit organization dedicated to growing the Optimism Collective. \n \n Not only are we writing software that scales Ethereum technology, we are also scaling Ethereum values by creating the rails for highly impactful projects that don’t have a business model to succeed. Read more about how we’re doing that here. \n ‍ \n Until the project is fully decentralized, we will be donating all profits from running a centralized sequencer towards scaling and sustaining public goods.[1]

What is Arbitrum

Arbitrum technology is one of many possible solutions for the recent transaction fee crisis on Ethereum. Ethereum is the 2nd largest cryptocurrency in terms of market capitalization, however, network congestion and high fees have hampered its exponential growth. Arbitrum aims to reduce transaction fees and congestion by moving as much computation and data storage off of Ethereum’s main blockchain (layer 1) as it can. Storing data off of Ethereum’s blockchain is known as Layer 2 scaling solutions. This is because it is built on top of Layer 1 (the main Ethereum network) and retains the security of Ethereum. 

At the moment, Layer 2 projects like Arbitrum are expected to be vital stop-gap solutions for Ethereum’s scalability crisis. Updates to the Ethereum network, intended to reduce fees and congestion, are slated for the next year and beyond. These updates, namely Eth 2.0, will help scale Ethereum and reduce fees. [2]

Arbitrum Versus Optimism

The largest difference between Arbitrum and Optimism is how the technology resolves a dispute on Layer 2. Both projects are optimistic rollups and use a challenge system where any validator can dispute a block on the chain. This is where the technology of the 2 projects diverge. Optimism re-executes the disputed transaction on Layer 1 and checks which party is correct in their assertion. 

The Arbitrum team realized that this process can contribute to network congestion significantly. Optimism needs to port a large amount of data to Layer 1 to compute the disputed transaction and resolve it. Instead, Arbitrum continuously subdivides the challenge until the disputed information is so small that it can be quickly sent to and resolved on Layer 1. Because they both use optimistic rollups, some trust in the validators is required. If all validators for a dApp collude in a malicious attack and no one challenges it, Arbitrum’s bridge between Layer 1 and 2 will assume the transaction is valid. [2]

Why Arbitrum is a Game Changer

Arbitrum sets itself apart by optimizing dispute resolution in optimistic rollups. This could reduce congestion on the Ethereum network even more than its competitors. However, it's difficult to determine what impact it may have on the overall success of Arbitrum. In a perfect world, all transactions would be valid and no disputes would occur. In this case, Arbitrum and Optimism would start to look identical from the surface. Unfortunately, we don’t live in a perfect world and disputes are going to happen at some point. If the frequency of disputes is high, Arbitrum’s efficiency in resolving them could make it the superior Layer 2 solution. [2]

Swap Metrics

Swap Fee

• Optimism and Arbitrum being an L2 are know for its low fee, we see that for the past 90 days only 3.2K $ETH has been collected in fee, majority coming from Optimism.

Swap Frequency

• Swap frequency has shot up for a few days in Nov 2022, other than that is has been consistently around 150K swaps daily.
• Arbitrum was dominant at first, but optimism seems to have taken dominance lately.

Number of Swappers

• The swappers have been consistent around 40K per day, with equal number of swappers coming from arbitrum and optimism.

Note: the analysis is only for the last 90 days, the number can be changed from the parameter above.

Transaction Frequency - Overtime

• We see around 1M daily combined transactions, 70% came from arbitrum vs 30% from optimism 90 days ago, but that has now changed with it only being 40% from arbitrum and 60% from Optimism
• The highest was 881k for Arbitrum and 800K for optimism.
• Optimism seems to be becoming more and more popular.

Transaction Fee over Time - $USD

• Optimism and Arbitrum like other L2s is known for its very low transaction fees.
• We saw there are 1M transactions everyday and the transaction fee is a mere 100K $USD per day.
• Optimism seems to clearly have a higher transaction Fee, even though it has the same number of transactions as arbitrum.

Active Users

• The number of new users and active user but falls for both arbitrum and optimism.
• More so for arbitrum which saw around 10K users 90 days ago, the number which has fallen to 7K now.
• Optimism has seen a new surge of new users since Dec 20.
• If we Look at new users and how long they have been active then Arbitrum fares a lot better than Optimism with a lot more users sticking around.

Transactions Per Second

• While L2s are known for low fees, they are not particularly know for high TPS, which is true for Arbitrum and Optimism.
• More so Arbitrum surprisingly has very low TPS as compared to optimism with an average of 7 TPS for Arbitrum vs 71 for Optimism
• The max for arbitrum has been 459 TPS vs 653 for Optimism

Conclusion

• Arbitrum was dominant at a time with number of transactions, active users, swaps.
• That time is in the past and now optimism has taken over as the dominant one with it dominating number of transactions, active users, swaps and even TPS.
• Arbitrum is surprisingly slow in terms of the TPS, where as optimism is slow but still a respectable number.