Optimism is Ethereum's next biggest Layer 2 to date (only beaten by Arbitrum).
A Layer 2 blockchain is an extension of Ethereum that benefits from the security assurances provided by Ethereum while operating independently. It can do all of this because it's an Optimistic Rollup.
Optimistic Rollups speed up Ethereum's smart contract by using a second-layer chain to handle most of the work, while still recording everything on the main chain for security.
In today’s newsletter issue, let’s talk about the bull case for Optimism.
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The Bull Case For Optimism
Everybody is talking about Optimism Optimism right now.
Coinbase are launching a new L2 blockchain called “BASE” built on the $OP stack.
In this newsletter issue, we’ll look at what Optimism is, why OP is a top choice for DeFi and DeFi protocols with huge potential.
I'll go through the following:
1️⃣ What is Optimism?
2️⃣ What makes Optimism a top choice for DeFi?
3️⃣ DeFi protocols with huge potential
4️⃣ Strong DeFi protocols to keep an eye on
Let's dive in!💰
1️⃣ What is Optimism?
Optimism is one of the most promising Layer 2 solutions on Ethereum.
With many DeFi advancements being made on L2s, Optimism is surely at the forefront! 🚀
Similarly to Arbitrum, Optimism uses Optimistic Rollups to increase transaction throughput and reduce gas fees.
It also enables developers to create scalable and efficient applications on top of Ethereum, which can benefit from the network's existing infrastructure.
Today (Thursday 24th of February) Coinbase announced they are launching a new L2 blockchain called “Base” built on the $OP stack that offers a secure, low-cost, developer-friendly way for anyone, anywhere, to build decentralized apps.
This collaboration strives to upgrade Optimism Mainnet, Base, and other L2s to an initial Superchain.
The hope is that the Superchain can blossom into a sprawling network that maximizes interoperability, shares decentralized protocols, and standardizes its core primitives.
From a price perspective it looks like the Coinbase narrative was frontrunned.
In other words, most people understood that it was talk about an L2 and that Optimism was the play.
In the chart below I’ve marked from when Coinbase posted their “2.23.23”-tweet and until now.
PS!
A little update on the chart, one day later and the price is now $3.15…
Things can change fast in crypto!
2️⃣What makes Optimism a top choice for DeFi?
What makes Optimism special is its focus on compatibility with Ethereum. This means that any Ethereum dApp can easily integrate with Optimism and benefit from its scalability and reduced gas fees.
This has led to many popular dApps and DeFi protocols migrating to Optimism. ⚡️
Optimism has existed on the mainnet for a while and has been battle-tested by several high-profile projects, including Uniswap, Synthetix, and MakerDAO.
With upcoming major network upgrades, activity on the Optimism ecosystem is soon expected to reach new highs 🚀
DeFi TVL on Optimism is up 41% last month, only beaten by Arbitrum.
Let’s take a look at some of the most interesting DeFi protocols.
3️⃣ DeFi protocols with huge potential
1) ✅️VelodromeFi
Velodrome is the largest and fastest growing DEX on Optimism. It has attracted many of the best names in DeFi to Optimism, developing a thriving ecosystem.
In a way it’s a mix of Curve, Convex, UNIV2 and therefore combines multiple protocol layers in one hub.
This exchange features an innovative liquidity pool called the Velocity Pool, which allows liquidity providers to earn trading fees and yield on their staked assets.
Velodrome also rewards its users with native tokens $VELO for their participation in the ecosystem.
Velodrome allows many popular protocols such as @LidoFinance and @fraxfinance to incentivize their liquidity for their token holders.
With the Velodrome V2 auditing recently, there is a lot of excitement brewing!
Here is a DeFi farming strategy:
Velodrome's TVL has grown exponentially from the start of 2023 and sits at over $277M today.
And the volume on the DEX is doing some wild numbers:
2) ✅️Synthetix
Synthetix is a decentralized asset insurance protocol that allows its users to mint and trade a wide range of derivatives through synthetic assets known as 'Synths'.
Synthetix is at the forefront of the DeFi movement and undoubtedly has the potential to create a massive tokenized market of digitized real-world assets on Ethereum.
Here is a detailed thread on what Synthetix V3 brings to the table:
3)✅️SonneFinance
Sonne Finance is the first Optimism-native lending protocol that offers fully transparent and decentralized peer-to-peer lending solutions.
A good intro to Sonne written by Slappjakke can be found here:
SonneFinance's TVL has been on a steady rise since the start of 2023 and is definitely a protocol you would not want to miss out on by any means.
It has also become one of the largest bribers on Velodrome.
But what differantes SonneFinance from other protocols?
Check the thread below:
4️⃣ Strong DeFi protocols to keep an eye on
1) TorosFinance
Toros Finance is a DeFi platform that gives its users the opportunity to earn yields through Dynamic Vaults
TVL for TorosFinance has doubled this month and is increasing swiftly
Here is a good thread on TorosFinance:
Perpetual Protocol is an on-chain perpetual futures DEX with deep liquidity and builder-ready composability. With a TVL of $17M, perpetual trade has a prominent marking on the Optimism ecosystem.
A thread on Perpetual Protocol:
Pika Protocol is a perpetual swap exchange that allows users to trade both Forex and Crypto with up to 100x leverage and nearly zero slippage.
Pika Protocol adopts the automated market maker (AMM) model, where minimum liquidity is needed to bootstrap trading.
Okay, that was it!
If you want to read this newsletter in a thread format, you can find it here:
There are also lots of other Optimism ecosystem tokens and protocols I didn’t mention here, but I’m going to share more of them in my upcoming newsletters.
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It is basically an archive of tweets, threads, articles, blog posts++ that I find interesting within crypto.
Mostly things that I bookmark on Twitter.
It is updated on a daily basis.
Feel free to join.
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The Bull Case For Optimism
Please check your link for Velodrome twitter. The first instance of it is linked to a fake account https://twitter.com/velodromefi_
It has an underscore as suffix