Layer 2 Network Optimism OP token surged to its all-time high above $2.50 on Wednesday as Layer 2 networks saw increased adoption.
OP, which launched on May 31, 2022 via a community airdrop, recently traded around $2.22, down 10% over the past 24 hours amid declining transaction volumes on the Optimism platform over the past few days , but is still up about 140% in gains since the start of the year when it was hovering below $1, according to CoinDesk data. OP was up about 30% recently this week.
The OP token price chart shows a price surge in January. (CoinDesk)
“People want layer 2 tokens and they’re seeing layer 2 adoption happening,” said Nick Hotz, vice president of research at digital asset management firm Arca, referring to the tokens that come with it accompanying blockchain systems are connected. “Optimism is currently the only way to face this issue.”
The OP token’s jump has outperformed the two largest digital assets by market cap, Bitcoin and Ether, which recently surged 39% and 33%, respectively, in 2023.
Funding rates for the token also remain positive, which according to data from Coinglass is a signal that market sentiment among traders is bullish.
Despite the rise in the price, Optimism’s transaction activities have recently plummeted.
According to Etherscan data, daily transactions on Optimism hit an all-time high of 800,000 on Jan. 12, although volume has subsequently dropped to around 200,000 daily.
Daily Transaction on Optimism Chart shows a decrease in transactions since January 17th. (ether scan)
Riyad Carey, a research analyst at crypto data firm Kaiko, attributed the sharp drop in transactions to the recent completion of Optimism Quests.
The quests, which ran from September to January 17, encouraged users to interact with a variety of protocols on the network, including minting non-fungible tokens (NFT) after completing a quest.
“It’s not necessarily discouraging,” he said. “The Quests have been successful in onboarding many new users, but it shows that many transactions were directly related to this initiative.”
Transfer of layer 2
Optimism is a Layer 2 scaling system based on Optimistic Rollup technology, running on top of the Ethereum network.
The story goes on
Optimism and other Layer 2 scaling schemes like Arbitrum aim to make transactions on the Ethereum blockchain cheaper and faster. After Ethereum completes its EIP-4844 upgrade, also known as proto-thanksharding, later this year, Layer 2 transaction fees will even be “an order of magnitude cheaper,” Marc Arjoon, Ethereum Research Associate at CoinShares, wrote in a note.
“2023 is shaping up to be the year of Layer 2,” Arjoon wrote. “For years, Ethereum has struggled to scale effectively while maintaining decentralization and security, and Layer 2s seem to have solved this trilemma.”
He added, “With a first-mover advantage and the greatest social capital, these advances in scaling should help the Ethereum ecosystem prepare for the next wave of adoption and reclaim some of its lost market share.”
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