Optimism, one of the leading layer 2 networks, has managed to get a slew of customers and companies to deploy their own blockchains using its technology, known as the OP Stack.
Part of the strategy for getting new networks to use the technology is giving issuing large sums of OP tokens in the form of grants. Officials within the Optimism ecosystem say these tokens should help various projects get their build on OP Stack going.
Some within the ecosystem argue that it is too early to conclude whether OP Stack has won the tier-2 race.
One of the biggest trends of 2023 among the leading layer 2 projects on Ethereum was the rise of “blockchain in a box,” where the teams encouraged developers to clone their code to create new layer 2s.
Now one project in particular appears to be emerging as the clear leader. And as is often the case in blockchain development, a crucial factor is the money that changes hands behind the scenes.
Optimism, one of the leading layer 2 networks, has managed to get a slew of customers and companies to deploy their own blockchains using Optimism’s technology, with the OP Stack, under open-source software licenses.
Optimism’s first major customer to emerge from OP Stack was Coinbase’s Base – last year. But in recent months, even more projects have emerged towards the ecosystem Uniswap, Sony and Kraken plans to deploy new layer-2 networks using the OP Stack.
It’s a crucial development in the evolution of the broader blockchain universe, as layer 2 networks are at the core of developers’ efforts to make transactions faster and cheaper in the Ethereum ecosystem. Ethereum, while the second-largest blockchain after Bitcoin, is currently the leading smart-contracts network – meaning it can process programs and support applications – and it has become the dominant home for decentralized exchange and lending platforms. Layer-2 blockchains work as auxiliary networks on top of Ethereum, providing a venue for transactions that can be executed quickly and at a low cost and then settle into the base chain.
Part of the Optimism Foundation’s strategy for getting new networks to use their technology is giving issuing large sums of OP tokens in the form of grants. Officials within the Optimism ecosystem claim that these tokens are supposed to help various projects kick off their build on OP Stack, while contributing to Optimism’s Superchain, a network of OP chains linked together, as well as the governance system of Optimism, known as the Collective.
Ultimately, the goal is to reach critical mass – perhaps akin to the 1980s rise of VHS over Betamax as the dominant videotape technology.
Kraken’s OP token allocation
The deal with Kraken came with a significant subsidy, including an allocation of 25 million OP tokens, worth approximately $42.5 million when CoinDesk recently announced the news. Kraken’s network is called ‘Ink’.
Representatives from World (the recently renamed Worldcoin project), Uniswap, and Sony all declined to comment on how many tokens their projects received as part of their packages, but According to Kraken’s Andrew Koller, the creator of Ink, other OP Stack participants also received significant amounts of money.
Optimism Foundation officials say they leave it up to the projects to announce the amounts of their grants.
In an industry that prides itself on transparency, the reluctance to share how many OP tokens have been allocated to those chains raises some questions about how big a role these subsidies played in those deals.
A spokesperson for the Optimism Foundation shared with CoinDesk that the Optimism ecosystem has this have been transparent about their treasury, and that the Kraken deal falls under their ‘partnership fund’, which ‘goes towards certain projects to help support the initial development of the chain’.
The distribution of the treasury and the subsidies of optimism
According to data as of September 30, there are approximately 841 million OP tokens earmarked for that type of financing, while just under 480 million OP tokens have already been committed. That amounts to a remaining 361 million, or almost $480 million today OP token price of $1.32.
Some smaller projects building layer 2s on the OP stack have also received tokens. Celo’s governance forum previously announced that it would receive up to 6.5 million OP tokens for building on OP Stack, and the Bitcoin-focused BOB project shared that it was still in the negotiation process, but at the time of writing the deal was for approx 500,000 OP tokens.
The tokens allocated to BOB come from a different grant bucket called Retroactive Public Goods Funding (RPGF), which is distributed through Optimism’s DAO, not the Foundation. The Grants Council, which is part of the DAO, is responsible for distributing these tokens, which takes place over cycles.
As of September 30, there are only 860 million OP tokens under the RPGF bucket, “which goes towards rewarding chain impact within Optimism and the Superchain,” according to an Optimism Foundation spokesperson. Projects such as Kraken’s Ink are also eligible for RPGF funding.
So did Optimism ultimately win the layer 2 race, and does their subsidy strategy play a role in that?
The Optimism Foundation spokesperson told CoinDesk via email that: “Like many other ecosystems in the space, we view grants as ways to support projects and developers, and allocations are earned by achieving agreed-upon growth milestones that are ROI positive are for the whole. Collective. We are all working together to scale the future of Ethereum and when teams on the Superchain are successful, it benefits the entire Ethereum community.” ROI stands for return on investment.
Did OP Stack win the Layer-2 Race?
Optimism Foundation Chief Growth Officer Ryan Wyatt told CoinDesk in an interview that “the adoption of OP Stack as the de facto choice for scaling L2s is starting to happen, which is exciting. Whether you want to call that winning or whatever, I don’t know.”
The OP token price has fallen as much as 65% this year, based on prices from the website DigitalCoinPrice. But that’s less than the decline for other major layer 2 tokens, such as Polygon’s MATIC, which fell 70% in 2024, and Arbitrum’s ARB, which fell 72%. Etherum’s native cryptocurrency, ETH, is up about 6% this year.
Wyatt added: “Whether we’re at a point where it’s just a fact that if you’re going to launch an L2, you’re just going to go OP Stack, I think it’s too early to tell. But when large institutions, companies, enter this space, and they want to be an L2, I think you start to orient more along the lines of, “Why wouldn’t we go with the OP Stack?”
Competitors, such as Offchain Labs, the main developer company behind Layer-2 Arbitrum, have taken a different approach in their attempts to let users build with their technology.
“There’s a strategy that prioritizes announcements, and there’s a strategy that prioritizes actual on-chain success and metrics,” Steven Goldfeder, CEO of Offchain Labs, told CoinDesk. “Our strategy is to empower real users and real builders and build real technology that enables new, interesting and established different use cases of technology.”
As for Kraken’s Ink decision to choose OP Stack, Koller told CoinDesk that the reasoning came down to “what will allow me to spend engineering resources most effectively,” he said.
“Do I want to worry too much about security and protocol upgrades and having to manage that myself, or do I want to be able to use resources effectively and just create good UX and good tooling and get our customers on-chain and make requests?” Koller said. “That’s really what we were about.”
He added: “Let’s just focus on experience so we don’t have to worry about the complexities of running a blockchain. I think that’s why Optimism was a clear choice.”
Read more: Kraken chose Optimism’s ‘Superchain’ after getting a stack of OP tokens
