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Ethereum Layer 2 Protocol Optimism Outperforms Arbitrum in Transaction Volumes

Ethereum-based Layer 2 scaling protocol Optimism has surpassed Arbitrum in transactional volume since December.

While both Ethereum scaling protocols have been on a steady upward trend since the start of 2022, recent transaction data activity shows that Optimism has been a more popular option than Arbitrum. 

On January 17, it was recorded that Optimism had a transaction count of 601,910, while Arbitrum had a count of 496,512 – and the huge gap may be due to Optimism’s OP token, which ranks at #84 on CoinMarketCap, and has been doing well recently across Layer 1 and Layer 2 protocols.

The Optimism ecosystem also is home to other tokens like Sonne, Velo, and Pool, which have all seen gains of over 200% since the start of 2023. 

Meanwhile, Arbitrum is in a rough spot – since December 10 2022, the Arbitrum-based decentralised perpetual futures exchange GMX saw a 30% drop in use.

Arbitrum however does not have its own token, and traders are looking for new ways to gain exposure to Ethereum, such as liquid staking derivatives Lido and Rocket Pool.

Arbitrum vs Optimism?

So, what’s a better Ethereum Layer-2 scaling protocol to choose between the two? Depends on what you want.

What’s similar?

Both protocols are ‘optimistic rollups’, where they bundle up together several transactions at the same time, processing them off-mainnet, then validating them with cryptography before submitting them back to the mainnet. 

These optimistic rollups also run on the assumption that all transactions are truthful (hence ‘optimistic’), and fraud proofs are only used when any given transaction is challenged by anyone. 

Optimistic rollups also make these protocols interoperable on Ethereum, and are  developer-friendly. DeFi applications can be translated with ease from the main Ethereum network to an optimistic layer-2 without any changes to code.

Arbitrum is great for security for cost

Arbitrum is the most popular Ethereum layer-2 scaling solution, natively compatible with all ERC-20 tokens, but relies on paying fees and posting bonds in ETH.

As for security, Arbitrum uses a verification system called ‘multi-round fraud proof’, which only requires a fraud proof to be submitted for any particular transaction that is being challenged, instead of an entire transaction block.

This makes transactions a bit slower to reach finality, but transaction fees are kept low, as the network doesn’t need to rely on the layer-1 network as much.

Optimism is great for speedy transactions

Optimism is the second-most popular layer-2 optimistic rollup network, and runs on a validation mechanism called ‘single-round fraud proof’.

Single-round fraud proof means that all layer-2 transactions on Optimism must also be executed on a layer-1 network to verify the blockchain state. This makes transactions on Optimism almost instant – but at the risk of increased fees, and limits the amount of data Optimism can handle.

Arbitrum vs. Optimism: the overall picture

Arbitrum has a clear lead in the markets – at the time of writing – with a total value locked (TVL) of $1.1b USD, whereas Optimism has has $592.22m USD.

So far, Arbitrum boasts a few better technical advantages (compatibility with Ethereum Virtual Machine coding languages), but Optimism is slowly and steadily improving its ecosystem to accommodate for more use cases.

Arbitrum is also a more appealing option for DeFi investors, as it natively supports ETH, but Optimism only supports newer token standards. Arbitrum is also a great network for interoperability due to its unified permissionless bridge for transferring assets to layer-2, but Optimism makes the process more simple – but with fewer options to bridge from.

In the long run, Optimism is a great platform to network with fellow crypto enthusiasts to keep up with the news, and build towards a better Ethereum. Optimism has an NFT, a rewards-based DAO, and many more community-based initiatives to build towards a sustainable future for Ethereum and the internet.

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