← Back

How To Do Optimism Taxes

Learn about Optimism Coin and Optimism, a Layer 2 scaling solution for Ethereum that offers faster and cheaper transactions while maintaining security.

In recent years, the increasing popularity of blockchain technology has led to a significant increase in the number of transactions being processed on various networks. This surge in demand, particularly on the Ethereum network, has resulted in slow transaction processing times and high fees. 

This bottleneck has created a need for a solution that can scale blockchain networks to meet the growing demand. Enter Optimism. It addresses these challenges by utilizing Optimistic Rollups. With its innovative approach, Optimism has the potential to drastically increase the throughput of the Ethereum network, reduce transaction fees, and enable more efficient and scalable decentralized applications. But, what is Optimism crypto, and how does it do it? What is Optimism Coin? Let’s find out. 

What is Optimism Crypto?

Optimism is a layer-2 scaling solution for the Ethereum blockchain that aims to improve the speed and efficiency of transactions on the network.

The Ethereum blockchain is a decentralized platform that allows developers to create and run decentralized applications (dApps) and smart contracts. However, as more users and developers have joined the network, it has become increasingly congested, leading to slower transaction times and higher fees. This has become a major obstacle to the adoption of Ethereum and its applications.

To address this issue, Optimism provides a layer-2 scaling solution that allows users to conduct faster and cheaper transactions on the Ethereum blockchain. Optimism is built on top of Ethereum and operates as a separate network that runs parallel to the main Ethereum network. It uses a technique called "optimistic rollups" to bundle multiple transactions into a single transaction, which can then be verified on the Ethereum network. This helps to reduce the load on the Ethereum network and improve transaction times.

Connecting your Optimism Address to ZenLedger For Your Crypto Tax Forms

  • To import your Optimism transactions into ZenLedger for your crypto tax forms, all we need is your public address.
  • Select the proper blockchain or wallet from the dropdown list.
  • Paste your address into the address field in ZenLedger.
  • Select if the wallet is based in the USA or not.
  • Then hit the ADD COIN button.

How Does Optimism Work?

Optimism is built on top of the Ethereum blockchain. It achieves faster transactions through a technique called "optimistic rollups," which bundles multiple transactions into a single transaction that is then verified on the Ethereum network.

Here's how the optimistic rollups work:

  1. A user sends a transaction to the Optimism network.
  2. The Optimism network bundles the transaction with other transactions and publishes them on the network.
  3. The Optimism network currently has two types of nodes: sequencer and verifier. The sequencer node is responsible for ordering transactions and publishing them to the network, while the verifier node is responsible for verifying the correctness of the transactions. Both sequencers and verifiers run on L2Geth, which is a modified version of Geth, the most popular implementation of the Ethereum protocol. It incorporates a variety of techniques that allow for faster and more efficient transaction processing, which is critical for the success of the Optimism network.
  4. Once the transactions are verified, they are bundled into a single "roll-up" transaction and submitted to the Ethereum network for final verification.
  5. The rollup transaction contains proof that the bundled transactions are valid, and it is verified by the Ethereum network.
  6. Once the rollup transaction is verified, the results are returned to the Optimism network, which then distributes them to the users.

By using optimistic rollups, Optimism can process a large number of transactions off-chain, which reduces the load on the Ethereum network and improves transaction times. Additionally, because the transactions are bundled into a single transaction, users can save on gas fees, which makes it more affordable for them to use the network.

What Makes It Unique?

Optimism is unique in several ways:

  1. It uses optimistic rollups: Optimistic rollups are a unique way of scaling the Ethereum network. Instead of relying on layer-1 solutions like sharding, which can be complex and difficult to implement, Optimism uses a layer-2 solution that is simpler and more efficient.
  2. It supports Ethereum-based assets: Unlike other layer-2 solutions, Optimism is specifically designed to support Ethereum-based assets. This means that users can transact with their existing Ethereum assets on the Optimism network, without having to convert them to a different token or asset.
  3. It has low gas fees: Optimism is designed to be a more affordable and accessible option for users who are looking for a cheaper way to transact on the Ethereum network. By using optimistic rollups and bundling multiple transactions into a single transaction, Optimism can significantly reduce gas fees for users.
  4. It is decentralized: Optimism is a decentralized network, meaning a single entity or organization does not control it. Instead, it is governed by a community of users and stakeholders, who work together to maintain the network's security and integrity.

Optimism Update

In May 2022, Optimism conducted its first Airdrop which distributed over 200 million Optimism coins (OP) to early adopters and engaged users. This marked the introduction of OP and the establishment of a bicameral governance system for the digital city of Optimism.

In Feb of 2022, Optimism announced their second Airdrop, which distributed 11.7 million Optimism coins to over 300,000 unique addresses as a reward for positive-sum governance participation and power users of the Optimism Mainnet. This Airdrop #2 was approximately 1/20th the size of the first Airdrop, distributing about 0.27% of the total initial supply, or 1.44% of the overall Airdrop allocation. Optimism has committed to distributing 19% of the total initial token supply to the community through Airdrops, leaving 13.73% for future Airdrops.

The Takeaway

As the demand for blockchain technology continues to skyrocket, it's becoming increasingly clear that current networks are struggling to keep up. But fear not, because Optimism is here. This layer-2 scaling solution offers a fresh perspective on how to tackle these challenges, utilizing Optimistic Rollups to enable faster, cheaper, and more efficient transactions.

Optimism FAQs

1. Is Optimism part of Ethereum?

Yes, Optimism is built on top of the Ethereum blockchain and is considered a Layer-2 scaling solution for Ethereum. Specifically, Optimism uses a technology called Optimistic Rollups, which allows for faster and cheaper transactions while still relying on the security of the Ethereum mainnet. This integration with Ethereum is one of the factors that makes Optimism unique and powerful, as it leverages the existing network effects and infrastructure of the Ethereum ecosystem.

2. Is the Optimism network safe?

Yes, Optimism is designed with security as a top priority and has undergone extensive auditing and testing to ensure the network is safe for users. It relies on Ethereum's security model and is highly resistant to attacks and tampering. However, users should still take appropriate precautions, and there may be unknown vulnerabilities or issues that arise over time.

3. Who is the founder of Optimism Crypto?

Optimism was founded by a team of developers and entrepreneurs, including Jinglan Wang, a former software engineer at Google and Coinbase, and Ben Jones, a former Coinbase engineer. The project has also received support and funding from various investors and partners, including A16Z crypto, Coinbase Ventures, and Paradigm.

Simplifying DeFi, NFT, and Crypto Taxes for Investors and Tax Professionals.

Get Started for Free

Simplifying DeFi, NFT, and Crypto Taxes for Investors and Tax Professionals

FB logolinkedin logotwitter logoyoutubrmedium

Copyright © 2022 ZenLedger
10400 NE 4th St, Floor #5,
Bellevue, WA 98004, USA