Ethereum has had a fruitful journey since its inception in 2013. However, the Ethereum Virtual Machine (EVM) built by Gavin Wood was not perfect. It was built in a hurry and hence, had inherent problems. Over time, blockchain developers came up with a solution called the Layer 2 protocol which would solve the Ethereum main net scaling problem. One such layer 2 (L2) solution is Optimism.
This article delves deeper into which are the top DeFi protocols on the Optimism blockchain. Read on.
What is a Layer-2 Blockchain?
To understand what a layer-2 blockchain is, it is necessary to know what a layer 2 protocol is. This is because layer-2 blockchains are built on the layer 2 protocol. This layer-2 protocol is a secondary framework built on top of an already existing primary blockchain, in this case, Ethereum.
Layer-2 protocol comes in handy to assist the underlying blockchain, also known as the ‘Mainnet’ to scale in terms of transaction speeds and costs.
What is Optimistic Ethereum?
Optimistic Ethereum, also just known as Optimism, is an example of a layer-2 blockchain built to scale Ethereum. It is compatible with the Ethereum Virtual Machine (EVM) and therefore, can support ERC-20 tokens. The chain is fast, simple, and secure and also supports smart contracts. This latter feature is especially important because it enables any blockchain to support DeFi. Simply put, there is no DeFi without smart contracts.
7 Largest DeFi Protocols to Use on Optimism
Since the establishment of this new improved technology, several decentralized finance (DeFi) companies have migrated there. They are now some of the largest blockchain financial companies on Optimism by total value locked (TVL). According to L2Beat, Optimism is the third largest Ethereum layer-2 protocol by TVL.
Without further ado, here are 10 of the largest and most used DeFi protocols on Optimistic Ethereum (with their Total Value Locked (TVL)).
Synthetix is a derivatives liquidity protocol that enables the creation of synthetic assets. These assets offer traders unique opportunities and exposure in the blockchain space. Synthetix is, by far, the largest DeFi protocol on Optimism. With Synthetix, you can stake and earn, or trade the synthetic assets (Synths). If it has a price, Synthetic has a Synth for it. SNX is the native token of the Synthetix project.
Lyra Finance is one of the first completely decentralized options markets built on Ethereum. Working closely with Synthetix, Lyra requires you to have some Synths in order to use the platform. It is the second-largest DeFi protocol on Optimism and boasts of low fees, fast execution, and high security. With Lyra, you can sell or buy options and earn yield infinitely. The native token of Lyra Finance is LYRA
Perpetual Protocol offers perpetual contracts that are decentralized. For the less financially inclined readers, a perpetual contract is a financial contract based on a derivative asset that has no expiration date. You can hold this contract for as long as you like. At Perpetual Protocol, they have contracts for every kind of asset. If it has a price, they have a perpetual contract for it. The Perpetual Protocol has a native token called PERP.
Described as a fully composable liquidity transport, Stargate allows you to transfer native assets across different blockchains. Again, if you don’t know what composability is, it is the ability of one system to integrate many different protocols. Stargate has its own unified liquidity pools that guarantee your transaction won’t remain pending for long. Stargate is the 17 largest DeFi protocol in the blockchain space (by TVL) out of over 200 other protocols. STG is the native protocol of Stargate.
If you have been in the cryptoverse for any amount of time, you must have heard or seen the name ‘Uniswap’ somewhere. Uniswap is one of the first automated market maker protocols on Ethereum. While it started rather insignificantly, it grew into one of the largest liquidity protocols on Ethereum. You can use Uniswap to convert one ERC-20 token to another across several layer-2 protocols, including Optimism. UNI is the native protocol of Uniswap.
Perhaps one of the largest stablecoin trading platforms, Curve provides deep liquidity on Ethereum and approximately ten other chains. Like many other protocols on Ethereum, Curve also uses the derivative power of the Synthetix network. You can deposit several different stable coins on Curve and earn lucrative APYs from the platform. The native token of the Curve protocol is CRV.
Synapse is a decentralized exchange that also acts as a cross-chain bridge. This protocol powers interoperability between chains, allowing them to work together and communicate seamlessly. With synapse, you can swap one token on one chain to a completely different token on a different chain. For example, you can swap ETH from Ethereum mainnet to DAI on the Arbitrum chain. Synapse is active in over 13 blockchains but has the largest TVL in Ethereum. SYN is the native token of the Synapse Protocol.
Optimism is a rapidly growing network and currently, it is fighting with Arbitrum to be the top L2 blockchain. While Arbitrum is still ahead in terms of TVL, Optimism is gaining ground. With a token launching soon, Optimism could harness the power of DAO incentives to lure in more volume and users into the ecosystem. Currently, all eyes are on the launch date of the OP token from Optimism.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.