Original author: Sleep in the rain

Next, I will break down the current situation of OP from two perspectives.

• Ecosystem & Project

• The future of OP Stack

Ecosystem & Project

As of now, from a data perspective, Arbitrum is still the leader in Layer 2, and OP is still at a disadvantage in terms of ecosystem. But with the widespread adoption of OP Stack, OP has gained more market attention recently (Basechain, Worldcoin) - even though there are continuous unlocks, the overall market value of OP has been growing.

It is worth mentioning that OP's daily trading volume has surpassed Arbitrum, showing a trend of sucking blood from Arbitrum.

TVL also has an upward trend.

OP's leading protocol Velo is a DEX using the ve 3, 3 architecture. It has been lukewarm before because there are not many native assets on the OP chain, far inferior to Arbitrum (GMX, Magic, Dopex, Pendle, etc.). To start the flywheel, ve 3, 3 needs to attract enough protocol participation, and the more native assets on a chain, the stronger the ve 3, 3 on that chain will be.

Native assets are abundant and powerful - high user adoption (mining + trading demand) - need deeper liquidity to reduce wear and tear - ve 33 meets the low liquidity procurement cost - increasing the emission value of ve 33 tokens and bribe income - positive flywheel

From the current situation, OP ecosystem still has a long way to go in development. But we can also see that there have been many protocols built around Velo, such as Extra Finance and Exactly Protocol.

Extra itself is a lending protocol, but the protocol comes with UI/UX support for users to participate in Velo DEX liquidity mining through the protocol leverage. So far, the protocol still provides high liquidity rewards. The high LP returns mitigate the token emissions that users face when holding $VELO (another way is to lock VE for bribe income). Its TVL is currently 19M, making it the fastest-growing protocol in OP recently.

Exactly is a protocol that provides users with floating/fixed interest rates on assets. Currently, the TVL is 82M. Now, Exactly's native token $EXA has been deployed on Velo in a liquidity pool and has increased LP rewards through bribes.

Extra and Exactly are the two directions that interact with the Velo protocol. The former leverages LP through lending, while the latter establishes liquidity pools to provide more bribes for veVELO holders.

Exactly's behavior represents the demand for liquidity of the native protocol on the OP chain and the fulfillment of its demand by VE 3, 3 DEX Velo. And Extra amplifies the wealth effect on the OP chain, attracting more people to enter the OP chain.

They represent two different aspects of catalysts, Velo is the beneficiary, and the ecosystem is also the beneficiary. We can also see from the growth of Velo's Fee and Incentive Rewards that Velo has gained more dividends in the gradual growth of the OP ecosystem. If more market attention and sentiment brought by the OP Stack can be sustained, Velo will also experience corresponding growth.

Another proof of the rapid growth of the OP ecosystem is the change in the contract deployment volume of OP in the last 90 days. So in the recent six months, the OP ecosystem should produce some protocols with good performance.

Another native protocol with good TVL performance is Sonne Finance. It is a lending protocol, and currently, its TVL is 107 M.

And Synthetix is ​​a multi-chain synthetic asset protocol that we all are familiar with, so I won't go into detail. However, the difference between it and GMX is that GMX's GLP provides a powerful asset Lego for the Arbitrum ecosystem, allowing various protocols to be built on top of it, creating a positive GLP flywheel. On the other hand, Synthetix's sUSD does not have such an advantage and even has to bear shared debt. SNX stakers are providers of protocol liquidity, and their income comes from inflation and fees, so the market value of SNX also determines the upper limit of SNX protocol liquidity - this problem will be resolved in v3 in Q4.

The advantage of Synthetix, like Velo, is that it provides a powerful product Lego for protocols deployed on OP. Unfortunately, they did not introduce a strong interest-earning asset Lego for OP like GMX/GLP did.

For the OP ecosystem, this gap is a potential growth opportunity.

The Future of OP Stack

As we can see now, OP Stack has gained a lot of adoption. The brand endorsement from institutions such as Coinbase has given OP Stack a good brand endorsement. Therefore, we don't have to worry about the future adoption and development of OP Stack. Its main threat comes from zkRollup, but based on the current situation, zkRollup is far from mature, and OP Stack has already started expanding its ZKP technology.

Another point worth noting is whether the chains that adopt OP Stack can contribute back to OP. The previous statement from Basechain was that a portion of the income would be given back to Optimism Collective. This is a good thing for OP because having a source of income in the treasury means "ability", and "ability" will be more reflected in the token price. If more chains follow the example of Basechain, it will provide more "ability" to Optimism Collective.

Obviously, the OP team has also realized this "capability" of the OP Stack and released the Law of Chain proposal on July 25, aiming to launch a shared governance model and sequencer for all chains using the OP Stack. This is similar to the previous model of establishing shared security in Cosmos. The essence of Law of Chain is to standardize the "revenue feedback" pattern. The implementation of this proposal will also bring more profits to the Optimism Collective.

Above are my insights into OP, and in the future, I will actively participate in the ecosystem of OP myself.