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On August 25, Optimism and Base jointly announced a governance and revenue sharing agreement, which stipulates the different governance collaboration models between Optimism and Base in the short and long term, as well as the economic interaction between the two parties.

If before this, the relationship between Optimism and Base was limited to the latter using the formers technology stack (OP Stack), which was a softer cooperation, then starting from today, the relationship between the two will be in governance. It is deeply bound to the two aspects of income, and can even be regarded as a family under the same ecosystem.

governance level

First, let’s talk about governance. Since Optimism designed a relatively complete governance system when it issued OP, this part of the content is mainly related to Base without governance tokens (it has also said before that it will not issue tokens).

From the perspective of specific governance forms, the two parties will also have different collaboration models in the short and long term.

Let’s talk about the short term first. The current upgrade of the Base network relies on a 2/2 multi-signature contract. The two signature permissions of the contract are controlled by Optimism and Base respectively., both sides will take over control in case of emergency, or after the Optimism side completes the governance decision on the upgrade, it will start to execute.

To put it simply, although this form seems to be a joint decision between the two parties in terms of results, it will depend softly on the willingness of both parties to cooperate. Assuming that there is discord between the two parties (although the possibility is very low), the 2/2 multi-signature cannot be unified, and the upgrade of Base will also come to a standstill.

In the long term, Base, as one of the super chains that adopts OP Stack, will achieve a more rigid binding with Optimism through the Law of Chains governance framework recently proposed by Optimism.

The so-called Law of Chains refers to a governance framework that hopes to uniformly manage all super chains (including OP Mainnet, Base and other OP Stack blockchains). This framework is planned to be implemented in early 2024.

According to the agreement content of Optimism and Base,After the Law of Chains is implemented, the two parties will transfer the multi-signature governance authority to a group of independent community members distributed around the world (Security Council), which will not only be responsible for the upgrade of Base , will also be responsible for the upgrade of OP Mainnet and other OP Stack blockchains.

In turn, since Bases governance will be fully dependent on Optimism in the future, it will also have a part of the governance of the entire council. In this regard, Optimism will give Base a certain OP share (the income level will be detailed below), thereby allowing Base to participate in the governance of the council. However, due to restrictions, it also stipulates that this part of the voting rights must not exceed the total voting rights. 9% of .

income level

Compared with the more abstract governance level, the collaboration between the two parties at the income level is more intuitive.

According to the agreement,Base will pay Optimism 2.5% of the sorters revenue (the sorters total revenue at Layer 2) or 15% of its profit (the total revenue minus the cost of submitting data to Layer 1), whichever is higher; in return , Base can obtain up to 118 million OP (approximately 2.75% of the total supply) in the next six years, allowing it to exert some of the powers mentioned above at the governance level.

To put it simply, there will be a direct exchange at the economic level between the two. Optimism needs to pay Base a maximum of 118 million OP over six years, and Base needs to permanently provide revenue sharing to Optimism.

As for which of the two expenditures is more and which is less, you can do a simple calculation here.The current value of 118 million OPs is approximately US$183 million; and according to Dune statistics, the revenue of the sequencer in the month since Base was launched (including the front-running time) is approximately US$2.6 million. Due to the lack of profit data, 2.5% of revenue is used. Therefore, it is roughly estimated that Base needs to share $780,000 (260 * 12 * 2.5%) with Optimism every year.

However, it should be noted that since the Base ecosystem has just started and the network currently only has a sequencer run by the team, both factors will have a certain impact on Bases future revenue.

From an Optimism perspective, although in absolute terms, the current OP chips it pays are much higher than Bases revenue sharing feedback,However, based on the positive expectation that Base will continue to expand in the future, there is still considerable room for growth in the returns that this deal can bring in the long run.

I personally tend to approve of the forward-looking nature of this deal. To give an inappropriate example, without confirming the revenue sharing agreement, the relationship between Optimism and Base is very similar to the previous relationship between Cosmos and Terra. Terra was released using the Cosmos SDK (here OP Stack), and in Before 2022, relying on UST magic to make a lot of money, but these value captures cannot be fed back to Cosmos and ATOM at all.

With the income from Base, Optimism will receive a continuous inflow of income, which is obviously helpful to the projects fundamentals.

Some OP position holders may be concerned about the potential selling pressure of 118 million OP, but there seems to be no need to worry too much.

• First, Base has mentioned that this part of the OP will be mainly used for governance purposes (but did not mention hard constraints);

• Second, this part of the OP will be paid in six years, not a one-time payment;

• Third, this part of the OP will be spent by the Optimism Foundation to stimulate the development of the Optimism ecosystem.In other words, these coins will be spent. What OP position holders should worry about is not whether the money will be spent, but whether it is worth it. I tend to think that the trade of trading up to 2.75% of OPs supply for a permanent reinforcement is worth it.

As for Base, this OP income also helps to solve the financial problems of Base operation (including developer remuneration, ecological incentives, business development, etc.). Previously, the operation of Base relied to a large extent on the implicit support of Coinbase. However, due to compliance considerations (recently there have been voices claiming that the relationship between Coinbase and Base may be suspected of violating regulations), Coinbase will most likely cooperate with Coinbase at the operational level in the future. Base to make a clear cut, at that time Base will also need to have its own financial resources.

From this perspective, this deal may be a win-win option that meets the respective needs of both parties.

“Super Chain” blueprint unveiled

Overall, the cooperation agreement announced today by Optimism and Base means that the cooperation between the two has entered a new level. This partnership is so close that it is difficult to find similar cases in industry history.

Looking to the longer-term future, by completing deep binding with Base, one of the most important super chains, the super chain blueprint planned by Optimism has finally been unveiled: Law of Chains collaborative governance—— Optimism expands the ecology and promotes decentralization by distributing OP - ecological individuals will use their income to continuously give back to the mother body, benefiting the mother bodys fundamentals - attracting more individuals... This positive cycle may become a boost to Optimism A flywheel for ecological acceleration and expansion.

Todays Base is just the beginning, Zora, Celo, PGN, Debank... We may see more projects joining this process in the future.