The Governance Model of Optimism and Its Implications
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The Governance Model of Optimism and Its Implications
OP's governance model and its implications.
Navigating Web3 tides with focused insights
On June 7, OFRTalk #8 held a discussion with guests centered around Optimism's governance token $OP. The event featured insightful remarks throughout, and this article serves as a written recap and summary of the session.
OFRTalk is a series of voice interview events supported by Old Fashion Research. Its vision is to become a community-driven open forum that offers diverse perspectives across various blockchain sectors, in-depth research on blockchain content, project dialogues from its investment portfolio, and discussions on trending topics—helping audiences deepen their understanding of the industry.
All content presented in OFRTalk reflects only the personal views of the speakers and guests. It may occasionally include introductions to projects we have invested in, but does not constitute any investment advice. Follow OFR Intern and OFR’s official Twitter accounts for timely updates on upcoming broadcasts.
Guests at OFRTalk #8
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Tu, Co-founder of Trillion.fi // @GaoFlynn
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Robin, Founder of 0x0crypto DAO // @zeroonerobin
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Sybil Attack, Researcher at Catcher VC // @eternal1997L
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Wayne, Founder of TokenInsight // @0xwayne_z
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Rainyday, BD & Journalist at TechFlow Post // @qiaoyunzi1
Host: Did everyone claim their $OP airdrop? Can you share your experience interacting with Optimism—what were the pain points and advantages? The seven-day challenge period on optimistic rollups remains a key obstacle to mass user adoption. How can this be overcome?
Robin: As a DeFi developer, I’ve claimed airdrops like $UNI and $DYDX and interacted with many protocols before noticing Optimism. $OP was my first time seriously using multiple accounts for interaction. At that time, large-scale airdrop farming studios weren’t common yet—I used about 200 accounts, though nearly half didn’t receive the $OP airdrop. Still, it was an enjoyable process. Looking ahead, if other Layer 2 chains like Arbitrum or ZK-based ones plan to launch tokens, I’m skeptical about continuing the airdrop model. Airdrops are inefficient and often create immediate sell pressure and irrational market sentiment. Personally, I don’t think launching a token now was ideal for Optimism—the outcome and user experience were underwhelming.
Host: Out of curiosity, did you sell the $OP you received?
Robin: Yes, I sold it—but not at the peak price. I wasn’t too concerned about timing. I kept 20% aside for future protocol interactions.
Tu: Optimism’s airdrop execution was quite flawed, for two reasons. First, there were simply too many airdrop farmers, which corrupted what was meant to be a fair distribution. Second, more people are now holding projects hostage, demanding similar airdrops. This has fundamentally distorted the purpose of token airdrops. Generally speaking, I’m not optimistic about the long-term viability of Layer 2 solutions—they mostly fail at scaling, and there isn’t enough real demand to justify them.
Host: On that note, what are your thoughts on Ethereum Layer 2s versus alternative Layer 1s like BNB Chain and Avalanche?
Sybil Attack: For Layer 1 scaling, unless it's specifically designed for sharding like Near, there's little hope left—the narrative has run its course. Solana is a prime example: extreme Layer 1 scaling achieved by sacrificing system reliability for performance. Since September last year, Solana has experienced numerous outages. As the number of nodes grows, consensus communication becomes increasingly complex and slow. From Solana’s case, we see that traditional Layer 1 scaling has hit a dead end—unless sharding is implemented.
Host: One major difference between $OP and governance tokens like $ENS or $UNI is that Optimism is a public chain, not just a dApp. Recently, Optimism’s TVL surged 108.9% over seven days, ranking second among L2s with 19.22% market share—still far behind Arbitrum’s 48.89%. Arbitrum already has a relatively mature ecosystem, led by derivatives trading via $GMX and NFT/GameFi ecosystems like TreasureDAO (MAGIC). Do you believe the fate of Layer 2s—especially optimistic rollups—is already sealed? And how might the battle among L2s evolve after Ethereum 2.0 upgrades?
Robin: I think the current L2 landscape is largely settled, with little room for change. Launching a token now wasn't optimal for Optimism—not because of poor market conditions, but because the application-layer narrative has already concluded. DeFi, GameFi, NFTs, and NFTFi have exhausted their storytelling potential, and no new applications have emerged to restart the cycle.
Optimism no longer enjoys first-mover benefits at the application layer. I struggle to identify any meaningful growth vectors for Optimism—it’s extremely difficult to break through within the existing格局. Future breakthroughs may come from new narratives like DID or privacy computing. Whichever chain captures these innovations could disrupt the current order. For now, the L2 hierarchy is stable, and future shifts depend entirely on new application-layer explosions.
Morty: There may still be short-term opportunities, such as LP mining incentives. But long-term success will hinge on how well Optimism manages its own governance—including allocating treasury funds toward hackathons and liquidity mining programs. Right now, markets are dominated by zero-sum competition; Optimism may not stand out. That said, I agree the application layer holds significant potential—many alternative Layer 1s are building dedicated app-chains or sidechains.
Host: I've been tracking L2 data since March. Aside from the recent surge due to $OP and Velodrome airdrops doubling Optimism’s TVL, the numbers haven’t changed much. So personally, I also believe the L2格局 is set.
Wayne: My view differs. Does anyone else feel that during the last bull market, some of the actions we took now seem incomprehensible—like rushing into absurd meme coins or obscure yield farms? Back then, plenty of irrational behavior occurred. Now, in a calmer market, we reflect and regret past decisions. But cycles repeat—when the next bull run comes, irrationality will return, potentially reshaping outcomes dramatically. For instance, if a new L2 project launches an airdrop, users might rush in again, reigniting the entire L2 narrative.
Looking at fundamentals, the L2 narrative itself is still young—only about a year old. Compare this to DeFi, which went through multiple cycles before one or two major breakouts, or NFTs, which followed a similar path. Declaring a “final state” now may simply reflect our current cautious mindset. When market sentiment turns euphoric, irrational behaviors could revive even failed projects.
Sybil Attack: Personally, I think the OP Rollup story has little room for evolution. After $OP launched, the most direct effect should’ve been increased spending and activity. But yesterday I checked OP’s block explorer—on the night of the airdrop claim, total transactions reached 500k in 24 hours. In the past two days, it's dropped below 100k, reverting to pre-airdrop levels. This strongly suggests the stimulative effect of the token launch has already faded.
What purpose did launching $OP actually serve? First, it forced the team to address financial sustainability, giving them stronger incentives to reduce gas fees—a move Metis previously made. In April, Metis drastically cut costs by switching storage layers, bringing gas fees down to Polygon-level pricing, essentially starting a price war. Previously, Optimism ran its Sequencer (block proposer) centrally, capturing all MEV value and collecting user fees directly.
What problem does this create? Gas fees become tightly linked to official revenue. Long-term reliance on transaction fees and MEV extraction reduces the incentive to lower gas costs. With the token launch, however, public infrastructure funding no longer depends solely on fee income—this resolves a core fiscal issue. Going forward, there may be strong motivation to slash gas fees. Their documentation mentions fixed cost assumptions, but emphasizes these are adjustable. Given recent moves—including a May announcement of a new architecture aimed explicitly at reducing gas fees—I expect cuts soon.
Optimism’s current edge over Arbitrum lies in being first to market with a token. Can they rapidly build an ecosystem using $OP to incentivize protocol deployments and user engagement? If not, they’ll fall behind. Once Arbitrum launches its token, it could completely overshadow Optimism.
Regarding Ethereum 2.0 upgrades: currently, the four major L2s compete for space within a single shard. They must post data to L1, and all consume resources from the same shard. This shared bottleneck prevents any of them from significantly lowering gas fees, as each requires substantial operational cost. None of the big four L2s will thrive under this constraint.
After sharding rolls out, each L2 could occupy its own shard—Arbitrum one, Optimism another, ZK another—allowing all to reduce fees substantially. Then, user volume will grow, and the battle will shift to ecosystem completeness, where Arbitrum likely holds the strongest advantage.
Ultimately, the final battlefield hinges on whether ZK-EVM can go live before sharding. If ZK-EVM fails to launch before next year’s sharding upgrade, Arbitrum will likely drain momentum from other L2s.
Tu: My perspective blends Robin and Wayne’s views. The application narrative is indeed over. However, I question what criteria define “final state.” Since January’s bear market, TVL hasn’t been a reliable metric. A single killer app like StepN could easily propel an L2 or chain into the top three by TVL—this market remains prone to disruption. While L2 rankings appear stable, to me they’re fragile—an illusion of stability. The entire L2 narrative itself may eventually be replaced by something entirely new. Chain operations matter greatly: a shift in operational capability or the creation of new hype could overturn the current order.
Looking back historically, the top 10 crypto assets change frequently—sometimes dramatically within a week. I remain skeptical of declaring a “final state,” especially in such a volatile environment. Moreover, it's possible the entire Layer 2 narrative gets supplanted by a newer paradigm altogether.
Host: Governance tokens like $UNI and $ENS were popular over the past year, yet often criticized as “air tokens.” Is governance merely a theoretical concept with no real utility? How should investors evaluate governance tokens?
Wayne: Governance tokens and the idea of decentralized governance are indeed abstract and largely ineffective—so yes, from that angle, they’re “air.” Even if you participate in voting, your impact is minimal. Most voters follow the leading options—your vote rarely changes outcomes, unless you're a whale. Decentralized governance doesn’t meaningfully involve retail participants. Conversely, do protocols really need decentralized decision-making? Running a protocol is like running a company—usually, one or two key individuals make decisions efficiently. Broad participation often leads to inefficiency.
Consider stocks: people believe stocks represent ownership in companies with cash flows, hence intrinsic value. But when an individual buys stock, what real influence do they have? Beyond providing capital, it's functionally identical to secondary market trading in crypto—you don’t actually govern the company.
Stocks don’t pay dividends to most holders, nor grant real control. Viewed this way, stocks are even more “air-like” than crypto assets. Yet, stocks enjoy broader legitimacy—backed by institutions and governments—making them seem more credible. Top crypto projects are unlikely to exit scam either, so compared to reality, they’re less “air.” Ultimately, governance lacks real substance; people just like associating utility with tokens. It’s a pseudo-concept—but slightly better than traditional equities.
Tu: I’m familiar with Curve. While much governance is indeed performative, Curve introduced something novel: fiscal governance. Through voting, bribing, or gauge deposits, users can directly increase their token yields via smart contracts. To me, this is the only meaningful form of token-based governance—one tightly coupled with protocol treasury rights, especially future allocations.
Curve’s model represents a massive leap beyond stocks—not just voting on proposals, but directly influencing yield distribution, vesting schedules, and gauge listings. In DeFi, token votes can tangibly alter treasury dynamics. Provided sufficient decentralization, only token holders can steer protocol decisions—even teams lose unilateral control.
Wayne: The concept of governance isn’t flawed per se—rather, current implementations yield poor results. Should we judge governance by outcomes or intended values? Today’s governance feels meaningless because most protocols lack substantive decisions to govern. Imagine three people founding a company: CEO, VP, GM—roles without real responsibilities. Curve works because it has real economics: fees, cash flow, clear incentives tied to tokens. Replicating Curve’s model elsewhere won’t guarantee success without similar fundamentals.
Another overlooked example: Ethereum. No formal voting exists, yet we can’t call it centralized. Governance structures and token value aren’t inherently linked. But when governance connects meaningfully to token value, protocol growth can feed back into token appreciation.
Tu: From an outcome perspective, the key question is: in what scenarios can genuine governance occur purely via contracts, producing valid results? Most cases don’t achieve this—governance rarely produces concrete, result-oriented outputs via on-chain mechanisms. Regardless of outcomes, the transparency of governance processes—such as vote counts per option, voter identities—is itself progress.
Host: The Curve case raises a chicken-or-egg dilemma. Was Curve’s advanced governance possible because of its large-scale operations?
Sybil Attack: Nick Szabo, Satoshi Nakamoto’s intellectual mentor, had a falling out with the Ethereum Foundation around 2016–2017. He likely disapproves of current governance models. While governance tokens might help true decentralization, if Szabo reviewed Optimism’s design, he’d probably criticize it harshly.
Host: Optimism recently published an article titled This Governance Will Self Destruct, exploring experiments to turn Optimism into an egalitarian network. Notably, OP governance will split into two chambers: Token House (PoS-like) and Citizens House (more egalitarian). Can you envision practical applications or significance of this model? Compared to Curve’s bribery-friendly, whale-dominated system, does it offer valuable alternatives?
Wayne: Earlier speakers noted that crypto governance tokens must tie closely to economic interests—and those interests stem from protocol revenues. But here lies a critical issue: when economic incentives dominate, participants naturally optimize for short-term personal gain, harming long-term protocol health.
We should separate token functions: reserve long-term or external-benefit roles (e.g., funding developer tools, testing frameworks, data services) for non-token mechanisms. Short-term, internal incentives can stay tokenized. People resist voting to fund public goods—even if beneficial overall—because individual ROI is low. Like building a park: everyone benefits, but no one wants to fund it alone. Some will always oppose.
Optimism’s dual-chamber model attempts to balance short-term self-interest (Token House) with long-term communal benefit (Citizens House). It counters the flaw of pure token governance maximizing only economic returns. Whether Citizens House achieves sustainable protocol development remains unknown—but their intent is clear and commendable.
Host: This model is just a proposal from Optimism. Real-world outcomes are unknown and will take years to materialize. Guests, please share insights on Optimism’s Constitution—specifically the Working Constitution and Bedrock Constitution. The Bedrock version evolves from the initial Working Constitution, which undergoes trial implementation for several years, iterating based on emerging issues before solidifying into Bedrock.
Morty: I translate "Working Constitution" as "Progressive Constitution." It allows experimentation—practice being the sole test of truth—with room for adaptive adjustments. If treasury allocation issues arise, citizens can vote to refine the constitution. An Optimism Council oversees governance trials, setting a four-year timeline. Afterward, the Progressive Constitution informs the final Bedrock Constitution, enabling detailed governance rules. Optimism aims to build a nation-like Layer 2, though current performance is weak. The model gains meaning only with broad participation; otherwise, it risks irrelevance.
Sybil Attack: Optimism’s approach resembles El Salvador adopting Bitcoin—a bold, real-world political experiment. It mirrors real-life governance models, serving as a controlled trial in digital democracy. Technical hurdles remain, such as preventing Sybil attacks—e.g., an entity creating thousands of fake addresses to manipulate votes. Despite challenges, this represents one of the most ambitious on-chain governance experiments to date.
Tu: Optimism’s governance model is fascinating, integrating concepts like Vitalik Buterin’s “soulbound” identity. V神 actively promotes his vision of decentralization—using soulbound tokens to enable KYC-like verification while preserving privacy and resisting censorship. Citizens House embodies this: a vetted participant group, akin to a standing committee exercising higher-level oversight.
Wayne raised the issue of economic alignment and how bribery can corrupt systems—an area worth deeper exploration. Balancing short-term incentives with long-term protocol health requires robust contract-level constraints. Within defined boundaries, actors can strategically weigh personal gain against collective good. Curve partially achieves this: votes affect mining rewards, not strategic direction. Separating treasury influence from team control enables bribery mechanisms to function constructively, driving protocol advancement.
Robin: Corporate law evolved over just two to three centuries—from the East India Company to modern corporations. Crypto maps this evolution onto a faster timescale. Corporate law developed through assigning rights and obligations, adapting to political environments while patching gaps in modern economics.
Optimism’s bicameral model marks real progress. Unlike Curve’s ve-model, where governance ties strictly to liquidity and profits, a public chain must support broader missions beyond revenue. Chains host technological exploration and future-facing applications—dimensions that can't be reduced to profit motives.
Current governance models fail to meet the needs of public chains, which carry ecological responsibilities beyond earnings. Drawing from corporate law’s evolution, Optimism synthesized lessons from prior L1 successes and failures, application cycles, and emotional market patterns. By structuring Token House to appoint Citizens House, it introduces layered governance—a structural improvement over flat, single-layer application governance. I consider this a truly groundbreaking experiment.
Host: Any interesting perspectives on blockchain political theory—either observed or original ideas? If you were to design a Web3 nation, how would you structure its political system?
Sybil Attack: I’d adopt Polkadot’s relay chain node model. Polkadot doesn’t allow every node to run the relay chain—participants must stake substantial $DOT. I’d implement credential verification: opening voting rights to all wallets invites Sybil attacks. One actor could acquire many tokens and distribute them across thousands of addresses, evading detection.
Rather than unrestricted access, establish formal qualification checks. DAOs or communities could elect representative delegates who stake and vote on behalf of others. This model would be far more resilient than universal governance rights.
Tu: My biggest concern is how public chains handle distribution and POW. Bitcoin failed to bring crypto to the global mainstream—it didn’t attract enough everyday users. Projects spend excessive energy designing governance and political systems, neglecting how to democratize token ownership. We need innovative ways to distribute tokens widely. A new form of POW must emerge to fulfill Bitcoin’s unfinished mission.
Host: Beyond governance, what other utilities could $OP have? Think creatively.
Sybil Attack: Look to Metis and other issued L2 tokens for inspiration. Optimism has two node types: Sequencers (block producers, like Ethereum miners) and Validators (verification nodes). Metis continuously incentivizes validators with its token—by April, it had nearly 90 active validators.
Optimism has never disclosed validator count—likely because the number is embarrassingly small. On April Fools’ Day, Optimism joked on Medium that users would never want to run validators, hence no urgency to lower gas fees. Post-token launch, Optimism could use $OP to reward validators, mirroring Metis’ model.
Currently, validators only earn rewards if they successfully challenge a sequencer publishing false data on Ethereum. But if the sequencer is honest, validators earn nothing—creating no incentive to operate. Metis fixes this: simply being a validator yields continuous METIS rewards. Optimism doesn’t do this yet.
The biggest impact of $OP issuance is solving fiscal sustainability. $OP can now strongly incentivize validator participation—significantly strengthening the security model. Additionally, having a token improves fundraising capabilities.
Replay link: https://twitter.com/ofr_intern/status/1534141708644290560
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