Rapture #191: Optimism PBC's Token

Rapture #191: Optimism PBC's Token

While the goblin's roar is ever increasing with every 1% drop in the US equities market... whoops I mean crypto... (what's the difference right now?), there remains plenty of tokens to remain optimistic about in the short term.

Optimism's upcoming token launch is not one of them. While optimism is innovating a new governance modal, which I am excited about, I do not expect the token to perform well once it finally comes to market.

Why? The tokenomics has left much to be desired.

Let's dive into what Optimism PBC's token will be all about.

Two branches of governance

First, the good news. Optimism is releasing a two-token governance modal that could become an excellent foundation for other tokens to utilize. The Optimism DAO will be governed by two different branches, each with their own respective token: the token house and the citizen's house.

The token house will be controlled by OP token holders, which will be your run of the mill transferable ERC-20 governance token. OP token holders will decide on the DAO's project initiatives, protocol upgrades, and allocation of the initial treasury funds. The citizen's house, on the other hand, will be comprised of users who have non-transferable NFTs that represent their reputation earned within the Optimism ecosystem. There will be quadratic voting for the citizen's house based on a user's reputation.

The citizen's house will determine the funding of public goods, which will come from the revenue generated from the small fees users pay to submit transactions and the auctioning off of blockspace to non-malicious sequencers, who bundle transactions and submit them to Ethereum, receiving ETH for their services. In the future, Optimism will auction off the right to verify transactions, which is a task that earns the verifiers some fees, to outside parties. The proceeds from the sale of these rights will be controlled by the citizen's house.

The citizens’ house will vote quarterly on distributions of funds to individuals, teams, projects, or communities that have provided subjective value over a specified time period. This directly rewards community members for the positive impact of their work.

Token allocation

Unlike other DAOs, the Optimism DAO (called the Optimism Collective) will have a series of airdrops, with airdrop #1 going live in Q2. Furthermore, the token allocations for OP will be the following:

Nothing out of the ordinary so far.

The total supply of OP is 4.294 billion and 100% will be liquid after 4 years.

Interestingly, Optimism for airdrop 1 has a multi-tier system to determine if users should receive the OP token. The tiers look as follows:

Users who hit multiple tiers receive a bonus multiplier, meaning that they will receive more tokens.

Why I am bearish on the token

The circulating supply for OP will increase 83% after the first year before the VC and team unlock. Furthermore, owning OP tokens does not entitle a user to any form of network fee.

The bearish thesis is that the token has no value accrual mechanism and such a tiny amount of the total supply will be available initially. With a huge amount of the total supply coming to market in coming years, inflation of supply will likely hurt the token's upward potential.

Too much potential for constant dumping.


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