What is Optimism (OP)?

Optimism is a layer-2 scaling solution for the Ethereum network. By leveraging Optimistic Rollup technology, Optimism is designed to be a fast, simple, and secure way to bundle transactions, saving users from the often high and volatile fees associated with the Ethereum network. 

Optimism benefits from the security of the Ethereum mainnet and helps scale the Ethereum ecosystem by using optimistic rollups. That means transactions are trustlessly recorded on Optimism but ultimately secured on Ethereum.

It is home to 35 protocols, the biggest being Synthetix (SNX), a derivatives exchange, Uniswap (UNI), a Decentralized Exchange, and Velodrome (VELO), an Automated Market Maker.

What is OP token?

OP is a governance token that allows holders to vote on issues pertaining to the Optimism network. There are two streams of governance related to the OP token, the Citizens’ House and the Token House. The Citizens’ House will aim to facilitate and govern a process to distribute retroactive public goods funding via revenues collected by the network, while the Token House will aim to facilitate protocol upgrades and project incentives. By design, there is a maximum supply of 4,294,967,296 OP units.

How does OP compare to Bitcoin?

OP differs from Bitcoin in a few important ways.

First, Bitcoin is a “coin” and OP is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated math puzzles to verify transactions.

OP on the other hand is a governance token on the Optimism Network. Holders of OP can participate to vote on changes to the Optimism Network, or on community initiatives that impact the overall ecosystem. While, like Bitcoin, OP can be used as a means of payment or a store of value, its market price may be very volatile and so it may not be useful for payments or storing value.

Finally, OP’s market capitalization is smaller than Bitcoin’s. As of May 2023, OP’s market capitalization was estimated to be $660 million, as compared to Bitcoin’s market capitalization of $560 billion. 

Risk statement

Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:

No Canadian securities regulatory authority has expressed an opinion about OP, including an opinion that OP is not itself a security and/or derivative.

Wealthsimple has performed a legal assessment of OP prior to making it available on Wealthsimple Crypto and has concluded that OP is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.

We evaluated OP based on publicly available information, including (but not limited to):

• The creation, governance, usage and design of OP, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created OP;
• The supply, demand, maturity, utility and liquidity of OP;
• Material technical risks associated with OP, including any code defects, security breaches and other threats concerning OP and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
• Legal and regulatory risks associated with OP, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of OP.

Like all other crypto assets, there are some general risks to investing in OP. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.

OP also presents an elevated short history risk, and in contrast to networks like Bitcoin and Ethereum, where multiple parties participate in development, the Optimism Foundation directs ongoing development of the software underlying the Optimism network.

Further, the Optimism Foundation, and the OP community are not under any legal or regulatory obligation to disclose material information to the public regarding their activities. Holders of OP have no recourse to OP or Wealthsimple if OP declines in value for any reason.

We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading OP. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.

Last updated: May 3, 2023