Market Analysis

Layer 2 Bridges Clog as Optimism Airdrop Recipients Leave Network

It appears many Optimism users who claimed yesterday’s token airdrop are now leaving the network. The mass exodus has caused performance issues on Layer 2 bridges. 

Key Takeaways

  • Many recipients of Optimism’s new OP token have begun offloading their holdings and transferring them back to Ethereum mainnet.
  • The exodus has caused a lack of liquidity in bridges connecting Optimism to Ethereum mainnet, resulting in slow and failed transfers between the two networks.
  • The OP token’s price has declined 70% since it began trading—not a wholly unusual outcome for initial token airdrops.

The Optimism token has also dropped over 70% since trading began yesterday. 

Users Cash Out From Optimism

Optimism airdrop recipients are taking their gains back to Ethereum.

Bridges connecting Ethereum to the Layer 2 network Optimism are experiencing performance issues today as users who received the network’s token airdrop send their gains back to Ethereum mainnet. 

Hop Protocol, the largest Optimism to Ethereum bridge, reported on Discord Wednesday morning that the bridge was seeing “a large spike in volume” and that transfers back to mainnet would be disabled until additional USDC and ETH liquidity was freed up. Users of Synapse and Across Protocol, two competing bridges, have also reported slow or failed Optimism withdrawals. According to a dev support account in the Across Protocol Discord server, the protocol was seeing a high number of transfers away from Optimism toward the Ethereum Mainnet. “This is causing some short-term liquidity shortages on the destination chains, and some transfers can be delayed. Any delayed transfers should be finalised within 2 hours,” they said.

Optimism is a Layer 2 network designed to help scale Ethereum. Yesterday, over 249,000 early Optimism users who met certain criteria received an airdrop of the network’s newly launched OP token. Although the Optimism team attempted to airdrop tokens to active and engaged network users over those looking to farm the airdrop, many recipients are choosing to convert their OP tokens to ETH and send their funds back to Ethereum mainnet. 

As a result of the exodus, the OP token price has been hit hard. Shortly after the airdrop went live, OP started trading at around $4.52, putting the token’s fully diluted value at over $19 billion. However, as more users claimed their airdrop, the token’s price plummeted. The OP token’s price appears to have stabilized and is currently changing hands for $1.34, down over 70% since its launch. 

OP/USD chart. Source: CoinMarketCap

The OP token’s sharp decline was not wholly unexpected. Previous airdropped tokens, such as those from ParaSwap and CoW Protocol, also experienced similar declines shortly after launching. On the other hand, last year’s Ethereum Name Service airdrop was able to recover from its initial drop in the short term. With risk-on appetite in the broader crypto market waning, it looks to be an uphill battle for OP token bulls going forward. 

Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies. 

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