# Exploring the Optimism Ecosystem

By [nixnox.eth](https://paragraph.com/@nixnox) · 2022-07-06

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What is Optimism?
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If you’ve never heard of it before, [**Optimism**](https://app.optimism.io/) is a Layer 2 **scaling solution** for **Ethereum**. Basically, it’s a project that aims to help Ethereum scale, allowing for faster, cheaper transactions whilst retaining the security of the base layer. It achieves that by being an optimistic roll-up protocol, meaning it tries to _roll up_ several Ethereum transitions into a single one.

![How Optimism works](https://storage.googleapis.com/papyrus_images/7dbc5199f4f5df86e85cdb5e9c3d827f2b91d3acdfc5c1ce74bffdfc2571af06.png)

How Optimism works

The graph above should indicate in a simple manner how roll-ups function. Now if you believe that Ethereum will remain a key player in the future of DLT, you need to explore Layer 2 scaling solutions since they’ll be the primary interface for everyday users. In the following article, I will go over some of my favourites.

Lyra Finance
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![](https://storage.googleapis.com/papyrus_images/32fb99a00db4d0da05ba40efc78d16c568d196985651ea157bd24e7dfe92ae33.png)

[Lyra Finance](https://www.lyra.finance/) is an on-chain **options** **protocol** built on top of [Synthetix](https://synthetix.io/). Its exchange allows to easily long & short calls and puts on the biggest cryptocurrencies. Even though it’s relatively new it already has over **500mn** in notional trading **volume**. Now Lyra had some issues in their first version, many that are getting addressed with their recent launch of the [Avalon Upgrade](https://blog.lyra.finance/avalon-upgrade-primer/).

It is now possible to chose longer exipiry dates, better fractionalise options, partial collateralisation and much more! They already do have a tradable token called **$LYRA**, but I would personally not buy it, as it’s utility is mainly limited to governance.

I think Lyra can lead to some pretty interesting strategies, like bein able to sell covered calls while remaining somewhat exposed to an asset you like. There are even some projects like [Polynomial](https://www.polynomial.fi/) that automate the process.

Pika Protocol
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![](https://storage.googleapis.com/papyrus_images/e0607998a63444178020ed9a5fefb5c88c8223e930a4dbf4dfb212d21fcf2dbe.png)

Pika Protocol is a decentralized **perpetuals** swap exchange which allows you to trade with up to 50x leverage and deep liquidity. Currently only pairs supported by Chainlink are tradable (BTC, ETH, SNX etc.), but they are planning on adding more pairs.

I think this is a great platform to use for your next swing trade, especially considering that they have [confirmed](https://pikaprotocol.gitbook.io/pika-protocol/pika-token) that a PIKA token is coming. The founder have been in support of previous airdrops and it would align with the overall Optimism ecosystem. I would recommend following [Olimpio ton Twitter](https://twitter.com/OlimpioCrypto) to stay up to date on anything airdrop.

Velodrome Finance
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![](https://storage.googleapis.com/papyrus_images/9f450d60072df583307fe2034dd426598da0084bf7de08bf68f14cbe6d19b4c1.png)

[Velodrome Finance](https://velodrome.finance/) is one of the most interesting DeFi protocols I have seen. At it’s heart is supposed to be a low-cost, low-slippage exchange, that tries to incentivise liquidity for their own use cases.

The main way they try to achieve this is by tying LP rewards with emissions. This means that **100%** of fees generated go to stakers of **$VELO**, their governance token. They also vote on which pools get greater emissions to better align incentives.

Personally I have a small position of **$OP**, which I’m using to farm VELO. I do not resell that yield though and vest it for one year.

AAVE V3
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![](https://storage.googleapis.com/papyrus_images/1f6040c238b1946ac9c41ddb2b07761dbd0af8785fa08a979bfb96c1c3662d25.png)

Although most of you probably already know AAVE, I quickly wanted to shout out some of the newer features that they brought to [V3](https://docs.aave.com/faq/aave-v3-features). With the new i**solation mode** you can add smaller cap coins as collateral and the **efficiency mode** boosts your borrowing power.

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*Originally published on [nixnox.eth](https://paragraph.com/@nixnox/exploring-the-optimism-ecosystem-2)*