What is OP used for?

OP is a new type of governance token that does not provide token holders sole governance rights over the protocol. Instead, OP holders share governance rights with "appointed citizens". This is based on the working constitution per the Optimism Collective, which is a large-scale experiment in decentralized governance. Within the collective, OP holders and OP citizens equally coexist in order to balance short-term incentives with the foundation's longer term vision. The Optimism network currently generates revenue through a centralized sequencer, and is expected to share this with OP token holders at some point in the future.

OP tokenomics

OP launched with a total supply of ~4.3M tokens with a 2% perpetual inflation rate per year. The token supply allocation includes 20% to be used retroactively for public goods funding, 25% reserved for ecosystem funds, 19% airdropped to eligible users, 17% to investors, and 19% to core contributors. The majority of investors and core contributors are subject to 2-year lock-up periods. Tokens reserved for community are vested for 1 year or less.

How does OP accrue value?

OP token holders share governance rights with OP Citizens but maintain enough control over the Optimism network to accrue value. The network also generates revenue through its centralized sequencer. The sequencer's role is adding and ordering transactions to Optimism. It generates revenue by selling block space. The sequencer fee consists of the L2 execution fee and the L1 data fee. Currently, this revenue accrues to the Optimism Foundation, a non-profit that donates all surplus to fund public goods on the network. As more developers and users are incentivized, activity is expected to increase on the network, thus increasing demand for block space and creating a flywheel effect.