On the 10th of October, the Optimism project announced that it discovered an error in its smart contract’s logic which set the inflation rate for the OP token to 20% instead of 2%.
When we first launched the OP token, we announced that the total supply would inflate at a rate of 2% per year. However, when we deployed the contract, the rate was mistakenly set to 20%. Later today, we’ll be updating the contract logic to the intended 2%.
— Optimism Governance (@OptimismGov) October 10, 2022
The Optimism crypto project is an Ethereum scaling solution introduced in June 2019. It was created to piggyback off the Ethereum blockchain, taking advantage of Ethereum’s security and infrastructure to process transactions faster and at lower costs.
It operates by processing transactions using a technology called Optimism Rollups, which rolls up hundreds of transactions into one transaction, then transfers the data of those transactions to the Ethereum mainnet, where they are validated. Afterward, it distributes the transaction fees among the hundreds of participating users, resulting in lower costs.
In a turbulent launch, the project airdropped its OP tokens in May 2022, with a total supply of 4.29 billion and no max supply stipulated. Optimism’s governance set an inflation rate of 2% each year during its OP tokens launch. With 25% allocated to funding the Optimism ecosystem, 20% allocated to retroactive public goods funding, and 19% set aside as airdrops to reward users for their helpful activities within the system.
On October 10th, 2022, the governance for Optimism went on Twitter to announce changes to its smart contract. They discovered an error in the contract’s logic that set the inflation rate to 20% instead of the 2% originally announced.
The flaw would have caused the OP token price to fall drastically if not been discovered on time. With an increased inflation rate, the supply would increase, which could be distributed to developers, investors, and core contributors, driving the price down due to inadequate demand.
Fortunately, there would be no negative impacts of the mistake a the inflation rates would start being implemented next year. Since no new tokens have been minted and released into supply, no tokens are currently at risk.
The Optimism governance went on to assure the public that It would promptly rectify the inflation rate to the original 2%, and there has been no intention to change it.