Plasma Group researchers raise $3.5M from Paradigm and IDEO to start new company

Four months ago, non-profit research organization Plasma Group proposed the design of Optimistic Rollup, a Layer2 scaling solution of Ethereum.

Now, the team has received $3.5 million from crypto venture fund Paradigm and the venture arm of design firm IDEO to put that design into production. 

The money will help fund the new company – appropriately dubbed Optimism – that Plasma Group members founded in December 2019. Earlier this month, the five-member team shut down Plasma Group on its one-year anniversary and donated the non-profit’s remaining fund reserve to Gitcoin, a fundraising platform dedicated to Ethereum developers. 

The transition from a non-profit organization to a for-profit business is in part due to the fundraising difficulty that the team experienced over the past year, Optimism CEO Jinglan Wang told The Block.

As a non-profit, Plasma Group was financed by donations and took small checks to sustain its day-to-day operations. Now, with the $3.5 million upfront investment, the company can free itself from operating paycheck to paycheck and instead focus on research. 

"Raising for nonprofit is a full-time job of piecing together a hundred different small donations just so you can make the next paycheck. With a for-profit company, you raised once you are good for however long [that sustains you], and you can offer things like benefits and health insurance," Wang told The Block. 

The newly raised capital will be mainly used to help the team make the Optimistic Rollup solution more implementable and allow developers to build applications on top of it. Meanwhile, the researchers are still adjusting to its new role as a for-profit business. At this stage, the startup has not developed a business model that would also allow it to continue contributing to the open-source research, similar to what they did at Plasma Group. 

“We believe that there is a way to ethically profit from public infrastructure, and we are still figuring out what that is,” said Wang.  

Unpacking Optimistic Rollup 

Optimistic Rollup – an L2 scaling solution on Ethereum – promises a 10x improvement in transaction throughput while preserving the L1 development experience. Decentralized applications (dApps) can leverage this solution with minimal changes and maintain interoperability with other dApps. 

Specifically, Optimistic Rollup increases the network throughput by computing state updates (the network’s latest status) off-chain and posting transactions along with the state updates, on-chain. This technique, dubbed rollup, is also adopted by ZK-Rollup, which uses zero-knowledge proofs to ensure the validity of every state update. 

Unlike ZK-Rollup, however, Optimistic Rollup does not verify the validity of every state. Instead, it takes an “optimistic” view of all the rollup blocks being posted on-chain and assumes that they are all valid.

However, people can challenge the assumption and prove a block to be invalid. When an invalid block is found, the original block producer will lose the security deposits they put down before starting to produce blocks, with a portion of the funds going to the challengers. 

Research on Optimistic Rollup has seen significant progress since it was first proposed by Plasma Group in August.

There have been wide-ranging discussions within the community and, at the 2019 DevCon in October, Plasma Group demoed Unipig, a spin-off of decentralized exchange Uniswap that incorporates the scaling solution. 

“We now see 4 or 5 different projects that are implementing our various Plasma, generalized Plasma, optimistic game semantics [solutions]... We feel like it's really implementation that’s ramping up now, not just research," said Wang. "So we felt like our time as a purely research organization was near an end with regard to what the individual team members want to spend time on."