In brief
OmiseGO (renamed OMG Network) is a scaling solution for Ethereum that is fully compatible with ERC-20 tokens and ETH.
Promising lower gas costs and faster confirmation times, the OMG Network aims to mitigate some of the scalability issues that have plagued Ethereum.
Introduce
Scaling Ethereum is a hot topic these days (in fact, it has been a hot topic for years). It's not an easy problem to solve, and the Ethereum developer community is exploring many different directions.
One of them is OmiseGO, which was recently renamed OMG Network. It promises faster transaction times and lower fees on the largest smart contract platform. Let's see how it works.
What is OmiseGO (OMG)?
OmiseGO (renamed OMG Network) is a Layer 2 solution for reliably transferring value on Ethereum. It aims to reduce fees and transaction times without compromising Ethereum's security.
In essence, the OMG Network helps solve Ethereum's existing scalability problems.
How OmiseGO (OMG) works
The OMG network is called a Layer 2 solution. The Layer 2 solution is built on top of an existing blockchain (in this case, Ethereum). Because transactions are processed on a “secondary” layer, precious block space on the Ethereum blockchain is freed up.
Roughly speaking, you can imagine a Layer 2 solution as a type of blockchain that sits on top of a blockchain.
The OMG network is said to have the same level of security as Ethereum, but with lower transaction fees and faster transaction times - and it works with all ERC-20 tokens and ETH.
This is good news for those using Ethereum. Although Ethereum has brought many exciting innovations, the Ethereum network can sometimes become extremely expensive to use, especially for small transactions.
OMG Network also has proof of its success. A portion of the largest stablecoin supply in the world, Tether (USDT), has been issued on the OMG Network.
The OMG Network is just one Layer 2 solution among a sea of competitors aiming to scale Ethereum, such as Optimism, Loopring, and zkSync.
The Importance of OmiseGO (OMG)
Network congestion is a crucial drawback of Ethereum. Usually transactions on Ethereum are relatively fast and are confirmed in 10 - 20 seconds. However, if gas prices increase, transaction times can last for hours (or even days).
Because transactions that set a higher gas price are prioritized through the network first, if you set a low gas price, the transaction may drag on, waiting for confirmation. Naturally, when network traffic is high (i.e. demand for block space), gas prices increase and transaction times increase.
In this case, you can either pay a higher price to have your transaction go through or wait for gas prices to fall. So, there are two problems with the Ethereum network when under stress: high gas fees and long confirmation times.
The OMG network solves this problem by providing high-speed, low-cost transactions. It offers thousands of transactions per second (TPS), at about a third of the average cost of using Ethereum.
This is not only important for token trading. With so many DeFi applications being deployed on Ethereum, network congestion will continue to be a problem. Although the Ethereum 2.0 upgrade will make Ethereum more scalable, it is expected that Layer 2 solutions will still be needed in the future. Additionally, Eth2 will take years to fully launch. Naturally, Ethereum users cannot wait that long for lower gas fees and faster transactions.
OmiseGO (OMG) Use Cases
Cryptocurrency exchanges can use the OMG Network for faster, lower-cost trading of ERC-20 tokens instead of using the Ethereum network. Like exchanges, wallet providers can also benefit from fast, high-throughput, low-cost systems.
While we often think of these types of systems in terms of financial assets and cryptocurrencies, the OMG Network can also be used for trustless community point transactions and more online rewards systems. other route. For example, Reddit's community points system has proven to be highly effective when used with the OMG network. This has been made possible by the recently developed Point Addition Engine (CPE).
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Token OMG
The OMG token is a staking token and has been used to fund project development. OmiseGO conducted an ICO in 2017, raising $25 million.
OMG is also used to pay fees online; however, other coins are being supported for development.
Tokens are also used by validators that run network nodes and validate blocks. They earn transaction fees in return for their services.
How to store OmiseGO (OMG)
Since OMG is an ERC-20 token, you can store it in a variety of wallets. Think of software wallets (web or mobile based) or simply exchanges like Binance.
OMG can also be stored on cold storage hardware wallets, such as Ledger and Trezor, when combined with MyEtherWallet or MyCrypto.
Conclude
The OMG network aims to solve problems related to Ethereum scalability. It is the value transfer layer that enables fast transaction times and low gas fees for financial services on the blockchain.
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