Summary
OmiseGO (now renamed “OMG Network”) is a scaling solution for Ethereum that is fully compatible with ERC-20 tokens and Ether.
The OMG network hopes to remove some of the scalability issues that have been a stumbling block to Ethereum’s development, promising to reduce gas costs and speed up confirmations.
Introduction
Ethereum scaling is a hot topic recently, and it has actually been a focus of attention for several years. Solving this problem is by no means easy, and the Ethereum developer community has tried various solutions in a multi-pronged manner.
One of them is OmiseGO, which recently rebranded as the “OMG Network.” It promises to help the largest smart contract platforms to speed up transactions and reduce transaction fees. Let’s take a look at how it works.
What is OmiseGO (OMG)?
OmiseGO (now renamed "OMG Network") is a Layer 2 solution for Ethereum that enables trustless value transfer. Its goal is to reduce transaction fees and shorten transaction times without compromising Ethereum's security.
The essence of the OMG network is to solve Ethereum's existing scalability problems.
How OmiseGO (OMG) Works
The OMG Network is a Layer 2 solution. Layer 2 solutions are built on top of an existing blockchain (in this case Ethereum). Transactions are processed on the "secondary" layer, freeing up valuable block space in the Ethereum blockchain.
In a sense, you can think of Layer 2 solutions as blockchains within blockchains.
Compared to Ethereum, the OMG network has the same security, but lower transaction fees and faster transaction speeds. In addition, it is compatible with all ERC-20 tokens and Ethereum.
This is undoubtedly good news for the majority of Ethereum users. Although the Ethereum network has brought many exciting innovative features, its use cost is sometimes extremely high, especially not suitable for small transactions.
The OMG network also has successful cases to prove that part of the world's largest stablecoin Tether (USDT) is issued on the OMG network.
There are many providers of Ethereum's Layer 2 expansion solutions. Optimism, Loopring and zkSync are typical representatives, and OMG Network is just one of them.
Why is OmiseGO (OMG) important?
Network congestion is a major shortcoming of Ethereum. Generally speaking, Ethereum transactions are relatively fast, with confirmation times ranging from 10 to 20 seconds. However, if the gas price increases, transaction times may be extended to several hours (or even days).
Transactions with higher fuel prices will be processed by the network first. If the user's fuel price is too low, the transaction will be stagnant and wait for confirmation for a long time. Of course, when the network load (i.e. the demand for block space) is high, the fuel price will rise and the transaction time will be extended.
At this point, users can choose to increase transaction fees to complete transactions, or wait for the gas price to fall. Therefore, under pressure, the Ethereum network faces two major problems: high gas fees and long confirmation time.
The OMG network solves the above problems by providing low-cost and fast transactions. Its transaction volume per second (TPS) reaches thousands, and the average cost is only about one-third of Ethereum.
Its importance does not only affect token transactions. When a large number of DeFi applications are deployed on Ethereum, network congestion problems will continue to exist. The Ethereum 2.0 upgrade will improve Ethereum's scalability, but it is expected that Layer 2 solutions will still be needed in the future. In addition, Eth2 will take several years to fully launch. Of course, Ethereum users cannot wait so long to reduce gas costs and increase transaction speeds.
OmiseGO (OMG) Use Cases
Cryptocurrency exchanges can use the OMG network to trade ERC-20 tokens faster and at lower transaction costs than the Ethereum network. Similar to exchanges, wallet providers can also benefit from a fast, high-throughput, low-cost system.
We usually associate these types of systems and financial assets with cryptocurrencies, but the OMG Network can also be used to trustlessly trade community points and other online reward systems. For example, the Reddit community points system is extremely efficient when using the OMG Network. The recently developed Community Points Engine (CPE) makes this possible.
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OMG Token
OMG tokens are equity tokens that provide financial support for project development. OmiseGO launched its ICO in 2017 and raised $25 million.
OMG is also used to pay network fees, but support for other cryptocurrencies is still in development.
The token is also used by validators to run network nodes and verify blocks. They earn transaction fees for providing services.
How to store OmiseGO (OMG)
OMG is an ERC-20 token that can be stored in any wallet. Possible options include software wallets (web or mobile), or directly depositing into exchanges such as Binance.
It can also be deposited into cold storage hardware wallets such as Ledger and Trezor through MyEtherWallet or MyCrypto.
Summarize
The OMG Network is designed to solve Ethereum's scalability issues. It is the value transfer layer that supports fast, low-gas-cost transactions for financial services in the blockchain.
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