Brief content
OmiseGO (renamed OMG Network) is an Ethereum scaling solution fully compatible with ERC-20 and ETH tokens.
By promising lower gas costs and faster confirmation times, the OMG network aims to alleviate some of the scalability issues plaguing Ethereum.
Introduction
Ethereum scaling is a hot topic these days (for many years actually). Solving this problem is not easy, and the Ethereum development community is exploring many different possibilities.
One of them is OmiseGO, a project that 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 secure transfer of value in Ethereum. It aims to reduce transaction fees and time without compromising the security of Ethereum.
Essentially, the OMG network helps solve the scalability issues that Ethereum currently has.
How OmiseGO (OMG) works
The OMG network is known as a Layer 2 solution. A Layer 2 solution is built on top of an existing blockchain (in this case, Ethereum). Because transactions are processed at the secondary level, the result is freeing up precious block space on the Ethereum blockchain.
In a way, you can think of a layer 2 solution as a blockchain on top of a blockchain.
The OMG network is supposed to have the same security as Ethereum, but with lower transaction fees and faster transaction times, and it works with all ERC-20 and ETH tokens.
This is good news for almost everyone who uses Ethereum. Although the network has seen many interesting innovations, sometimes using the Ethereum network can become extremely expensive, especially for small transactions.
The OMG network also has proof of its success. A portion of the offering of the world's largest stablecoin, Tether (USDT), has been hosted on the OMG network.
OMG Network is just one such Tier 2 solution among a host of competitors targeting Ethereum scaling, such as Optimism, Loopring, and zkSync.
Why OmiseGO (OMG) is important
Network congestion is a serious drawback of Ethereum. Usually transactions in Ethereum are relatively fast and are confirmed within 10-20 seconds. However, if gas prices become high, the transaction time can stretch to hours (even days).
Since transactions with a higher gas price go through the network first, if you bid a low gas price, the transaction may take a long time to confirm. Naturally, when the network is heavily loaded (that is, when space is needed for the block), gas prices rise and transaction time increases.
In this case, you either pay a higher price for the transaction, or expect a decrease in gas prices. So, when the Ethereum network is under stress, there are two problems: high gas fees and long confirmation times.
OMG Network solves this problem by offering low-cost and high-speed transactions. It offers thousands of transactions per second (TPS), which is about a third of the average cost of using Ethereum.
This is not only important for token trading. With so many DeFi applications deployed on Ethereum, network congestion will remain an issue. Although the Ethereum 2.0 update should make Ethereum more scalable, it is expected that layer 2 solutions will still be needed in the future. Also, Eth2 will take years to fully deploy. Naturally, Ethereum users can't wait that long for lower gas costs and faster transactions.
OmiseGO (OMG) usage examples
Crypto exchanges can use the OMG network for faster and cheaper ERC-20 token transactions instead of using the Ethereum network. Like exchanges, wallet providers can also benefit from fast, high-performance, and low-cost systems.
While we usually think of these types of systems in terms of financial assets and cryptocurrencies, the OMG Network can also be used for trustless transactions and various other online reward systems. For example, Reddit's community scoring system has proven highly effective when using the OMG Network. This is made possible by the newly developed Community Points Engine (CPE).
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OMG token
The OMG token is a staking token and was used to finance the development of the project. OmiseGO held an ICO in 2017, raising $25 million.
OMG is also used to pay commissions on the network; however, support for other coins is under development.
The token is also used by validators that run network nodes and validate blocks. They receive transaction fees in exchange for their services.
How to store OmiseGO (OMG)
Since OMG is an ERC-20 token, you can store it in a variety of wallets. These can be software wallets (web or mobile) or simply exchanges such as Binance.
OMG can also be stored in cold hardware wallets such as Ledger and Trezor in combination with MyEtherWallet or MyCrypto.
Final thoughts
The OMG Network aims to solve Ethereum's scalability problems. This is a level of value transfer that allows for shorter transaction times and lower gas costs for financial services on the blockchain.