OmiseGO (rebranded to the 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 hinder Ethereum.
Ethereum scaling is a hot topic these days (actually, it has been for years). It isn’t an easy problem to solve, and multiple different avenues are being explored by the Ethereum developer community.
One of these is OmiseGO, which recently got rebranded to OMG Network. It promises faster transaction times and lower fees on the biggest smart contract platform. Let’s see how it works.
What is OmiseGO (OMG)?
OmiseGO (rebranded to OMG Network) is a Layer 2 solution for transferring value trustlessly on Ethereum. It aims to reduce transaction fees and times without compromising the security of Ethereum.
In essence, the OMG Network helps solve the scalability issues that Ethereum currently has.
How OmiseGO (OMG) works
The OMG Network is what’s known as a Layer 2 solution. A Layer 2 solution is built on top of an existing blockchain (in this case, Ethereum). As transactions are processed on the “secondary” layer, precious block space is freed up on the Ethereum blockchain as a result.
In some sense, you could think of a Layer 2 solution as a kind of 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 tokens and ETH.
This is good news for pretty much anyone using Ethereum. While it has brought forth many exciting innovations, the Ethereum network can become exceedingly costly to use at times, especially for smaller transactions.
The OMG Network also has proof of its success. A portion of the supply of the biggest stablecoin in the world, Tether (USDT), has been issued on the OMG Network.
The OMG Network is just one such Layer 2 solution amid a sea of competitors aimed at scaling Ethereum, such as Optimism, Loopring, and zkSync.
Why OmiseGO (OMG) is important
Network congestion is a crucial drawback of Ethereum. Usually, transactions on Ethereum are relatively fast and confirmed in 10-20 seconds. However, if gas prices become high, transaction times can stretch out to hours (even days).
Since higher-priced gas transactions get put through the network first, if you bid a low gas price, the transaction can sit around for a long time, waiting to get confirmed. Naturally, when there’s a high network load (i.e., demand for block space), gas prices go up, and transaction times increase.
In this case, you either pay a higher price for your transaction to go through, or sit around waiting for gas prices to decrease. So, there are two problems with the Ethereum network when it’s under stress: high gas fees and long confirmation times.
The OMG Network solves this by offering low cost, high-speed transactions. It offers thousands of transactions per second (TPS), at around a third of the average cost of using Ethereum.
This isn’t just important for token trading. With the plethora of DeFi applications being deployed on Ethereum, network congestion will continue to be a problem. While the Ethereum 2.0 upgrade should make Ethereum more scalable, it’s expected that Layer 2 solutions will still be necessary in the future. In addition, Eth2 will take years to roll out completely. Naturally, Ethereum users can’t wait that much for lower gas costs and faster transactions.
OmiseGO (OMG) use cases
Crypto exchanges can use the OMG Network for faster, lower-cost ERC-20 token transactions instead of using the Ethereum network. Much like exchanges, wallet providers can also benefit from fast, high-throughput, low-cost systems.
While we generally think of these sorts of systems in terms of financial assets and cryptocurrencies, the OMG Network can also be used for trustless community points transactions and various other online rewards systems. For example, Reddit’s community points system was shown to be highly efficient when used with the OMG network. This was made possible with the recently developed Community Points Engine (CPE).
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The OMG token
The OMG token is a staking token, and it has been used to fund the development of the project. OmiseGO conducted an ICO in 2017, raising $25 million.
OMG is also used for paying fees on the network; however, support for other coins is in development.
The token is also used by validators that run network nodes and validate blocks. They earn transaction fees in return for their service.
How to store OmiseGO (OMG)
Since OMG is an ERC-20 token, you can store it in a wide variety of wallets. Think software wallets (web or mobile-based), or simply exchanges like Binance.
OMG can also be stored on cold storage hardware wallets, such as the Ledger and Trezor, when combined with either MyEtherWallet or MyCrypto.
The OMG Network aims to solve issues with Ethereum scalability. It’s a value transfer layer that allows for fast transaction times and low gas costs for financial services on the blockchain.