Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.
OMG Network, formerly known as Omise GO, is a blockchain protocol that helps speed up transactions on the Ethereum blockchain, which has become sluggish and expensive to use after years of growth.
Blockchains like Ethereum are online networks that process transactions on a decentralized ledger. Think of them as alternatives to the current system, on which payments network like Visa, Mastercard and PayPal transfer currencies created by central banks. While central banks control the coins and Visa and Mastercard are companies, blockchains are maintained by a network of anonymous users from around the world.
OMG is what is known as a layer-2 technology. Ethereum, the second-largest blockchain by market capitalisation, processes just 14 transactions per second, and there’s a lot of demand for blockchains that can process more than that. A lot more: hundreds of thousands of transactions per second are necessary to compete with payments networks like Visa and Mastercard.Buy and Sell Bitcoin, Ethereum, and over a dozen other cryptocurrencies with Wealthsimple. Sign up and Trade here.
To do this on a blockchain, OMG Network uses something called a scaling solution, a blanket term that refers to any piece of technology used to speed up transactions on another blockchain, then relays this information to Ethereum. OMG Network claims that this means that Ethereum could scale to thousands of transactions per second, far faster than the 14 transactions per second that Ethereum currently musters.
OMG’s scaling solution is called MoreViable Plasma. This is what is known as a sidechain: a blockchain that operates parallel to Ethereum. OMG collects transactions of ETH (another name for Ethereum) and ERC-20 tokens (tokens that are minted on the Ethereum blockchain), then processes them on a sidechain. OMG collates all of these transactions and processes them, then verifies them as a single transaction on the Ethereum blockchain.
A token called OMG powers this whole operation. Instead of just paying Ethereum gas fees, you’ll pay the OMG network in OMG tokens. There are 140 million OMG tokens in circulation, which combined have a market capitalisation of $2.1 billion; each token is worth precisely $15 as of mid-October 2021 but the coin is volatile and can swing up or down in an instant. It hit its all-time high of $28.35 on January 8th, 2018.
Ethereum’s bottleneck problem
To really understand why technologies like OMG Network are so important, it’s necessary to understand the problem they are trying to solve. Simply put, Ethereum’s limit of fourteen transactions per second makes simple transactions on the Ethereum blockchain very expensive. As of this writing, it costs an average of $8.8 to send a transaction of an ERC-20 token (a generic Ethereum token) between a wallet, and $27.2 to swap tokens on Uniswap, a decentralized exchange (even for swaps worth under a penny). If you think that’s expensive, note that these fees can easily triple during times of great network congestion.
The caveat of decentralization is that distributed blockchain networks are slow and expensive when compared to traditional financial networks. Banks in developed countries, like the United Kingdom, do not charge a cent for bank transfers, and merchants pay 0.35% for debit card payments, according to cardswitcher.co.uk. This fee increases to up to 1.8% for commercial credit cards.
Adding to that, blockchains have scalability issues. Ethereum transactions used to be very cheap when nobody used the network, but up until the start of August 2021, the network was running at 98% capacity. After a network upgrade called EIP-1559 went live in early August, this reduced to 51%. This did not make it cheaper to process Ethereum transactions,
A lot of whitepapers for blockchains protocols often speak of decentralization, speed/cost and scalability as the trifecta that’s difficult to crack, then invariably claim that they have found the path forwards. Upon closer inspection, they often sacrifice one of these elements; they are slow but secure (Bitcoin or Ethereum) or sacrifice decentralization (EOS or Binance Smart Chain).
The main way forwards for Ethereum is something called Ethereum 2.0, an upgrade that claims to have resolved these issues by various scaling techniques, including sharding and plasma, and also reduces costs through something called proof-of-stake.
However, Ethereum 2.0 has remained something of a running gag in the industry, since it’s always just out of reach and always in development. A version of it technically went live in 2020, and Ethereum will officially switch to proof-of-stake by the end of 2021. The final version, which would cut costs dramatically and increase throughput to about a hundred thousand transactions per second, will take serveal years to implement.
This is why scaling solutions for Ethereum exist. Ethereum is the most popular smart-contract enabled blockchain. It supports the vast majority of the decentralized finance and non-fungible token industry, and its size, robustness, community and history make it a popular blockchain on which to build.
Since Ethereum 2.0 is taking its sweet time, scaling solutions have cropped up to make it easier to use. OMG is far from the only one. Polygon (also known as MATIC) is another Ethereum layer-2 scaling solution, as is Arbitrum (which doesn’t have a token). Polygon has a market cap of $10 billion. OMG has a market cap of just $2.1 billion.
Rival blockchains, such as Solana, Fantom and Binance Smart Chain, have also become popular. On these blockchains, transactions are fast and often cost a fraction of a penny. Some analysts think that these blockchains will overtake Ethereum. They already host huge projects, like PancakeSwap on Binance Smart Chain, a BSC version of Ethereum-based decentralized exchange Uniswap, and the SolanaPunks NFT project on Solana.
Some analysts are concerned that Ethereum 2.0 will make scaling solutions like Polygon, Avalanche and OMG redundant. After all, if Ethereum 2.0 resolves the issues that are present on the blockchain, why bother with scaling solutions?
Vitalik Buterin, the co-founder of Ethereum, expects that these scaling solutions will co-exist with Ethereum 2.0. In March 2021, he said on The Tim Ferriss Show, “in Ethereum, everyone is roughly on board with the idea that you have some layer 1 scaling [improving the blockchain] and you have some layer 2 scaling.”
Who created OMG?
OMG was created in 2017 as OmiseGo. In a whitepaper, the team said that they would build “a decentralized exchange, liquidity provider mechanism, clearinghouse messaging network, and asset-backed blockchain gateway.”
It was founded by Vansa Chatikavanij as a subsidiary of SYNQA, a Thai fintech company that used to be called Omise Holdings. Chatikavanij became CEO in 2019. OmiseGO raised $25 million in a 2017 initial coin offering (a token sale that functions a little bit like an IPO, and precedes token listings on cryptocurrency exchanges).
Under OmiseGo, the company’s most popular innovation was to partner with Tether, the world’s largest stablecoin that’s pegged to the US dollar. The company claims it is backed by cash and cash equivalents but regulators have called this into question several times. Tether’s sister company, Bitfinex, said that transferring USDT (another name for Tether) through OmiseGo would reduce transaction costs by two-thirds and hasten speeds. Tether has also integrated with other networks, including Algorand, EOS, Liquid and Tron.
OMG Network was bought in December 2020 by a venture capital firm called Genesis Block Ventures. GBV is a subsidiary of Genesis Block, a Hong Kong over-the-counter firm. Genesis Block acquired OMG from its former parent company SYNQA.
OMG’s Latest Move: Boba
The OMG Foundation, the non-profit that maintains the OMG Network, has since expanded its offering. In August 2021, Enya, a scaling solution built by core contributors to the OMG Network, launched the beta of its mainnet (a test version of its blockchain). This mainnet beta is called Boba, and it uses another scaling solution called optimistic rollups. Again, it reduces gas fees and improves transaction throughput, making it cheaper to interact with non-fungible tokens and decentralized finance protocols.
Critically, Boba is not a side chain, a blockchain that operates parallel to Ethereum. In the creators’ own words, Boba “lives inside of Ethereum as a series of smart contracts that are capable of executing Ethereum transactions.”
In blockchain jargon, this makes Boba a “child chain”, since it relies on Ethereum’s security. Boba supports the same smart contract language used for Ethereum, called Solidity. Its foundational technology, Optimism, “is essentially a modified version of Ethereum, which makes it relatively easy to ensure EVM and Solidity compatibility, minimizing the efforts required to migrate smart contracts from L1 to L2.”
The OMG Foundation is launching a new project to support the network called BOBA. BOBA is a governance token, meaning you can use it to vote on proposals as to how the network is run. You will also be able to stake BOBA to earn a portion of the transaction fees levied by the network.
BOBA will be dropped in the wallets of OMG token holders. For each OMG token someone holds in their wallet on a participating exchange, or tokens held in certain liquidity pools, on November 12, 2021, the Boba Network will deposit an equivalent amount of OMG tokens. Token holders will receive 28% of the total supply of BOBA; a treasury will hold 42%, strategic investors will receive another 10% and the team will retain 20%.
How to buy OMG
The easiest place to buy OMG is on cryptocurrency exchanges. There are two types of cryptocurrency exchanges. The first are companies that maintain matching engines that let you trade with other users. Established cryptocurrency exchanges charge low fees and offer high liquidity.
The largest cryptocurrency exchange is called Binance. It is banned in Ontario (and many countries) but accounts for the greatest amount of OMG trading. As of this writing, a single pairing sucked up 13.79% of all OMG trading, or $1.4 billion. The pairing was for USDT (Tether, a stablecoin pegged to the US dollar).
Huobi, FTX and Coinbase are the next most popular trading venues for OMG, all for pairings of either USDT or directly for US dollars. Wealthsimple is slightly different; it is a crypto brokerage. Wealthsimple does not support OMG.
The second is a decentralized exchange. These are usually non-custodial protocols that let you swap tokens in and out of vast reserves called liquidity pools. The largest decentralized exchange is called Uniswap. The ETH/OMG pool has a market cap of $539,158 as of this writing. Trading on Uniswap is expensive; as of this writing, it costs $60 to trade an Ethereum coin for OMG.
To buy OMG, you’ll need to create an account with one of these services. To do so on a centralized cryptocurrency exchange, you’ll need to create an account. To trade in large amounts, you’ll likely have to provide some form of identification, like a driver’s license or a passport.
Once confirmed, you can wire money to the exchange and use it to buy cryptocurrencies. Note that many cryptocurrency exchanges do not insure deposits and are not regulated; you are entrusting them with your funds. Previous exchanges have turned out to be scams.
Once you have wired money to a crypto exchange, you can buy OMG. Since lots of exchanges do not support direct pairings for the Canadian dollar and OMG, you might have to first buy a coin that is paired with the Canadian dollar. Likely options are Bitcoin, Ethereum, or a stablecoin like USDC or USDT. You can then buy OMG with these coins. Note that exchanges will likely charge a withdrawal fee for OMG. For instance, as of this writing, it costs 3 OMG (about $42) to withdraw your funds from Kraken, and you’ll have to withdraw a minimum of 6 OMG ($85).
Decentralized exchanges will not charge withdrawal fees, nor do they require identification checks. However, you can only swap tokens for other cryptocurrencies; regular currencies aren’t supported. To get started, you’ll have to create a MetaMask wallet and buy OMG with cryptocurrencies held in your account. As mentioned, trading fees can be steep. Many of these protocols are also experimental and are prone to hacks.
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