OMG Network Review: Latest Ethereum Scaling Solution
While development for the project has been fairly slow with even its social media being nearly silent for over a year, OMG is back in the spotlight.
On June 1st, OmiseGO rebranded to become the OMG Network. This was in tandem with the official public launch of the beta version of their main net, something which has been in the making for over 2 years.
For those unfamiliar, the OMG Network seeks to become the world’s ultimate decentralized exchange, allowing users to seamlessly transfer almost any asset between borders and even between existing payment gateway giants such as PayPal and Alipay.
By the end of this article, you will understand why the OMG Network has people saying OMG!
A Synopsis of The OMG Network
You can think of Omise as the South-East Asian equivalent of companies such as PayPal and Stripe. Operating primarily in Thailand, Japan, and Singapore, Omise has an impressive list of partners including McDonald’s and Allianz.
Enter Vansa Chatikavanij, a Thai-born public infrastructure specialist who was raised in the United States. She helped many South-East Asian countries including Thailand, Malaysia, Indonesia, Laos and Myanmar develop their infrastructure by working with the World Bank to secure loans for various projects in the early 2000s.
Chatikavanij was shocked at how complicated and timely it was to get these funds from the banks into the hands of the workers who were actually building the infrastructure. In 2010, her father suggested she look into a remarkable technology called cryptocurrency and introduced her to Bitcoin.
Fascinated by this alternative, she noted in an interview that she had tried proposing Bitcoin to the World Bank as a method to transfer their development funds. In her own words: “they basically looked at me as if I was drunk”.
Some years later, Chatikavanij began putting together a team to develop a solution to the expensive and fragmented financial ecosystem found in East Asia.
As part of her hunt for the necessary talent, she secretly tried poaching developers from Omise. When Jan Hasegawa picked up on this, he called her to ask if she would be interested in working together to create what would eventually become OmiseGO.
When Hasegawa and Chatikavanij heard about Ethereum a few years later, they considered it to be the perfect network on which to build the OmiseGO platform. They contacted Ethereum’s creator, Vitalik Buterin, for assistance in developing the project.
Buterin, along with another Ethereum developer named Joseph Poon, ultimately became the architects of OmiseGO’s network and even had a hand in the writing of its whitepaper.
Since its inception, OmiseGO’s vision has been to facilitate the transaction of assets across both physical and digital borders. Not only that, but they wanted to become the entity which would bank the unbanked in South-East Asia and eventually the rest of the world. Ironically, OmiseGO’s slogan is “Unbank the Banked”, which is intended to be fanservice to the cryptocurrency community and its ethos.
To ensure the project would not lose steam right out the gates, the OMG Network has worked very hard to build partnerships and get on the good side of regulatory bodies within Thailand. This hard work paid off in 2017 when they finally got the nod from the Thai Ministry of Finance.
Furthermore, they are obsessed with user experience and have been focused around creating user-friendly interphases for their products. However, it was not until June 1st of this year that OmiseGO delivered what they had been promising since their 2017 debut – their first publicly available main net along with the extra bonus of officially changing their name to the more eye-catching OMG Network.
The OMG ICO
OmiseGO’s initial coin offering for the OMG ERC-20 token took place in June of 2017. 65% of OMG’s total supply of 140 million was sold at a price of roughly 50 cents USD per token.
This raised over 25 million USD. Of the remaining 35%, 20% was kept by the parent company Omise, 10% was given to the early developers of the project, and 5% was reserved for future airdrops to Ethereum wallets.
How Does The OMG Network Work?
Now that the OMG Network V1 Mainnet Beta has been released, we can comfortably take a deep dive into how it works. As mentioned at the beginning of the article, it was Ethereum founder Vitalik Buterin and Ethereum developer Joseph Poon who designed the underlying framework for the OMG Network.
The pair had earlier proposed a protocol called Plasma which sought to increase the performance of the Ethereum network. They drafted an adapted version of Plasma called “Minimal Viable Plasma” which was fully developed by the OMG Network team to become “More Viable Plasma”.
What is Plasma?
While Plasma involves some fairly complex technology, it is quite easy to understand at the conceptual level. Ethereum has had issues with scalability for quite some time. Its blockchain network can only process around 14 transactions per second (TPS).
For years, developers in the Ethereum community have been trying to create some solution which can increase the performance of Ethereum without sacrificing its decentralization and security, ideally without an overhaul of the network.
This problem is commonly referred to as the “blockchain trilemma”. It is often said that only two of the three ideals of scalability, decentralization, and security can ever be met by existing blockchain consensus mechanisms (namely Proof of Work and Proof of Stake).
Plasma was one of many solutions which was sidelined by Ethereum’s core development team, who realized their best move was to completely redesign Ethereum's network which is now in development and is known as Ethereum 2.0.
Plasma is technically a blockchain of its own – a second layer to Ethereum which is colloquially called a “child chain”. To optimize scalability, it processes transactions in batches rather than one at a time. The way the OMG Network describes this by likening it to car-pooling. Collecting multiple transactions and then validating them all at once against the core Ethereum blockchain can let you reach exponentially higher TPS.
The version of Plasma specific to the OMG Network uses a Proof of Stake consensus mechanism involving 3 components. The first is the smart contract which delivers the batches of transaction data to the core Ethereum blockchain.
The second is the “Operator”, the entity which provides the computing power necessary to aggregate transactions, produce blocks, and sends those blocks containing batches of transactions to the smart contract. The third component is the “Watcher” which monitors the network for any irregularities and ensures the information being submitted to the Ethereum blockchain by the Operator is correct.
Chatikavanij has stated that the OMG Network itself focuses on scalability and security at the expense of decentralization. Operators are centralized, and Watchers ensure the security of the network by monitoring the actions of Operators. This is how Buterin designed Minimal Viable Plasma out of the box. The lack of decentralization is likely why it was designated to be ‘minimally’ viable.
OMG Network developers made some additional changes to optimize Plasma’s design, namely removing the need for multiple network confirmations you often require processing a transaction on other blockchains, and giving users the option to immediately withdraw their funds from the network as a safety precaution. This drove them to name their version of Plasma as More Viable Plasma.
What Does The OMG Network Do?
The recently released OMG Network V1 Mainnet Beta only has a single function, albeit a very important one. It allows you to transfer Ethereum and ERC-20 tokens for a third of the cost and at breakneck speed.
Currently, the Ethereum blockchain is limited to anywhere between 14-20 TPS. In contrast, the OMG Network can process around 4000 TPS. Not bad at all!
As you may have guessed, the OMG token is used to pay the fees on this supersonic network and will eventually be used for staking by network Watchers. While the main net release may be a step in the right direction, there is still a long way to go in the grand scheme of where the OMG Network wants to be.
The OMG Network Roadmap
The OMG Network roadmap is quite short. While development appears to have been in high gear since 2017, it wasn’t until April of 2019 that they completed a testable version of their protocol. Almost every single deadline has been missed during development and only a handful of network features have been realized so far.
In a recent YouTube video, CTO Kasima Tharnpipitchai (known as ‘Kasima’) detailed the most significant milestones which have been met since 2018. These include the development of the More Viable Plasma protocol in 2018, the millions of test transactions they have executed on multiple test nets since 2019, the audits conducted on their smart contracts by Quantstamp and Consensys Diligence, and of course the launch of the OMG Network V1 Mainnet Beta.
Kasima also detailed the next steps for the OMG Network, namely expanding the types of assets which can be transacted on the network beyond Ethereum and ERC-20 tokens, and also introducing a staking mechanism for Watchers.
For the time being, Watchers on the OMG Network are also centralized, consisting of trusted parties known by its development team. No exact dates have been provided for when the OMG Network expects to add these features to their platform.
OMG Price Analysis
OMG has quite an impressive price history. Introduced to the markets in July of 2017 at its ICO price of about 50 cents USD, it skyrocketed to over 12$USD in the month that followed before settling down to around 7$USD.
During the crypto bull run of late 2017/early 2018, OMG reached a price of nearly 25$USD per token, more than double its previous high. This was a whopping 50x increase from its ICO price!
Although OMG ate the dirt like so many other cryptocurrencies in the year that followed, it has only dropped below its ICO price once and that was this year during the flash crash in March, where Bitcoin lost more than 65% of its value in a matter of hours due to the coronavirus crisis.
The price of OMG has seen a small pump in recent weeks from roughly 50 cents USD to nearly 2$USD, likely due to the long overdue launch of the OMG Network V1 Mainnet Beta.
The question you should be asking is where CAN’T you get OMG! It has over 200 trading pairs on what must be over 3 dozen exchanges (we stopped counting after 30). Unfortunately, not all of these exchanges are known to be particularly trustworthy or even operable.
Luckily, Coinbase Pro, Binance, Huobi, and Kraken are all on the list. Liquidity is excellent and trading is very active with more than half of OMG’s market cap being traded every 24 hours. Trading volume is also spread quite equitably among the top 10 exchanges it is being traded on.
OMG Cryptocurrency Wallets
Since OMG is an ERC-20 token, it can be stored on just about any wallet which supports Ethereum. Digital wallets for OMG include Trust Wallet (mobile), Atomic Wallet (mobile), MetaMask (web/desktop), and My Ether Wallet (web/desktop).
Our Take On The OMG Network
While the OMG Network looks good on paper, it has been seriously lackluster in practice. In addition to frequent development delays and missed targets, the OMG Network has come under fire in the past for falsely advertising the nature of its partnerships.
While its parent company Omise does have some notable partners, the OMG Network can’t say the same (for the time being). The general disconnect between expectations and reality throughout the duration of this project has given it quite a poor reputation.
Why is development so slow?
This is a question which the OMG community has been asking for years. Although the official response from the OMG Network team has been that they are trying to make sure the network has the integrity required to achieve the level of adoption and scale they are aiming for, comments by Omise’s CEO Jun Hasegawa suggests something different.
Hasegawa was the founder and CEO of OmiseGO when it launched but has stepped back to act as chairman to the OMG Network, with Chatikavanij taking the throne as CEO. While Hasegawa was still CEO, he noted in an interview that the OmiseGO development team was closely in contact with Buterin and Poon to develop the Plasma child chain network.
It is not farfetched to assume that the reason why there were so many delays, missed targets, and even internal errors in the network when it was launched internally in 2019, is because the two individuals who designed it were no longer present.
There is no denying that developers such as Buterin and Poon are geniuses or at least visionaries. In the absence of their continued support behind the scenes, the OmiseGO development team probably encountered some significant issues, some of which may have been impossible to fix without the helping hand of Buterin or Poon, both of whom have shifted their focus to other projects.
Additional flaws of OMG Network
As is often the case with cryptocurrency projects, there are some concerns regarding the total supply of the asset. OMG is supposed to have a maximum supply of 140 million but as can be clearly seen on CoinMarketCap, the max supply of OMG is slightly above this amount. It is also problematic that their main net blockchain explorer does not go in depth as to what’s actually happening on the OMG network.
Furthermore, some Reddit threads in the OmiseGO subreddit have discussed how it is possible to have a fixed supply of OMG which can also be staked. If the OMG Network is really looking to become the world’s exchange, how long can the ecosystem last on the small 20% supply that has been kept by Omise? That is only 28 million tokens.
Finally, the OMG Network has no shortage of competitors who are quite literally years ahead in developing their platforms. The most relevant is perhaps the Ren Project which is looking to be a complete interoperable solution for Etheruem.
The Ren main net launched on May 27th, just a few days prior to the OMG Network main net. It can do what the OMG Network will likely struggle to do next, which is transact cryptocurrencies between blockchains in a secure and trustless manner.
With such sluggish performance, borderline dishonest marketing, and no shortage of competitors, the future of the OMG Network looks quite grim. That being said, the development team seems determined to continue building on the momentum the recent main net launch has brought.
With some luck, they may just achieve their next milestones quickly enough to keep up the pace with similar cryptocurrency projects.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.