The OMG Network (formerly OmiseGO) is a value transfer network for Ethereum and any ERC-20 token. It describes itself as the first production-grade layer-2 Ethereum scaling solution and aims to let people move money and a variety of digital values on the blockchain faster, cheaper, and without compromising on security.
The Beginner’s Guide
Created by an established payments processing company called Omise, OmiseGo seeks to use the OMG cryptocurrency to streamline how electronic wallets issue and exchange assets.
The idea is that digital payments today mostly occur within single payment platforms like Venmo or Alipay, meaning money can’t move easily from one platform to the other.
The vision, then, is that payment networks like Omise could leverage OmiseGo to trade assets on behalf users, sourcing liquidity for trades and facilitating transfers on a blockchain that serves as a real-time market for assets in all participating networks.
But the OmiseGo blockchain isn’t designed to operate solely on its own. Rather, it’s built on top of Ethereum (ETH), assets on its network can be backed by Ethereum’s cryptocurrency, ether.
Using Ethereum and OmiseGo, Omise posits that e-wallet users could freely move and convert these assets, whether they are loyalty points, government currencies or new crypto assets.
Understanding how OmiseGo works can be complex, and it’s important to remember OmiseGo is still working to develop the technologies first outlined in its 2017 white paper.
As of 2020, OmiseGo has released a public testnet with audited contracts designed to interact with Ethereum’s public testing platform. So, the project remains in its early stages.
Who created OmiseGo?
OmiseGo is developed by Omise Go Pte Ltd., a subsidiary of Omise, a Thailand-based payments processor founded in 2013.
The company began exploring how it could apply blockchain to its business in 2015, launching the Omise Blockchain Lab to conduct research and testing.
Then, in 2017, it set up a new company, which raised $25 million to fund development by selling 65% of the supply of its OMG cryptocurrency. Thanks to Omise’s partnerships with companies like Alipay and McDonald’s, OMG was able to attract interested investors.
Twenty percent of the OMG cryptocurrency supply was then reserved for future network costs, while 9.9% was set aside to compensate the founding team.
An additional 5% of the OMG supply was distributed to anyone who had an Ethereum wallet with more than 0.1 ETH. OmiseGo framed this as a payment to the Ethereum network, as it raised its funds by creating an Ethereum token.
How does OmiseGo work?
The vision of Omise is to integrate many electronic wallets using the OmiseGo blockchain.
Over time, as more e-wallet providers are added to the network, and more of the crypto assets they issue can be exchanged on a blockchain, OmiseGo believes it could help provide banking services to those who have been excluded from the financial system.
The OmiseGo blockchain
OmiseGo is a proof-of-stake blockchain meant to clear and settle the movement of assets between various e-wallets, without those e-wallets necessarily having to trust each other.
The OmiseGo blockchain also includes a built-in trading engine where e-wallet providers can publish orders and be matched with other parties seeking to trade various assets.
These orders can be programmed to complete within a given block on the Omise blockchain or can be left open-ended based on available asset pricing.
Not all payments have to take place within the OmiseGo decentralized exchange, as OmiseGo is interoperable with the Ethereum blockchain and the Lightning Network, a payments technology built on top of Bitcoin (BTC).
How OmiseGo uses Ethereum
OmiseGo has a number of technical features designed to make it compatible with the Ethereum blockchain. For example, all nodes validating transactions on the OmiseGo blockchain need to be set up as nodes on the Ethereum blockchain.
E-wallet providers can also create new assets backed by ether, or they can create contracts that lock ether on Ethereum, pending certain conditions on the OmiseGo blockchain. If contracts execute, these funds can then be again unlocked and returned to their original owners.
The idea is that trading between e-wallets can take place at a high volume on the OmiseGo blockchain, with the final transactions being ultimately settled on Ethereum.