Scalability is one of the most obvious problems in the encryption industry. For Ethereum, which is questioned by the most used blockchain network, difficulty in scaling is a bigger problem.
According to YCharts data, Ethereum’s daily transaction volume reached its highest point in history in September 2020 , with 1.4 million transfers, exceeding the record of 1.278 million in January 2018. With the vigorous development of the DeFi field, this number is expected to increase further, and Ethereum currently processes more than 1.3 million transactions (as of February 10).
In order to achieve further growth, OMG Network (formerly OmiseGo) has launched an expansion solution for Ethereum, which we will introduce in this article.
What is OMG Network (OmiseGo)?
The predecessor of OMG Network is OmiseGo, which is a two-layer expansion solution for value transfer on Ethereum.
Simply put, the second-tier expansion solution is based on another blockchain (OMG sub-chain) on top of one blockchain (Ethereum).
Transferring transactions to a fast chain with higher throughput can free up valuable block space on the main blockchain while speeding up and reducing costs.
OMG Network does exactly this, while retaining the security and credibility of the second layer of transactions .
OMG Network and Ethereum blockchainETHAnd ERC-20 is compatible tokens, encryption currency exchange Bitfinex has integrated into its nativeUSDTStable currency transfers, withdrawals and deposits.
The problems faced by blockchain scalability and its impact on Ethereum
Before we dive into the working principle of the OMG network, let’s take a brief look at the scalability of the blockchain, especially Ethereum.
Although centralized systems, such as Visa, PayPal, or MasterCard, can process thousands of transactions per second, decentralized networks are often troubled by limited scalability.
The main reason behind this problem is that the intensive mechanism required to reach consensus and verify data on the blockchain network is the key to maintaining a high degree of decentralization and security.
To this end, each verifier in the network must reach a consensus to verify transactions and add new blocks to the chain. Bitcoin can only process about 5 transactions per second (TPS), while Ethereum can process up to 15 TPS.
When scalability is limited and the network encounters high demand, it is prone to congestion, resulting in excessive transaction costs and processing time.
At present, due to the extensive use of decentralized finance (DeFi) applications, Ethereum is under a huge load. As a result, the network is getting more and more congested, and the average gas fee on February 9 reached $24.67 .
How OMG Network Works
In order to release the block space on the Ethereum chain, OMG uses More Viable Plasma (MoreVP), which is an update of Plasma’s second-layer expansion technology.
Here, the OMG network bundles the transfer together, compresses it into a single transaction, and moves it to the OMG sub-chain (the second-layer chain above Ethereum) for verification.
Finally, the sub-chain sends the verified transfer back to the Ethereum main blockchain for final verification.
Due to the efficiency of the expansion technology, the OMG network can process thousands of transactions per second, and the cost of each transaction processed through OMG is exactly one-third of the cost on Ethereum.
The reason why the OMG sub-chain can have such a good scale is because there is only one node in the network, the operator. In comparison, there are approximately 8,000 nodes on Ethereum .
Although the single-node structure makes the OMG sub-chain more centralized than Ethereum, it can achieve much higher transaction throughput than the main blockchain
However, despite the centralized nature of operators, a decentralized computer network called a watcher constantly monitors the operators for suspicious or malicious activities to ensure that the data submitted to the Ethereum blockchain is correct .
In addition, since the validator on the Ethereum blockchain must finally complete the transaction through the OMG network, in the entire process, a level of security and decentralization similar to the standard transfer on the main chain is achieved.
In addition, the OMG sub-chain is non-custodial, which means that the user’s funds never really leave the Ethereum network, but are invested in smart contracts . Therefore, even if OMG is offline or under a major attack, users can normally withdraw funds.
OMG Token and its price performance
OMG Token (OMG) is the native token of the OMG network. It is used to pay for the second-tier transfer fees. Watchers can pledge OMG.
As early as June 2017, OMG Network to release the OMG Token, the investment raised $ 25 million persons. Interestingly, OMG is one of the few crypto projects that can survive the 2017 ICO boom, and its price has appreciated significantly.
As of February 10, 2021, the OMG token has soared from its initial valuation of $0.35 to $5.68, which means a historical return on investment of 1520%.
How will OMG develop next?
In general, the OMG network is an exciting cryptocurrency project that aims to provide a feasible solution to one of the most important problems in the blockchain field by enhancing the scalability of Ethereum.
In June 2020, the project released a beta version of OMG Network and has been deployed on the Ethereum mainnet.
Since its launch, OMG has integrated its second-tier expansion solution with multiple cryptocurrency services, including Bitfinex for USDT transfers and Ledger hardware wallets . The project hopes to reach new cooperation with more crypto asset companies.
About AAX Academy
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