Detailed Explanation of Ethereum Expansion Project OMG Network
Scalability is one of the most obvious problems in the crypto industry. Difficulty scaling is a bigger problem for Ethereum, which is questioned by the most used blockchain network.
Ethereum’s daily trading volume in September 2020, according to YChartsachieveThe all-time high of 1.4 million transfers surpassed the record of 1.278 million in January 2018. along withDeFiThis number is expected to increase further due to the booming field, with Ethereum currently processing more than 1.3 million transactions (as of February 10).
In order to achieve further growth, OMG Network (formerly OmiseGo) launched a scaling solution for Ethereum, which we will introduce in this article.
What is OMG Network (OmiseGo)?
OMG NetworkOmiseGo, formerly known as OmiseGo, is a layer-2 expansion solution for value transfer on Ethereum.
To put it simply, the second-tier expansion solution is based on another blockchain (OMG sub-chain) on top of one blockchain (Ethereum).
Moving transactions to a faster chain with higher throughput frees up valuable block space on the main blockchain while speeding up and reducing costs.
OMG Network does exactly that, while preserving the security and trustworthiness of Layer 2 transactions.
OMG Network is compatible with both ETH and ERC-20 tokens on the Ethereum blockchain, and cryptocurrency exchange Bitfinex has integrated it for transfers, withdrawals and deposits of its native USDT stablecoin.
Problems facing blockchain scalability and their impact on Ethereum
Before diving into how the OMG network works, let’s take a brief look at the scalability issues of blockchains, and Ethereum in particular.
While centralized systems, such as Visa, PayPal or MasterCard, can process thousands of transactions per second, decentralized networks often suffer from limited scalability.
The main reason behind this problem is that on a blockchain networkIntensive mechanisms required to reach consensus and validate data, is the key to maintaining a high degree of decentralization and security.
To do this, every validator in the network must reach a consensus to validate transactions and add new blocks to the chain. Bitcoin can only handle about 5 transactions per second (TPS), while Ethereum can handle up to 15 TPS.
When scalability is limited and the network experiences high demand, it is prone to congestion, resulting in excessive transaction fees and processing times.
Currently, Ethereum is under heavy load due to the heavy usage of decentralized finance (DeFi) applications. Therefore, the network is getting more and more congested, and the average gas cost on February 9 reaches$24.67。
How OMG Network works
In order to release block space on the Ethereum chain, OMG uses More Viable Plasma (MoreVP), which is an update of the Plasma layer-2 expansion technology.
Here, the OMG network bundles the transfers together, compresses them into a single transaction, and moves them to the OMG child chain (the second layer chain on top of Ethereum) for verification.
Finally, the child chain sends the verified transfer back to the main Ethereum 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 transfer 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, which is the operator. In comparison, aboutThere are 8000 nodes。
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 the operator, a decentralized network of computers known as watchers constantly monitors the operator for suspicious or malicious activity to ensure that the data submitted to the Ethereum blockchain is correct .
In addition, since validators on the Ethereum blockchain must finalize transactions through the OMG network, a similar level of security and decentralization to standard transfers on the main chain is achieved throughout the process.
Plus, the OMG child chain is non-custodial, which means that user funds never actually leave the Ethereum network, but are invested in smart contracts. Therefore, even if OMG goes offline or suffers a major attack, users can recover their funds normally.
OMG Token and its price performance
OMG Token (OMG) is the native token of the OMG network, which is used to pay for transfer fees on the second layer, and watchers can pledge OMG.
As early as June 2017, OMG Network issued OMG Token and raised $25 million from investors. Interestingly, OMG was one of the few that was able to survive the ICO boom in 2017surviveOne of the most popular crypto projects, its price has appreciated significantly.
As of February 10, 2021, the OMG token has soared from an initial valuation of $0.35 to $5.68, implying a historical ROI of 1520%.
How will OMG develop next?
Overall, the OMG Network is an exciting cryptocurrency project that aims to provide a viable solution to one of the most important problems in the blockchain space by enhancing the scalability of Ethereum.
releasereleaseThe beta version of OMG Network has been launched and has been deployed on the Ethereum mainnet.
Since its launch, OMG has integrated its Layer 2 scaling solution with multiple cryptocurrency services, includingUSDT transferBitfinex andLedgerAbout AAX Academy
About AAX Academy
AAX is a digital asset exchange supported by London Stock Exchange Group. It is a "high liquidity, low spread" extremely fast cryptocurrency contract trading platform. AAX Academy is a user education channel created by AAX, which aims to help more users learn novice tutorials and understand the basics of blockchain.
