On June 1, OmiseGO, the developer of the Ethereum blockchain scaling solution, changed its name to OMG Network and launched the bet...
On June 1, OmiseGO, the developer of the Ethereum blockchain scaling solution, changed its name to OMG Network and launched the beta version of the OMG Network V1 mainnet with a demo wallet and an explorer for tracking transactions. This is a second tier solution - it should scale the Ethereum network to several thousand transactions per second, reducing the cost of one by 66%. On the same day, Bitfinex, the issuer of the largest stablecoin in the Tether market, began migrating the exchange's stablecoins to the OMG Network. How the new network is arranged and whether it will solve the problem of ether scaling, we understand the material.
Saturated May for OmiseGO
The Thai company Omise was founded in 2013. She handles domestic and international money transfers in Asian countries. In 2017, the company launched the OmiseGO project, a decentralized exchange platform for fiat and digital currencies based on Ethereum with the OMG token.
OmiseGO spent three years developing a solution to scale Ethereum by creating a second blockchain layer on top of the main network. Closed testing of the beta version of the project was launched in December 2019. The team believes they are creating " the fastest and most affordable way to transfer ETH and ERC20 tokens ."
The past few weeks have been very meaningful and eventful for OmiseGO. On May 14, Coinbase Pro, a platform for professional traders, added an OMG listing, which raised the coin's price by 25%. On May 21, the asset became available to customers of the main Coinbase platform, as well as users of its applications.
On June 1, OmiseGO announced a rebranding, changed its name to OMG Network and launched a new website. According to the company, the new name reflects much more what it is doing now and what it claims to be - providing the infrastructure that supports decentralized financial services in all their forms. Previously, the project was just a development, but now it is a working network. In addition, the project team has expanded by 45 people, and OMG Network will become the company's main product.
How OMG Network works
The main problem with Ethereum is scalability: the blockchain is constantly overloaded, transactions are becoming slower, and the cost of "gas" (transfer fees) is growing. The current networking capabilities have long been lacking for existing dApps. Because of this, the project is losing market share and competitors are stepping on its heels. Developers have been working on a massive update package for many years that will help the network move to state 2.0.
One possible solution is Plasma. It is a structure that allows additional blockchains (sidechains) to be created on top of the main network. Each such additional blockchain can meet specific requirements. Plasma eliminates unnecessary data in the root chain by broadcasting only transaction results to the network, which saves a huge amount of processing power and resources. This is the analogue of the Lightning Network for Bitcoin.
Unfortunately, Plasma developers have failed to achieve a stable and reliable solution. The sidechain must rely on validators to ensure the security of transactions, and all participants must be constantly online. These and other circumstances overloaded, not offloaded Ethereum. To solve these problems, the developers have come up with modernized versions of Plasma.
OMG Network uses one such solution - the More Viable Plasma specification (MoreVP, "the most viable Plasma"). MoreVP combines multiple transactions into one block, grouping them and sending them through a suite of Ethereum smart contracts. It turns out that the commission must also be paid for only one transaction. The grouped transactions are then verified and confirmed in a decentralized network of validators. They "freeze" a portion of the OMG coins for batch processing and routing transactions on behalf of the child chains.
MoreVP reimagines the general concept of Plasma. It is based on consensus - Proof of authority (PoA) - proof of authority. So far, the algorithm is not used often. In it, consensus is achieved only through the action of validators. The algorithm is similar to PoI (Proof of Importance) and PoS (Proof of Stake), but validators must be pre-approved and the centralization of the network must be higher. Likewise, the OMG Network will be managed by a pre-designated operator, and validators will only be responsible for transactions. Important conditions are also the impossibility of performing a "mass exit" from the network (which was one of the biggest stumbling blocks of the original Plasma concept), and the "one-tier" network, which implies the existence of only one additional blockchain layer, and not many of them.
OMG Network consensus is achieved by the following components:
- Root Chain Contract - Secures the child network, i.e. the OMG Network. Responsible for storing funds, keeps track of hashes of blocks of child chains, which contain information about depositing funds into the child chain, manages safe withdrawal;
- Child server - creates and sends blocks. This includes: collecting transactions that move funds across the OMG Network, sending OMG Network hashes to the root network contract, publishing transaction information. It also limits the maximum number of transactions that can go in one block. A sent transaction that exceeds the limit is queued and scheduled for inclusion in the next block. The priority of the queue is determined by the commission. If there are too many transfers in the queue, then the ones sent with the lowest fees are lost and must be resubmitted.
- Validator - Validates and verifies transactions to ensure that the consensus mechanism is working as expected.
The OMG Network team says the solution will increase the network's throughput to several thousand transactions per second and reduce their costs by 66% while maintaining the security of the Ethereum blockchain.
The company has launched a developer documentation portal and has also released two additional products to help with network deployment:
- A demo wallet that allows users to log into the network, conduct transactions and withdraw funds back to the main Ethereum blockchain on the network;
- Browser of network blocks , with which users can find out information about transactions and the state of the network: the number of blocks and transactions, wallet addresses.
Faster and more scalable withdrawals and staking options are planned in the future.
Any user can test the new network. The team is currently negotiating support for the network and other platforms. The developers advise making payments only for small amounts for experimental purposes - the network may contain bugs and errors.
Not all users are happy with OMG Network. "I am extremely disappointed. 1. Waiting time ~ 30 seconds to send one transaction for one user. 2. Can't send a transfer until the previous one has been sent (in eth 1.0 you can at least queue it in the mempool). 3. Only four inputs and four outputs for UTXOs (DeCenter models). 4. I don't see how it can be integrated into the current DeFi. 5. Strong centralization. Well, well, "- shared his experience of using the sidechain Roman Storm from the cybersecurity company PepperSec.
Bitfinex integrates OMG Network into Tether
On June 1, Bitfinex, the issuer of the largest dollar stablecoin Tether (USDT) by capitalization, announced the transfer of some of its tokens to the OMG Network. All transfers in USDT on the exchange will be forwarded to the OMG Network. The sidechain developers will take over the support of USDT deposit and withdrawal on the exchange.
OMG price chart for the last three months according to CoinMarketCap . In May, the coin doubled in price, and after the news release on June 1 - by 18%, but lost a little today.
Bitfinex's decision is not surprising - over 60% of Tether coins are launched on Ethereum. The Bitfinex team believes the Ethereum network is "vulnerable to severe congestion" during times of high demand. Ethereum's total transaction throughput is capped at approximately 12 transactions per second. But when the demand for transactions exceeds this level, this period increases, the payment for "gas" also increases. According to the exchange, the integration of the solution will reduce the size of the commission, increase the speed of transactions, reduce the congestion of the main network and allow traders to improve the efficiency of arbitrage trading.
Today, Tether is the largest consumer of "gas" on the Ethereum network: for example, in May, about 10,000 ETH (about $ 2.03 million) went to commissions - which is more than the next five protocols combined.
The largest gas consumers in the last 30 days according to Ethgasstation.info .
“This is good for Bitfinex, our users and the entire Ethereum ecosystem,” says Paolo Ardoino, CTO of Bitfinex, talking about the project's integration.
Indeed, transferring part of Tether to the OMG Network will not only improve the performance of the stablecoin, but also reduce the pressure on the Ethereum blockchain. The network will be freed up for more use among other DeFi protocols, it will be able to reduce its level of congestion and the size of the commission.
"DeFi now has 178,000 users, up from 90,000 five months ago. Is this a sign that Ethereum use cases are growing parabolic?" Asks Spencer Noon, CEO of DTC Capital. In the thread he opened, he parses other numbers that speak of the growth and potential of DeFi.
Finally
OMG Network launches at just the right time - Ethereum desperately needs more bandwidth, and the network upgrade to Ethereum 2.0 is once again being delayed. The launch of a second tier solution is a positive sign for the entire Ethereum ecosystem.
However, the project is still in beta and remains experimental. The solution is similar to the Lightning Network, and that one has many vulnerabilities.
OMG Network isn't the only company building a second layer for Ethereum. Most of the developers are now focusing on the Optimistic Virtual Machine (OVM) as the leading network scaling solution. OVM is a modification of the Ethereum virtual machine for the development of smart contracts in solutions of the second level, allowing to maintain all existing developer tools in the same form, with the same languages and tools as they are presented in the first level of the blockchain. In OVM-based developments, the most promising now seems to be the Optimistic Rollup solution from Optimism (formerly Plasma Group), as well as the Synthetix solution ... So, Optimistic Rollup rethinks transaction confirmation by validators. Rather than validating every transaction, the system simply assumes that they are all valid. Users, instead of proving the entire sidechain is correct, should only intervene when they see an invalid transaction by submitting “proof of fraud”. It is also quite possible that a better solution to the Ethereum scalability problem will be to abandon the second layer. For example, last December, BloXroute Labs introduced a BDN solution that cuts block creation and propagation times to 172 milliseconds, half the current level of 360 milliseconds.
The beta version of the Plasma-solutions may not be very popular on the eve of updates Ethereum, involving sharding (Sharding) - refusal of full node in favor of load distribution between all network nodes (shards) and other innovations. OMG Network is a solution for infrastructure that is not finished yet. It may be too early for such projects. At least, it is not worth waiting for something revolutionary from them yet.
