OMG Network is a Layer-2 scaling solution for Ethereum that increases the transactional throughput of the network

It was initially called OmiseGO and was a subsidiary of Genesis Blockchain Ventures, a venture capital firm based in Hong Kong. OMG Network has since changed its name to OMG Foundation .

Technology

OMG Foundation's technology is based on Plasma, a framework developed by Ethereum creator Vitalik Buterin and blockchain technologist Joseph Poon.

Plasma is a framework for moving bulk transactions off of the Ethereum blockchain onto “child chains” — blockchains that exist alongside the Ethereum blockchain connected to the main network. Plasma child chains are optimized to speed up transaction processing before data is returned for final validation on the Ethereum root chain.

OMG Foundation can process thousands of transactions per second (TPS) and can reduce the costs of operating on Ethereum by one-third. OMG Foundation’s native token, OMG, was minted to raise funds to develop the project through an Initial Coin Offering (ICO) in 2017.

Shortly thereafter, OMG was airdropped to the Ethereum community — the first instance of such an airdrop on Ethereum. OMG is now used for paying transaction fees, and once OMG launches Proof of Stake (PoS), the token can be used as a staking mechanism and for network governance.

How Does OMG Work?

OMG Foundation utilizes an update of Plasma — called More Viable Plasma (MoreVP) — to significantly increase transaction throughput. More specifically, OMG Foundation bundles transactions together, compresses them into one transaction, and verifies them on the OMG Foundation child chain.

The child chain then returns confirmed transactions to Ethereum for confirmation on the blockchain This bundling technique enables OMG Foundation to process thousands of transactions per second.

Transaction costs are one-third of what they would cost on Ethereum because gas fees are paid on the bundled, compressed transaction instead of each individual transaction.
The OMG Foundation child chain is controlled by a single block-producing node called an Operator, which validates transactions before forwarding them to Ethereum.

While Ethereum has more than 8,000 nodes, OMG Foundation has only one. Proponents of state channels argue that this centralized mechanism compromises the distributed ethos of blockchain. OMG Foundation, however, decentralizes security through a network of computers called “Watchers,” which monitor the Operator and the network for suspicious activity. Anyone can become a Watcher.

OMG Foundation is a promising Layer-2 scaling solution for Ethereum. It has the potential to significantly increase the transactional throughput of the network and reduce transaction costs. OMG Foundation is still under development, but it has already shown promising results.

References:

OMG Foundation’s Layer-2 Scaling | Gemini. (n.d.). Retrieved from https://www.gemini.com/cryptopedia/what-is-omg-network

elegant_solution. (n.d.). Retrieved January 13, 2024, from https://www.freepik.com/author/user28432665

Freepik - Goodstudiominsk. (n.d.). Retrieved January 5, 2024, from https://www.freepik.com/author/goodstudiominsk

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