Last week saw the astronomical rise in the price of OMG (OMG Network’s cryptocurrency). From a decent price of ~$3 per OMG on August 17, the price of the token went as high as $9.82 on August 21, 2020. The price of the token went up by more than 100% within a few hours when the integration of USDT on OMG’s Network was announced. This report has been written to cover the entire journey of OMG Network and what led to its rise.
What is OMG Network?
Originally named as OmiseGO, the OMG Network is a decentralized exchange that can be used to transfer any asset between borders and even between existing payment gateway giants such as PayPal. OMG Network is not owned by any single one party but a distributed network of validators that enforce behavior of all participants. Even though the protocol that processes transactions may be centralized, the Plasma based design helps to decentralize the network. Unlike more blockchain ecosystems that have a low throughput, variable transaction fees and poor user experience, the developers of OMG Network aim to cross all these barriers to provide the leading payments service to businesses across SE Asia and the world.
Journey so far
OMG Network was established in Thailand in 2017 by the Omise company to provide electronic payment services to businesses in Thailand and Japan. Once it received a $17.5 million Series B funding led by Japan based SBI Investments in July, 2016, Omise began to expand its reach.
Omise, which is pronounced as ‘Oh-Mee-Say’ and which means ‘store’ in Japanese was founded by Hasegawa and Ezra Harinsut in 2014 who became friends during a homestay trip. Initially, the company provided a payment gateway system that allowed retailers to take credit card payments online. Since making payments had been a problem in South East Asia for a long time, getting a platform like Omise helped in making the payments system uniform in most SE Asian countries.
When Vansa Chatikavanij, a Thai born public infrastructure specialist realised how complicated and difficult it was to get funds from the banks and distribute them among workers who were building infrastructures, she tried to find a solution using blockchain technology that could solve the fragmented and broken financial ecosystem in SE Asia. This is when she collaborated with the Omise to form OmiseGO (OMG Network now).
With a large potential lying in the online payment system, Omise announced its ICO in March 2017 for a separate payment settlement system named OmiseGO (OMG Network now), that would be built on Ethereum. You can read the white paper here.
With an initial target of $19 million, Omise was able to raise $25 million worth of Ethereum during its ICO in 2017. 65% of OMG’s total supply of 140 million was sold at a price of roughly $0.50 per token. Of the remaining 35%, 20% was kept by the parent company Omise, 10% was given to the early developers of the project, and 5% was reserved for future airdrops to Ethereum wallets. The launch of the OMG tokens by the platform would be used to access the decentralized exchange and for payments purposes.
At the time of writing, according to CoinMarketCap, OMG is ranked 29th, is trading at $5.31 and with a circulating supply of 140,245,398 OMG it has a market capital of $744,155,262.
OMG Network is one of the only two projects that Ethereum co-founder Vitalik Buterin would provide support to, intellectually and financially. This thread on Reddit talks about Buterin’s contribution to OMG which includes working on the original Plasma white paper and much more. Along with Buterin, it was Joseph Poon (another Ethereum developer), who helped in developing OMG’s network.
In March 2019, OMG Network was acquired by Thailand’s largest private company Charoen Pokphand Group, for a whooping $150 million.
With a vision to bank the unbanked in SE Asia and eventually the rest of the world, OMG Network seeks to form a platform for the transfer of assets across and within borders. All throughout its development phase, it has been partnering with major players in the blockchain space and is even on the good side of Thailand’s regulatory body. Although there had been a delay in the delivery of the product, the OMG Network, on June 1, 2020 announced the launch of their mainnet .
The platform of OMG Network has adapted a version of Plasma called More Viable Plasma. Plasma in simple terms, was developed to increase the performance of the Ethereum network. Unlike the original Ethereum network, where transactions take place one at a time, Plasma can allow for the validation of transactions in batches. This would increase the number of transactions per second (TPS) and lead to more adoption among people. As explained by OMG Network, a good example for Plasma is like carpooling, where multiple payments and transactions will be batched and validated all at once to give a higher TPS.
Currently, the OMG Network V1 Mainnet Beta allows us to transfer ETH and ERC-20 tokens at a very low transaction cost and a high speed. Unlike the Ethereum blockchain which is stuck at 15-20 TPS, OMG Network can process around 4000 TPS and OMG tokens are used to pay fees on this network and will eventually be used for staking purposes too.
Our views about OMG
Although OMG Network has great partners in the blockchain space, it took quite some time for them to deliver until April 2019 when they had a testable version ready. While most deadlines have been missed, the OMG Network has tried to keep the audience updated with all the latest developments and learning through their social media. According to the OMG Network developers, the delay has been caused to ensure that the network is absolutely safe and secured. The only notable thing about the OMG Network is its association with Vitalik Buterin who has been an advisor for some time now. The OMG network has got great potential but the real problem lies in the list of competitors that it has got. According to The Block’s article, there is no shortage of competitors and some have even succeeded at developing platforms which can offer a lot more than OMG Network’s platform
Another flaw that was recently discovered is that the maximum supply of OMG tokens must be at 140 million OMGs but clearly CoinMarketCap shows that there are more tokens in supply than there should be. This could be one of the reasons why the price of OMG has not been able to reach its potential value.
Recently, there was a huge pump in the price of OMG after Bitfinex announced the integration of Tether (USDT) on OMG Network. We would like to discuss what that means and where it takes OMG from here.
What does this integration mean?
The integration of USDT on OMG Network took place on August 20, 2020 (although it was announced in June). This will help in the reduction in the confirmation times and make the payments faster. Integrating USDT with OMG Network will help in lowering transaction costs while ensuring that the network is as secure as Ethereum’s network. People can now enable USDT deposits and withdrawals on the OMG Network using Bitfinex’s platform.
In simple words, the transfer to OMG Network means that transactions will now happen in the Plasma. Initially, each transaction would have variable transaction costs which would add up and become very expensive. Since OMG is used to transfer ETH and ERC-20 tokens on its network, the Plasma will be able to send transactions in batches, thus ensuring that the several transaction costs are replaced by one. This was a major move by OMG Network that could reduce the congestion on Ethereum’s network and lower the fees.
As claimed by Paolo Ardoino, CTO at Bitfinex, “This will allow traders to react faster to trading opportunities and take advantage of arbitrage more efficiently between exchanges as the network grows.”
The reason why USDT was considered to be a good partner is because of the stability that it brings with it. Talking about statistics, the total market capitalization of USDT more than quadrupled from $2 billion to $ 10 billion between February, 2019 and today. Moreover, Tether also works with other notable blockchain networks like Algorand, Ethereum, EOS, Liquid Network, Omni and Tron.
Since the official announcement on August 20, 2020, there was an exponential increase in the price of OMG with the token value rising by even more than 100% within a matter of hours. Still wondering what might be the reason?
As mentioned earlier, this was because of the integration of Tether on OMG Network that led to an increase in hope for the reduction in the high fees that people have been paying on the Ethereum network. Since, OMG is the native token of the network, it’s usage is set to increase massively in the coming days if meaningful volume from USDT gets transferred to OMG’s network. This might take some time. As the transaction fees on Ethereum’s network will rise, we assume, people will start shifting to OMG’s to help alleviate the matter.
Even though it’s likely that the initial price rise was caused by speculation from users, we believe that OMG Network has a lot of potential and the price might rise as and when the demand for it increases.
Please note that CoinDCX does not give any Investment Advice. This report is purely for informational and research purposes. DYOR! Follow us on our Medium, Telegram and Twitter handle to get new updates.