The OMG Network (OMG) token skyrocketed recently with its price rising from $1.88 to $6.55 (with a high of $9.57) on 22 Aug – a weekly ROI of 222.89%! The project itself wasn’t commonly known, not so long ago. So what caused the recent boom for OMG Network, in terms of both popularity and price?
What Is The OMG Network?
Before looking into the cause behind the spike, let us look at OMG first. The OMG Network (previously known as OmiseGO) is a Layer 2 scaling solution for the Ethereum blockchain. The scaling solution itself is called Plasma. It’s a decentralized, non-custodial, low fees and high throughput blockchain, working side-by-side with the Ethereum mainnet. It can help increase the transaction capacity of the Ethereum blockchain and relieve the congestion.
The OMG Network announced the Plasma V1 mainnet beta launch on June the 1st. The Plasma solution scales the Ethereum blockchain to thousands of transactions per second (TPS) – against the normal 12-15 TPS rate. It also reduces the fees by an estimated 1/3rd, while maintaining the same level of security.
OMG does this by processing transactions outside the Ethereum mainnet. The Ethereum mainnet itself is only used for the final settlement. Further, it batches and groups the transactions, making the process more efficient, less resource intensive, and thus cheaper.
Tether (USDT) Joins The OMG Party
The Tether (USDT) has long been the largest stablecoin issuer on all blockchains (majorly Ethereum) since it possesses the deep network effect and high liquidity across all digital exchanges. It’s total market cap has exceeded $10B! For this reason, Tether transfers on the Ethereum mainnet have long remained among the top three gas users.
Tether partnered with the Plasma network, the day it was launched on June 1st, realizing the utility and the potential of the solution. On Aug 17th, the integration with the OMG Network was reported to be completed. According to the press release “users will be able to withdraw and deposit Tether (USDT) to Bitfinex via its value transfer layer”.
“By processing USDt transactions on the OMG Network, users benefit from transaction validation times as low as a few seconds and transaction fees of a few cents — all at the same level of resilience as the Ethereum Network,” stated Vansa Chatikavanij, CEO at OMG Network.Official Press Release From OMG Network – Aug 17, 2020
Why Did The OMG Price Rise?
The OMG token price rise can be attributed to the on-boarding of the largest and most liquid Stablecoin on its network. The current extremely high fees on the Ethereum blockchain might also be a contributing factor, for the shifting of traffic to OMG Network will help alleviate the problem. Since, the OMG token is used as the native token of the network, it’s usage is set to increase massively in the coming days.
Even though, it’s likely the initial price rise was caused by speculation from users, since the network wasn’t being used much by Tether yet. It can be reasonably understood that OMG Network has potential to become the go-to protocol for other exchanges besides Bitfinex, looking to speed up USDT transfers.
About Layer 2 Scaling Solutions
The Layer 2 scaling solutions are decentralized protocols applied to increase the processing capacity of a blockchain (hence scaling) and as a result relieve congestion on the network. They work by delegating the network processing “off-chain” to their own chain, processing it there, before settling the final balances on the base layer mainnet.