There exists a fundamental issue in our traditional financial world: the services provided by banks, payment processors, gateways and financial institutions are majorly subject to privileges for the middle class. Not to mention, there is also a severe lack of communication and coordination amongst these service providers themselves before they work in coalition with the outside world. Now there have been significant efforts in engineering around payment systems whose compatibility encompasses most of these payment networks and financial institutions. But in a world dominated by centralized networks allowing for the controlling entity to arbitrarily change the mechanisms which result in significant amount of transaction costs, OmiseGo (OMG) comes across as an emerging disruption in the traditional digital payment platforms.
The OmiseGO team has been founded on the principle that, “using a decentralized exchange on a public blockchain may alleviate a lot of those concerns. In their mind, anyone should be able to access any type of financial transaction in a decentralized and affordable manner…”
OmiseGo: Unbanking The Banked
In their crowdsale document, said “Our target customers are both the 73% of the Southeast Asian population who do not currently use or have access to formal financial services (the so-called “unbanked”) and the 27% of the population currently using formal financial services (“banked”) because it’s been their best option until now. These end-users will be provided a tool to more effectively and informatively manage their wealth in and out of whatever asset-type or currencies they choose, including decentralized currencies like ETH and BTC, as well as nationally licensed full reserve-backed fiat tokens that users can take custody of themselves”
OMG essentially plans to become an alternative financial and digital commerce tools platform. This next generation Ethereum based platform enables real-time, peer-to-peer value exchange and payment services agnostically across national jurisdictions and organizational silos.
The OmiseGO blockchain has been constructed in a manner for it to allow eWallet interchange, supported by a decentralized exchange, cryptocurrency matching, orderbook, and clearinghouses without full-custody trust. The construction has the additional benefit of allowing for a decentralized liquidity pool to be created for use with payment channels on various cryptocurrencies, such as Bitcoin.
Before we proceed to discuss the benefits of OMG, let us look at some technicalities that the blockchain is built upon and their definitions, as mentioned in the whitepaper :
- OmiseGo is a blockchain which hooks into other blockchains to allow for trading across token/asset classes, largely backed by Ether. From the perspective of any individual chain, it is a scalable blockchain whose contract state is bonded by the activities of the OMG chain itself. Activity on other chains can interlink with this chain via interchain committed proofs similar (but constructed differently) to BTC Relay on the OMG chain which can be submitted on Ethereum.
- Liquidity is the ability to quickly buy or sell a commodity without a significant change in its price and without incurring transaction costs. The markets that provide liquidity are referred to as liquidity pools. OMG provides as a decentralized liquidity pool i.e., by using the mechanisms of a decentralized clearinghouse, they plan create a Lightning Network hub which is not owned by any single individual on tokens which support more complex smart contracts. This allows the OmiseGO chain to offload a lot of on-chain activity, while encouraging decentralization. They believe that the natural network effects of liquidity centralization can be mitigated by decentralized stake-chains with deterministic/known consensus rules.
- This Lightning Network is designed to avoid this type of rent extraction for nodes with a great deal of liquidity however, there is some optimal benefit of having well connected nodes. It is possible to construct mechanisms similar to the clearinghouse in the section above whereby a node can bond up activity on the OMG chain, and the OMG chain can act as a single Lightning hub with a great deal of liquidity.
- The OmiseGO White-label Wallet SDK will allow a diversity of payment solutions to be easily deployed on the robust OmiseGO network. Digital wallet providers have the flexibility to enhance, add, and customize payment solutions for various industries and vertical markets.
- Centralized full-custody cryptocurrency exchanges such as Poloniex are high performant, but relies upon the trust of a single party to hold custody responsibly and execute orders honestly. Networks such as Ripple (XRP) rely upon trusted named validators to reach consensus, which game theoretically converge on an unchangeable set. Many decentralized exchange platforms using EVM smart-contracts rely upon either doing things directly on-chain (which forces everything on the Ethereum network and does not permit cross-blockchain activity), or they do things off-chain without a single execution 9 engine. The OMG chain is designed to operate trading across chains (e.g. ETH-BTC) without using full-custody issued assets for native cryptocurrencies.
All these features have been included in the OMG blockchain after careful consideration by a management team that includes some of the finest brains of the crypto industry:
- Jun Hasegawa : CEO, Founder
- Donnie Hariunsut : COO, Co-Founder
- Wendell Davis : Product Design
- Thomas Greco : Special Advisor
- Vansa Chatikanaij : Managing Director
- Joseph Poon : Lightening Network Co Author
- Vitalik Buterin : Founder, Ethereum
- Dr Gavin Wood : Co-Founder, Ethereum; Founder, Parity
- Jae Kwon : Creater of Tendermint and Cosmos Network
- Prof David Lee Kuo Chuen : Professor of Quantitative Finance, Singapore University of Social Sciences
“As you can see by the heavy weights on this team, they believe they can uphold Ethereum and help project it to the future by assisting its growth through systems such as this. They obviously see this as a means to change how we do business between ourselves and how businesses accept currency for purchases….”
Reinventing The Wheel
As quoted in an article on The Merkle, The popularity of OmiseGo is currently on the rise. Although it is possible this is merely the result of someone artificially pumping the OMG price, the token sees a fair amount of trading volume. Right now, one OMG is valued at $3.03, which is quite a high value considering there are nearly 100 million tokens in circulation. There are over 140 million tokens in total. It is an intriguing project to keep an eye on, although one should never be fooled by initial successes.
Bringing a new type of financial inclusion to the banked population is not easy. This is not due to a shortage of people, as there are nearly 6 billion banked individuals on the planet today. However, not everyone wishes to be included in this new financial system either. A lot of people value the concept of living off the grid and not relying on global financial services.
As stated on the reddit thread r/Ethtrader,
“From a community angle, we’re launching OmiseGO to support Ethereum scaling and to provide a decentralised exchange, that is not only totally decentralised but also has correct incentive alignment with Ethereum (because it uses the Ethereum mainnet for economic security, OMG will not siphon off value from ETH like most other tokens have the potential to, but will rather support it). But from a business angle, we’re launching OmiseGO to support Omise Payments and all existing stakeholders, including our existing and future merchants, such as McDonald’s in other countries in Asia – McDonald’s Thailand is just the start.
Through OmiseGO, all Omise merchants will be able to seamlessly accept payments in multiple currencies, including ETH or BTC or other cryptos, without needing to know what their client is paying in. And any other payment gateways, including Omise’s biggest competitors, as well as global giants like Stripe or Cybersource, will benefit from using OmiseGO/OMG, and are welcome, no partnership or permission needed. The OMG chain will be an entirely public and permissionless network, connected to Ethereum.”
A Promising Future
A McDonalds in Thailand jumped on board to use their software as a means of payment from customers to the McDonalds, to make purchases from McDonalds and then the funds are automatically converted into the currency in which the McDonalds would like to take.
Like McDonalds, the technology and benefits that OmiseGo offers are being quickly recognized by many companies worldwide. The secret behind the building of Omise’s success is their focus on understanding and addressing real business needs in an easy, integrated and secure manner. Leveraging their in-house expertise in the payment market and experience in implementation and commercialization of financial products, we at ItsBlockchain believe that OmiseGO has the potential to be a global standard for exchange and payments.
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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