Omisego, now known as the OMG Network, is not a mineable cryptocurrency. It operates on a proof-of-stake (PoS) consensus mechanism, which means that new coins are not created through mining but by staking. Users can participate in the network by holding and staking OMG tokens to help secure the network and, in return, earn staking rewards.
This is in contrast to cryptocurrencies like Bitcoin, which use a proof-of-work (PoW) mechanism where mining is necessary to validate transactions and create new coins. If you’re interested in obtaining OMG tokens, you would have to purchase them from a cryptocurrency exchange or earn them through staking or participating in the network.
OMG Network token (formerly known as OmiseGO) launched into crypto space back in 2017 at the height of the DeFi craze, as an early experiment to solve the Ethereum blockchain’s scalability issues, and with the promise of reducing the congestion that troubled the Ethereum network.
Jun Hasegawa and Donnie Harinsuit, founders of Thailand-based payment platform Omise, created OmiseGo with an ambitious vision to bank the unbanked and make financial services accessible to millions around the world.
Early investment from Japan’s Bank of Ayudhya and Omise’s partnerships with giants like McDonald’s and Alipay generated a lot of buzz for the token, and the OmiseGo startup raised around 25 million USD within a month of its initial coin offering (ICO) launch.
Fast forward a couple of years and OmiseGo is now the OMG Foundation and it has been sold to Genesis Block Ventures. While the token itself remains the same, the story around the token has changed considerably.
We prepared a short guide to explain how OMG token and OMG Network changed and help you understand how they work at the present.
What Is Ethereum’s Blockchain Scalability Problem?
Blockchain technology became the basis of cryptocurrencies ever since the launch of the world’s first cryptocurrency, Bitcoin (BTC). Blockchains are public and immutable ledgers that store transaction information. Transaction details are shared over a peer-to-peer network of users in order to validate and verify the accuracy of the ledger.
While this novel solution has allowed digital currencies to flourish, blockchain technology is not without its problems. One of the most pressing issues blockchains face is the problem of scalability.
While most blockchains allow trustless transactions without third-party authorization, existing technology puts limits to how many transactions can be accomplished in a given time and how fast transactions clear, depending on the network traffic.
Payment processor companies like Visa and Mastercard can process up to 5000 transactions per second whereas the Ethereum network can only process up to 20 transactions per second (for comparison, Bitcoin can process up to 7 transactions per second).
As the Ethereum network grew over the years, the scalability issues became clearer and more pressing.
In 2017, Vitalik Buterin and Joseph Poon suggested a layer two solution called “Plasma” to enable Ethereum blockchain to process smart contracts quicker. However, it became clear by 2019 that Plasma wouldn’t work as previously thought and it was largely abandoned for another layer two solution known as Optimistic Rollup.
Groups that previously developed applications and clients for Plasma abandoned their projects to develop products that can work with Optimistic Rollup, and some other layer two solutions that are being considered by the Ethereum community.
How Does OMG Network (OmiseGo) Help the Ethereum Blockchain?
Thanks to the Ethereum blockchain’s infrastructure, Omise was able to create OMG cryptocurrency on the Ethereum blockchain as an ERC-20 token, without having to develop a dedicated OmiseGo blockchain.
OmiseGo initially planned to develop a client for Plasma to take advantage of the layer two solution in order to offer financial services to those who don’t have access to mainstream financial institutions.
Similar to how Ripple works, the OmiseGo network would facilitate Omise payments, helping people make transactions without using bank accounts or credit cards, and send money across Southeast Asia and Japan without paying exuberant fees.
The startup promised to develop a network that would facilitate seamless transactions between different blockchains, similar to how SWIFT payments work across different banks. OmiseGo Network would utilize OmiseGo Coin, with OMG Coin stakers profiting from staking their coins.
However, like most companies that worked to develop products for Plasma, the OmiseGo project was left unfinished.
It was sold and rebranded as OMG Network with the reversed motto of “unbanking the banked”. Later on, it became OMG Foundation and partnered with Enya, a company that works to develop Optimistic Rollup scaling solutions for Ethereum.
OMG Network aims to become an interoperable decentralized exchange that runs on the Ethereum blockchain, allowing seamless exchange between digital currencies. The final product can be an alternative to centralized cryptocurrency exchanges such as Binance, having lower transaction fees for exchanging digital currencies.
Can You Mine OMG Tokens (Omisego Coin)?
Originally, the OMG token was designed as a utility token for the plasma network. Users would be able to use the token to send digital currencies across blockchains and stake their tokens to validate transactions to make a profit off transaction fees.
This staking mechanism is also known as the proof-of-stake (POS) model and it’s different from other consensus mechanisms like proof-of-work (POW) cryptocurrencies like Bitcoin use. With PoW, users mine in order to validate transactions and are rewarded with block rewards and transaction fees.
With PoS, users stake the cryptocurrency they already own by locking it in a smart contract to be able to validate blocks. Since OmiseGo Network had planned to use PoS to allow users to validate transactions, OMG tokens can’t be mined.
OmiseGo project developers minted a total supply of nearly 140 million OMG tokens. The majority of tokens were distributed to investors during the ICO. There were also airdrop distributions to spike public interest in the coin.
A Few Words Before You Go…
To summarize, you can’t mine OMG tokens.
OMG tokens might be useful in the future if the OMG foundation-supported Boba Network can solve Ethereum’s scalability problems.
OMG Foundation doesn’t have a working product for the OMG token yet, however, token owners could earn fees in the future depending on the project’s development.