OmiseGO Layer-2 scaling protocol for Ethereum

OMG Network is a Layer-2 scaling protocol for Ethereum. What this protocol aims to achieve is a higher transaction throughput at a lower cost while leveraging the security guarantees of its underlying layer. OMG Network is predicated on the creation of a child chain that batches transactions before committing them to the root chain, which, in this case, is Ethereum. The child chain relies on the root chain as the trust and arbitration layer. With this type of relationship, if something goes wrong with the child chain, users’ funds should remain safe. The protocol's token, OMG, is the primary method by which users can pay for transaction fees and interact with the network.

Background

OMG Network (first developed as OmiseGo) is a non-custodial, Layer 2 scaling solution for transferring value on Ethereum. How the protocol processes transactions is centralized, but its Plasma-based design aims to decentralize network security. It also relies on Ethereum at its final arbitration layer. Most blockchain ecosystems are limited by low throughput, high and unpredictable transaction fees, and poor user experience. The project's team believes these are barriers that need to be overcome before businesses and developers will adopt blockchain for real-world applications, leading them to develop the OMG Network.

The core security proposition of Plasma revolves around honest users being able to exit the child chain (in other words, withdraw funds to the root chain) at any time. To exit the child chain, a user submits an exit transaction – along with an exit bond – to the root chain. The exit is subject to a "challenge period," during which any user can prove, if applicable, that the exit is invalid. If successfully shown to be invalid, the exit is not processed, and the challenger is awarded the exit bond. This exit game is solely dependent on the root chain.

As the child chain relies on the root chain to be its ultimate arbiter, it must periodically commit a hashed version of its state changes to the root chain by way of a smart contract. As opposed to submitting individual transaction data onto the root chain, the child chain bundles transactions into a Merkle tree and submits the root hash. Beyond these core elements, there is no prescribed configuration for a Plasma chain. They can take on different consensus protocols, block validation mechanisms, or fraud proofs. The design is adaptable to the use case. OMG Network is based on the Plasma MoreVP design, an extension of Minimum Viable Plasma optimized for the settlement of payments and value exchange between users and exchanges.

The original OMG Network team (under the OmiseGo name) co-authored the original Plasma white paper with Joseph Poon and was also the first project to perform an airdrop, a way to more widely share ownership of our token with the existing Ethereum community.

Technology

OMG Network is a Layer 2 scaling solution for Ethereum built using the plasma protocol. Plasma is a technology that hopes to allow developers to create a series of smart contracts that run on top of the main Ethereum blockchain.

OMG Network is currently operating as a PoA (Proof of Authority) network. It aims to offer a higher transaction throughput and lower execution fees than its underlying network (i.e., Ethereum). It is backed by a decentralized security model provided by Ethereum and a network of watcher nodes.

OMG Network is made up of three components interacting together to ensure funds in the network are secure:

The OMG Network Smart Contracts, deployed to Ethereum, provide the interface through which users can move funds into and out of the network.
The Child Chain Application, run by the OMG Network team, receives users’ transactions, encapsulates them in blocks, and publishes those blocks to the OMG Network Smart Contracts.
The Watcher application continuously observes the Child Chain application, validates its behavior, and reports any misdoing to the users who are subscribed. Watchers can be run by anyone, and the more are running, the safer the network is.