Strategy vol. 02

In Blog, OMG Network by OMG Network

My very first communication on Omise/OmiseGO business strategy was posted 8 months ago. How time flies!

Since then, the OmiseGO team has been full steam ahead on product development, and elbow deep in initiatives to help grow this ecosystem. Here’s a summary of OmiseGO’s key milestones over these past months:

  • Released the first open beta implementation of the OMG wallet SDK
  • Developed Tendermint-based Honte, which is now open source on GitHub
  • Constructed the initial Plasma MVP
  • Announced the hard spoon of Honte onto Cosmos
  • Launched our inaugural blockchain co-working space, Neutrino, due to open its doors later this year in Tokyo, with Singapore, Bangkok and Seoul offices soon to follow
  • Donated an equivalent to USD1M to refugees living in poverty through GiveDirectly, along with Ethereum Founder Vitalik Buterin, to demonstrate our commitment to use blockchains to help struggling populations
  • Announced a partnership with MakerDAO to have their Dai stablecoin available to trade on the OmiseGO network, and OMG available as collateral for issuing Dai
  • Together with the best projects in the space, launched the Ethereum Community Fund, with a phenomenal first round of grantees supported

It has been a while since I wrote Strategy vol. 01. The key themes of that post were:

  1. Omise solution layers: Acceptance, OMG Money Gateway (network, DEX and SDK), Cash-in out
  2. OmiseGO entity structure
  3. Challenges across regions
  4. Strategies to address those challenges

Since then, our commitment to delivering highly performant solutions has been consistent, and we continue to #BUIDL according to the strategy set forth when we first embarked on this project.

OMG development is in progress, with the SDK open-source beta already released. If you’ve been following our updates on Plasma implementation and our recent hard spoon, Plasma development is progressing more rapidly than we expected. That said, we still have a lot of homework to do to correctly build our Layer 2 scaling solution: staking consensus, nested child chains, Plasma cash implementation and the Decentralized Exchange (DEX) mechanism are all still under construction.

“2 Birds, 1 Stone”

Today we’re announcing a significant addition to our strategy.

OmiseGO’s vision is to carry blockchain technology beyond cyber space and into the real world. It should be applied in our daily lives with interoperable wallets and apps accessible to every smartphone. To achieve this, there are several requirements of our network:

  1. Ethereum/OMG should be able to support massive transaction volume
  2. OMG Network should have sufficient transaction volume to incentivize validators to stake
  3. Wallets should be able to exchange in any tokenized value via a decentralized exchange
  4. Wallets should have cash-in (deposit)/cash-out (withdrawal) capabilities to enable free access to funds

We have ongoing efforts to build out #1, using the Plasma architecture to ensure the network can scale to process unlimited transactions simultaneously. To achieve #4, cash-in/cash-out, we will pursue integration with our existing Omise Payment Gateway platform to enable access to different sources of funds — credit, debit, internet banking, bill payment, Konbini pay, Alipay and many others.

However #2 and #3, sufficient transaction volume and support of all tokenized assets, present a chicken-and-egg problem: do we launch a network with existing transaction volume or do we start from scratch and wait for volume to flock to us? We have decided that the simplest way to resolve this is to be the chicken.

But what breed? Put another way, where can we capture transaction volume in the real world? There are several primary possibilities:

  • Chicken 0x01 : Payments
  • Chicken 0x02 : Commodity Trading (e.g., Gold, Oil)
  • Chicken 0x03 : Stock Trading
  • Chicken 0x04 : Derivatives Trading
  • Chicken 0x05 : Crypto Trading

For the purpose of incubating large transaction volume and diversity of tradeable assets for OMG from the get-go, we’ve decided the best route is to hatch Chicken 0x05: Crypto Trading. To this end, Omise will launch a new subsidiary which will aggressively develop a user-facing crypto exchange network this year.

The accompanying trading volume won’t be cooped up on a closed platform; this exchange network will connect with the OMG Money Gateway, providing two major benefits:

  1. Trade volumes on order books that will be migrated to the decentralized exchange, to provide liquidity on the DEX once it is launched on Plasma
  2. Transaction volume to incentivize staking with the OMG token, once staking functionality is enabled

We aren’t able to disclose full details at the moment but we are working to acquire small to mid size exchanges that will ultimately transact via OMG Network.

OmiseGO’s mandate is to build the back-end infrastructure to support the exchange of value across blockchains, and the wallet SDK to provide the means for users and service providers to easily take advantage of all of the OMG Network’s capabilities; it will not produce a consumer-facing exchange platform. However, our new (yet to be named) subsidiary will be tasked with building that functionality. The resulting exchange will enable trading of crypto and fiat as well as support deposits and withdrawals.

How will we differentiate from other exchanges?

The common challenges exchanges face include:

  • Execution speed
  • Transaction fees
  • Security concerns

As the community is already aware, OmiseGO is currently designing the OMG DEX mechanism. To enable high transaction speed, the DEX will be built upon the foundations laid by the first phase of Plasma. Transaction fees will be derived from the market rate for validation of Plasma chains and security will be ensured by Ethereum-rooted consensus for chain exits and disputes.

Our exchange will leverage this potent combination of built-in security, high throughput and low cost, applying the lessons learned over 5 years’ experience operating Omise as a payments provider.

With the chain protocol’s features and security, users will no longer need to store value in a bank. They will be able to hold, access and withdraw value without mandatory intermediaries. The availability of Dai trading pairs from launch will also make it easy to transact with stable values, without having to cash in and out of decentralized holdings.

Of course we should take steady and realistic steps to achieve these objectives. We believe this combination of ambitious goals and measured strategy will help to bring a practical decentralized blockchain use case to the real world in a timely manner.

I really want to see the capacity for people to tokenize value and have open access to funds; this is personal for me and gives me the motivation to build OMG into a “world exchange.” We will continue to utilize Omise’s expertise from specialization in payments for the past 5 years to conceive and develop the best tools for finance on Ethereum, always striving to grow the ecosystem and strengthen alignment of incentives among all stakeholders.

I would like to thank the community for supporting us as our path evolves, and for your continued enthusiasm as we develop the OMG Money Gateway’s capabilities. Our interest is always in creating a sound financial system, enabling financial sovereignty for all, and maximizing OMG community incentives. This new venture is one more way for us to expand and improve our contribution to a disintermediated economy.

I plan to describe in more detail why this is important for the community — and the entire world — at EDCON. Hope to see you there!