With crypto exchange fees soaring to nearly 500 Gwei on September 18th, 2020, we know exchanges and their users need a solution — fast. We’ve taken the first step to rein in high gas fees by integrating with Bitfinex, one of the largest crypto exchanges, to support transfers of the biggest gas-guzzler of them all: Tether (USDt).
But what does Bitfinex’s OMG Network integration mean for you, and why should other exchanges integrate with our Ethereum scaling solution?
Think of OMG Network as a super-highway built on top of Ethereum Road, with Bitfinex being the first stop. As of now, USDt deposits & withdrawals (cars) can use our super-highway to get to Bitfinex or exit back to Ethereum Road. As we add more stops by integrating with more exchanges, we’ll have an interconnected super-highway primed to reduce Ethereum congestion and crypto exchange fees (toll).
The OMG Network’s value proposition was best described by our COO, Stephen McNamara:
As icing on the cake, scaling solutions like OMG Network free up Ethereum to support services predicated on smart contracts like dApps, developer tools, and more.
Why did OMG Network integrate with Tether (USDt) to reduce crypto exchange fees?
High crypto exchange fees occur because the Ethereum blockchain is a valuable but limited resource. Exchanges and their users compete for this high-cost computational resource by sending and receiving value. But when demand is too high, Ethereum faces severe network congestion and transaction fees and times shoot up.
Further bombardment of the rootchain prevents arbitrage from happening across exchanges, making each market a price island, and sky-rocketing crypto exchange fees. That’s when severe instances like the March 12th pandemic flash-crash can occur.
We chose USDt because we know it makes up most transfers moving across exchanges, contributing to a large portion of the transaction fees on Ethereum. By supporting USDt value transfers, the OMG Network can offload some of Ethereum’s burden, helping the entire ecosystem by lowering fees, helping price transparency, fairness, and improving market liquidity. Let me illustrate with an example.
- Exchange A’s users make about 200K withdraws/month;
- Exchange B’s around 150k;
- Exchange C’s around 100k;
- Assuming we capture withdraw and deposit, we can move up to 450,000 x 2 = 900,000 transactions off Ethereum/month
- Assuming each transaction costs 1.5 USD, and the OMG Network charges 1/3rd the gas fees of Ethereum, we reduce crypto exchange fees from 1,350,000 USD to 445,500 USD.
Building The Future’s Financial System on The Ethereum Blockchain
The speed of settlement provided by blockchain attracts fiat money, and USDt is the rail for various types of money. Tether’s $4.5B growth back in March was due to traditional traders moving their assets from fiat USD to USDt for faster settling.
Tether is the easiest way to hold a relatively stable volume of value at an exchange that doesn’t accept dollars. It’s much more about that [USDt] network effect than any technology, infrastructure or other advantage.Why Tether Volume Is at All-Time Highs
USDt is also used worldwide as a medium of transfer. So not only does this integration help exchanges tap into the USD pool, it’s an opportunity to propel the Ethereum blockchain globally.
A year after China banned local fiat on-ramps for crypto exchanges, Chinese traders continue to drive the market forward by using the dollar-pegged stablecoin tether (USDt).Why Tether Volume Is at All-Time Highs
In short, OTC traders provide fiat on-ramps to USDt, although this is a gray market within Chinese borders. Then Chinese traders use USDt to liquidate their broader portfolios on global exchanges like Binance, Huobi, or OkCoin.
Exchanges are valuable checkpoints on our money highway, but to truly become an ecosystem that makes value transfer breezy, we’ll need other related services as well — from on-ramps like eWallets to rest stops like custodians. So, if you’re a project that’s ready to integrate with our Layer-2 solution, shoot us an email at email@example.com.
The Time To Build a Layer-2 Money Highway Is Now
As USDt, the currency rail for exchanges, grows in importance, Ethereum transaction volumes and fees will continue to hit all-time highs. With OMG Network’s Plasma optimized for value transfer, we believe any exchange looking to improve user experience should integrate with our Ethereum scaling solution. Not only to gain a competitive advantage but to advance the Ethereum ecosystem as a whole.
Are you an exchange looking to integrate with the OMG Network to reduce transaction fees, boost transaction speeds, and improve customer experience? Contact us at firstname.lastname@example.org.
Connie ensures product and marketing excellence by building high functioning teams. Previously, she was Head of Product for Atlassian’s Marketplace and Developer Ecosystem, delivering the second largest B2B Marketplace and associated API suite. She has also led teams at Microsoft, Cypress and SunPower.Connie Kwan, VP of Product & Marketing, OMG Network
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