Why Would Enterprises Use the Public OMG Network?

In Blog, Enterprise by OMG Network

This blog is a response to the community questions in this thread on r/omgnetwork

Q1: One of Reddit’s requirements for the bake-off (albeit listed as a bonus) is for users to be able to exit to Ethereum in a “fast & simple” manner. While fast exits are on the way, they only work with liquidity providers. But how would you find a liquidity provider for points that were directly minted on OMG? Would it be possible to have a smart contract on Ethereum that holds a portion of minted tokens and provides liquidity for exiting users?

A: We have a number of designs to provide fast exit liquidity on our Network, one of which acts as a smart contract on the rootchain like the one you described in your question. On Reddit CPE, it’s possible to have a portion of the community point tokens sits on Ethereum (points ERC20 tokens are always minted on the rootchain) These pooled points/smart contracts should adequately provide liquidity for fast exits. Of course, more research is needed to ensure that this type of fast exit scheme is practical and does not compromise the security of the Plasma chain.

Q2: While USDt usage is high, it’s a token used mostly for trading. By not supporting any of the more major ERC20 tokens (at least ETH), wallets have very little incentive to integrate with the network since users don’t usually withdraw USDt from exchanges. This hinders arbitrage too. What exactly is the process for rolling out support for new ERC20 tokens on the OMG Network?

A: The OMG Network already supports ETH and all ERC20 token types. The reason we think USDt is a good first target is because it is generally the base pair for many token trades on most custodial exchanges. Moreover, supporting USDt aligns with our mission of reducing Ethereum congestion, since it is the number one asset that is settled between different exchanges (as evident by the network fees). With all that said, we do expect to have other ERC20 tokens integrated on more exchanges later on. However, the choice of which token to migrate to our Layer-2 sits with the users, for example: exchanges, wallets, etc — and not us.

Q3: There’s been some concern in the community lately after the CBDC article. It’s easy to understand why a big enterprise would avoid a public chain, but people assumed it was somehow “solved” by the team. So why would an enterprise use the public chain? What benefits would they have over sticking to a private instance? Also, in what case would a private plasma chain need to communicate with the public one?

A: Enterprises would find value in interacting with a public chain for the following reasons:

  • They want to support a publicly traded token like USDt or ETH for customer transactions. Being directly integrated into the public chain allows for easy movement of those tokens into their system.

  • Financial companies are slowly beginning to support custodial wallets for customers. This allows them to hold those funds just like they hold a savings account. It also allows customers to use crypto as collateral for traditional financial transactions. For example, the US just legalized the holding of crypto assets by financial institutions.

  • Smaller companies with lower volumes might find it more cost-effective to pay per transaction instead of paying for the cost of an entire plasma architecture.

  • Enterprises may want a controlled subset of an internal token to be available publicly to pilot different types of services. Being able to freely use the token on a private instance while still allowing for movement of that token in the public ecosystem allows for a lot of flexibility.

  • With the possibility to perform “atomic swaps” between private and public plasma instances, enterprises will have interoperability with both network types. Again, allowing for tokens to move freely between both without incurring the fees of the rootchain.

We’ll tackle more in upcoming blog posts, webinars, and videos around the CBDC.

Q4: There’s the OMG Network Integration Team board on GitHub. It has dozens of tasks for version 2.0 and even 2.1. All have been stale since 2018–2019. Why is this board still there? What caused the priority changes which slowed down this development for more than two years?

A: In late 2019, the integration team began focusing their efforts on the OMG Network V1 Mainnet Beta launch. Now that Mainnet V1 is live, we are shifting resources back to integration work, including the eWallet. In our effort to bring enterprise use cases and traffic to OMG Network, we’ve also been working on generalizing and honing the eWallet feature set. So you will see a significant shift in the project boards in the near future.

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