Why Trustlessness is the Key to Enterprise Adoption of the OMG Network

In Blog, Product by Unnawut Leepaisalsuwanna

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The OMG Network focuses on scalability while building for security. Our MoreViable Plasma architecture relies on Ethereum’s security protocols (smart contracts) alongside a decentralized Watcher network to ensure your funds remain safe no matter what.

But how does security relate to trustlessness?

Before we go into further detail about that, let's talk about the three things that make traditional financial services like banks trustless:

  1. Verify: that the banks are making transactions correctly and user assets are safe.
  2. Withdraw: funds whenever the user needs them
  3. Appeal: If the user can’t verify their transactions or withdraw their assets, they should be able to appeal to some sort of authority that can help them recover their funds. Authority includes working with lawyers, or going to court.

Blockchain has the same properties:

  1. Verify: Blockchain is a transparent ledger, which means users can see their transactions and verify them through public services online
  2. Withdraw: user can withdraw funds on the blockchain whenever they want to with their private key
  3. Appeal: This is a little different from banking systems, because in permissionless blockchains, the code is law. Which means users don’t need an appeal process.

And that means blockchains are trustless because we don’t rely on any party or institution to give us our funds back. The coded rule is the king.

Trustlesness is an important part of blockchain design, but the technology is a sum of its parts. This means a blockchain is truly trustless when the ecosystem surrounding it (Layer-2 solutions, dApps, developer tools, etc) is. In this article, we talk about what makes the OMG Network trustless, and explore how it is the key to enterprise adoption.

Part 1: Trust and Layer-2

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Alice runs an enterprise that makes 1 million transactions daily. On Layer-1 (Ethereum), this costs her 100,000 USD/day in fees, and processing these transactions takes 40 hours/day because of Ethereum’s 12-14 tps. Even though it is time-consuming and expensive to transact on Layer-1, Alice continues to use it because it is secure.

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2. This is where Bob comes in and offers Alice his Layer-2 solution (OMG Network). He promises cheaper transaction fees and higher throughput. He also mentions that his solution is secure because it relies on the Layer-1’s security mechanism (Ethereum smart contracts).
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3. And so, Alice moves her operations from the Ethereum Network to the OMG Network, enjoying faster, cheaper, and secure transactions.
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Part 2: Murphy’s Law

Anything that can go wrong, will go wrong. This isn’t just theory though, we’ve seen this happen in the blockchain space as well. What was once hailed as unhackable, has been breached a few times.
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But, 3 out of 4 compromises happen outside the blockchain network, because of things like lost private keys or a hacked app/service. While we are confident that the base blockchain network, Ethereum, is secure, it is important that the ecosystem around the blockchain system remains secure as well.
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As a financial network, we have to plan for this, because without a solution, real-world enterprises will never feel safe enough to move over to blockchain.

So far, there are four popular ways to rectify this situation, namely:

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Part 3: Trustlessness and OMG Network’s MoreViable Plasma

What does that mean for the OMG Network? There are 3 mechanisms the OMG Network employs to ensure that the network remains Trustless, no matter what happens to it.

  1. Watcher -  A mechanism that observes and verifies normal and unusual account activity.

  2. Exit - Ability to reclaim funds by bypassing the layer-2 solution and communicating with the layer-1 solution directly. This feature is useful if the layer-2 solution is under attack or shut down.

  3. Challenge - Ability to dispute malicious claims and challenge the system when my funds are not right.

Case A - Exiting Without An Operator: “How do I recover my funds if the OMG Network Disappears?”

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Alice can get her funds back by presenting her Smart Contract to the Ethereum Network. The Ethereum Network communicates with the now-defunct Layer-2 and asks if it can challenge Alice’s ‘proof’. It can’t, and so Alice gets her funds back.

Case B - Exiting Without An Operator: “How do I recover my funds if an operator on the OMG Network becomes malicious?”

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Say someone obtains OMG Network’s private key and asks the OMG Network to transfer 10 million USD from her account to theirs. The watcher system in-place detects this unusual activity and notifies Alice of it immediately. Seeing this, Alice challenges the fake transfer with her latest Smart Contract, telling the Ethereum Network to reject the transaction.

The Ethereum Network’s Smart Contract waits for the third-party to object to Alice’s ‘challenge’, they can’t– Again because Alice is challenging with a valid proof, no one has a truth-ier proof to object Alice's challenge; and so Alice exits her nearly-stolen funds to her bank account.

Considerations

So what does all this mean for enterprise-adoption and for those using the OMG Network?

First, trust issues are not limited to Layer-2 solutions. It applies to all the applications that have to talk to the blockchain and hold user funds. As long as we can’t answer the question of “what happens after things go wrong?” confidently, it will be difficult to gain enterprise-adoption.

Few questions we can start asking to speed up the process:

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Lastly, one of the most important points we can propose to any dApp or service out there is: It's as important to design your solutions for trustlessness as it is to design for scalability. It’s important to ask yourself if you’re able to trust your service and even more prudent to ask if it is trustless when things go wrong.

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