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 at times shoots up.
Further bombardment of the root chain 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.
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Why it’s happening: OMG Network chose USDT (Tether) because 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. Citing an illustrate, assume;
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Exchange A’s users make about 200K withdraws/month;
Exchange B’s around 150k;
Exchange C’s around 100k;
- Assuming OMG Network captures withdraw and deposit, it 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 one-third the gas fees of Ethereum; OMG Network reduces crypto exchange fees from 1,350,000 USD to 445,500 USD.
What you need to know: The OMG coin was designed as a white-label eWallet. It was designed on the Ethereum blockchain by a Thailand-based financial services company called Omise. Its full name is OmiseGo.
- OmiseGo helps in easing the transfer of coins from one blockchain to another, without using a crypto exchange.
Most blockchain ecosystems are limited by low throughput, high and unpredictable transaction fees, and poor user experience. - A few months back the federal agency in charge of regulating crypto assets in Japan, the Financial Services Agency (FSA), has given OMG Network, formerly known as OmiseGo, approval for the sale of its native crypto coin in the world’s third-largest economy.
READ: Ethereum transaction fees drop by 80%
Recall Nairametrics a few months ago, broke the news that Thailand-based Fintech firm, SYNQA, the parent company of OmiseGo (previously called Omise Holdings), secured $80 million in capital, via a Series C investment round, led by SCB 10x, a subsidiary of the Siam Commercial Bank. Asia-based VC group SPARX also took part in the round.
Other investors included Japan’s Toyota Financial Services Corporation, Sumitomo Mitsui Banking Corporation, SMBC Venture Capital, and the Aioi Nissay Dowa Insurance Corporation.