Tether Turns to OMG Network as Ethereum Fees Hit Record Highs

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In Brief
  • Tether goes live on the OMG Network

  • The OMG price spikes to a two-year high over $9

  • Ethereum average transaction fees hit record high

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The DeFi boom of 2020 has taken its toll on the Ethereum network, making the cost of most minor transactions for regular users completely unfeasible. The world’s leading stablecoin, Tether, has turned to the OMG Network in an attempt to alleviate some of this pressure.

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In an announcement this week, Tether stated that it has now gone live and been integrated on the high-speed OMG Network. The move comes as average Ethereum network fees surge to their highest ever levels.

Tether’s partner exchange, Bitfinex, has started to use the OMG Network to facilitate faster and more cost-efficient deposits and withdrawals of USDT in times of high demand.

The OMG Network was formerly called Omise GO, a high-speed Ethereum-based Layer 2 payments platform, launched in 2017. The network has the capacity to process several thousand transactions per second, at a fraction of the cost of base-layer Ethereum transactions.

This is made possible by using the Plasma L2 scaling solution to batch larger groups of transactions within a single block on the Ethereum chain, reducing transaction times and costs.

Network Fees

According to ethgasstation.info, Tether is the second-highest source of network fees on Ethereum, accounting for $6.4 million over the past 30 days. Only Uniswap has a higher gas usage at just under $7 million over the same period.

CTO at Tether, Paolo Ardoino, stated that the transition was good for the entire Ethereum ecosystem,

By migrating USDT value transfers to the OMG Network we save costs, drive performance improvements and relieve pressure on the root chain network. This is good for Bitfinex and our customers, and the whole Ethereum ecosystem.

Aside from Ethereum, Tether is issued on a variety of public blockchains including Algorand, EOS, Liquid, Omni, and Tron.

Vansa Chatikavanij, CEO at OMG Network, added that the transaction validation times will be reduced to a few seconds with transaction fees of a few cents,

We aim to solve the problem of Ethereum congestion and high gas fees by integrating with exchanges, wallets, custodians and dApps. We believe the migration of USDT to the OMG Network will significantly reduce the monthly costs associated with using Ethereum,

OMG Price Spikes on Tether News

The OMG Network’s native token, OMG, was revived by the move following two years of lethargy. As with most altcoins that skyrocketed in late 2017, OMG had slumped over 90% from its all-time high of $27, spending the better part of the past year below a dollar.

The Tether integration has resulted in a significant move in OMG as the token skyrocketed to $9.4 on Friday, according to Tradingview.com.

Source: TradingView

In true altcoin style, the dump came quickly after and prices have retreated to the $5.60 level at the time of writing. That said, OMG prices still sit about 250% above the baseline for most of this year, which has been around $1.60.

The momentum may well continue for this once unicorn of the altcoin world if Tether adoption takes off, and more users switch to the network.

Average Gas Fees at Record Highs

Total transaction throughput on Ethereum is currently capped at roughly 12 transactions per second (TPS). When demand exceeds this cap, settlement times increase, and gas costs rise significantly. This is clearly evident in the past few months as DeFi yield farming and token swapping took off.

Average network fees are currently at record highs, according to bitinfocharts.com. With a monumental spike to an average cost of $6.63 on August 13, the reading is at historic highs.

Average transaction Fees | Source: bitinfocharts.com

Currently, the average Ethereum transaction cost is $4, which is almost 5000% higher than it was at the beginning of this year. Even during the 2017/18 crypto boom, average transaction prices only spiked briefly to this level.

The median transaction fee chart is equally as bleak with a steady increase measured since the beginning of May.

Daily transactions are approaching all-time highs, last seen in early January 2018. At the moment, there are 1.25 million transactions on Ethereum every day, which some might say is a bullish indication of demand.

With Ethereum scaling still a long way off, it’s likely that other DeFi protocols and decentralized exchanges such as Uniswap, Synthetix, and dXdY will start implementing their own Layer 2 solutions.

Another ATH for DeFi Markets

There is no slowing down in the world of DeFi as total value locked (TVL) across all platforms hit another all-time high on Friday, August 21. DeFi Pulse recorded a TVL of $6.76 billion, marking a monumental gain of 70% this month alone.

Today, this figure has fallen slightly to $6.55 billion but is still up a whopping 860% since the beginning of 2020. Maker is the leading platform with a TVL of $1.4 billion and a market share of 21.3%.

Aave has retaken the second spot in the TVL charts with $1.3 billion, an increase of 4% over the past 24 hours. Curve Finance is the third billion-dollar DeFi protocol with a 2% climb on the day.

The once darling of DeFi, Compound, holds the fourth position as its TVL retreated slightly to $780 million. Most DeFi platforms are in the red today as investors withdraw crypto collateral from the markets. The only other exceptions to this (apart from Aave and Curve) are Yearn Finance, Flexa, and dForce.

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Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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