Hazards of Centralization

Last updated 4 months ago

Please note: the OMG Network is still in development, and some details cannot yet be included. This knowledge base will be revised regularly to include updates and additional details.

Hazards of Centralization

On a global scale, centralization in monetary systems create and perpetuate inequality: a tiny minority of people act as gatekeepers to the vast majority of the world’s wealth. Wealth buys power, power begets wealth, and resources are siphoned into a black hole from which they rarely return: the richest 1% of people own more wealth than the rest of the planet combined and this disparity is only increasing.

Our current financial institutions don’t just enable this hoarding of wealth (whether intentionally or inadvertently), they also control the channels by which ordinary people can hold and move money, and impose regressive fee structures which make it very expensive to be poor. Many banks now impose fees on accounts that do not maintain a high enough balance - literally charging customers for not having enough money

Even for the consumer who can maintain a healthy account balance, avoid crushing debt and manage to establish a comfortable financial position, privatized systems are motivated by profit first before customers’ needs. They charge a lot to use, are kind of unpleasant, and are resistant to improvements that don't first improve conditions for owners. No ‘interoperability' between networks means customers must juggle many accounts, wallets and payment systems, often paying high fees to transfer money or assets between networks.

On OMG’s decentralized network, transaction fees will directly reflect the actual cost of validation, not the whims of a third party. Fees serve as an incentive to validators to enforce consensus across the network, rather than funneling to a central self-enriching authority. The cost of using the network is no more or less than the cost of maintaining it.

The OMG network is also optimized for interoperability: providers can allow their customers to send and receive payments not only inside their own channels, but also cross-channel. The OMG network allows for seamless interchange between wallets, while the OMG blockchain keeps a universal ledger of every wallet’s current balance.

As long as everyday users have no other option, financial institutions have no incentive to change (and to be fair, these institutions haven’t really had a better alternative either). With blockchain technology, we can now do better. Existing institutions that adopt this technology will be able to serve their users better, decrease fraud risk and improve efficiency. Institutions that do not may find themselves out-competed by the adopters.

OMG will use centralized mechanisms only ever as a transitional stage, with an understanding that decentralized mechanisms will replace them, along with the open-source culture of a public development progress. At no time will Omise or OmiseGO charge rent on the network or impose mandatory fees on network users other than those earned in the same way as anyone else - as validators on the network.