Is OMG Crypto Coin Halal?

In this article we do a complete Shariah screening of OMG Network to determine if OMG is a halal or haram cryptocurrency. The short answer is yes, Muslims may trade and invest in OMG, but have a read and see if you are comfortable with our assessment first.

What is OMG Network?

OMG Network functions as a layer 2 scaling protocol for Ethereum. It is designed to facilitate the transmission and verification of data at lower costs, while leveraging the security guarantees of the underlying layer. The OMG network uses the enlargement of a child chain to consolidate transactions and signal them to the root chain, in this case Ethereum.

The child chain relies on the parent chain as the security and mediation link. With this kind of association, if something goes wrong with the child chain, user’s funds will stay intact. The protocol token, OMG, is the principal payment method that enables network users to cover transaction costs and interact with the arrangement. 

OMG Network (first developed as OmiseGo) is a non-custodial system of Layer 2 scaling operated on Ethereum. How the protocol handles transactions is not decentralized, but its Plasma-based protocol strives to decentralize native network security. It also relies on Ethereum for its SLA of arbitration. Most blockchain-based ecosystems are inhibited by scalability issues, high fees, and unpredictable results.

The OMG team believes that these potential barriers must be overcome before corporations and implementers make large-scale uses of blockchain, motivating them to develop the OMG Network. 

Plasma’s core security strategy is based on users having the ability to withdraw funds to the root chain (also known as the child chain) at any time. 

To provide an exit from the child chain, a user submits an exit transaction to an exit bond to the central chain. If successfully shown to be invalid, the exit is not processed, and the challenger is awarded the Exit bond. This exit game is solely dependent on the root chain. 

Further details on OMG website

Who Invests In OMG?

Pantera Capital

Royal Venture Capital

Sailor Capital

Solidum Capital

The Hive Index

VB Capital

ValueNet Capital

ZMT Capital

OMG Technology

OMG is a Layer 2 scaling solution for Ethereum built using the plasma protocol. Plasma is a technology that leveraged by Ethereum developers, which offers a series of smart contracts that run on the blockchain. 

The OMG network is currently operated as a PoA (Proof of Authority) network. It aims to supply higher transaction throughput and lower trading fees than the underlying network. It is backed by a decentralized security model provided by Ethereum. 

The OMG network consists of three components that work together to ensure funds are safe on the network:  

• The OMG Network Smart Contracts deployed on Ethereum provide the interface through which users can move funds in and out of the network. 
• The child chain application, run by the OMG network team, receives the users transactions, encapsulates them into blocks and publishes these blocks in the OMG networks smart contracts. 
• The watcher application continuously monitors the child chain application, validates its behavior and reports any wrongdoing to the subscribed users. Watchers can be run by anyone, and the more running, the more secure the network. 

Legitimacy Screening of OMG

The OMG Network currently has more than 50 employees operating from various corners of the world. The current CEO of OMG is Vansa Chatikavanij, and OMG is a subsidiary of SYNQA, a Thailand-based digital company that was formerly called Omise Holdings. 

Chatikavanij had been the Director of the company up until November of 2019, prior to her promotion to CEO, which she is still to this day.

Stephen McNamara, a former Head of Blockchain Technology Research & Development Strategy at Huawei Technologies, leads OMG Network’s COO function. Kasima Tharnpipitchai, a highly experienced engineer and consultant, became CTO of OMG Network in 2016. 

The OMG platform was made possible with $25 million in seed funding through the sale of OMG coins during its 2017 initial coin offering (ICO) with founding team members Jun Hasegawa and Donnie Harinsut. The OMG Network’s parent firm SYNQA also received another $80 million in Series C funding and was supported by major investment firms, including Toyota Financial Services Corporation. 

This gives us the confidence to confirm that OMG has an underlying fundamental value, that can be considered as “Mal” under Islamic rulings. Therefore, as a project it has legitimacy in terms of Shariah.

Is OMG project aligned with Islamic values?

Yes, OMG crypto project does align with Islamic values as the protocol facilitates the creation of Decentralized Applications (DApps). It aims to increase scalability by introducing a proof of history (PoH) consensus along with the underlying proof of stake (PoS) consensus of the blockchain technology. There is nothing against Islam about such a technology. 

Financial Screening of OMG:

Financial screening ensures that the crypto asset meets the financial criteria for Shariah compliance, if it is an equity based token. OMG is not backed by any equity, so there is no financial screening required on this coin/ token. Here we would typically look at things like debt to income ratio to ensure borrowing is limited to a tolerable level.

OMG Token Screening for Shariah Compliance

Token Type: ERC-20

Token Uses: Payments

The OMG token is a utility token and is the primary communication channel by which holders can interact with the OMG network. More broadly, OMG aims to be a channel to create value for the Ethereum mainnet as the token will be backed by the assets moving across the OMG network. 

These assets include both real world currencies and cryptocurrencies that users push through the network in a variety of ways, including defi applications and corporations, as well as anyone that outsources DEX requirements to OMG Network. 

This token has a utility that is permissable under Shariah so OMG’s token is considered halal.

Is Staking OMG Halal?       

Stakers are rewarded by transaction fees which does not contain Riba, Gharar, or Maisir and therefore staking OMG is halal.

What Does The Muslim Crypto Community Think of OMG?           

Crypto Halal Office for Monitoring and Sharia auditing on cryptocurrency markets thinks OMG coin is a Halal digital asset based on its Shariah complaince screening.

Sharlife considers OMG as a halal cryptocurrency based on the five areas assessed for Shariah complaince screening. 

If you know of other academic or scholarly views on this, please add in comments and we will update accordingly. Alternatively, you may want to join our community of Muslims crypto investors and traders, to share, learn and profit from halal digital assets.          

Is OMG Crypto Coin Halal?

Yes, OMG crypto coin is Halal as it’s network allows value transfer using Ethereum, including the development of DApps and smart contracts. This technology is not against Shariah guidelines so Muslims may invest, trade and stake OMG crypto coin.

We hope you found this useful. Please view our Halal Crypto List to find suitable digital asset investments, without compromising your Islamic faith.