Omni Layer, formerly known as Mastercoin, is a popular protocol layer built on top of the Bitcoin blockchain. Omni Layer is home to popular tokens such as Tether and MaidSafeCoin. But what is Omni Layer, how does it work, and what is it used for? In order to answer the question “What is Omni Layer?” and the others, we must first ask the question, “What is Mastercoin?”.
Mastercoin is considered to be the very first “altcoin”— an alternative to Bitcoin (BTC). The term “master” is actually an acronym of “Metadata Archival by Standard Transaction Embedding Records”.
The Mastercoin protocol was proposed in, “The Second Bitcoin White Paper” published in January 2012 by software engineer J.R. Willett.
In his document, Willet claimed that the existing bitcoin network could be used as a protocol layer, on top of which higher level protocols could be built. This would enable the creation of new currencies with their own set of rules without altering the foundation protocol or creating an alternate blockchain for the new rules.
The whitepaper also explained the motivation behind Mastercoin as a means to increase cryptocurrency adoption by consolidating developer focus on one blockchain.
Instead of having multiple blockchains with multiple currencies, spreading developer resources thin, having the largest and most popular blockchain as a foundation layer would concentrate efforts while still enabling new currencies with experimental new rules.
The following year, in 2013 Willet set about gaining funding for the Mastercoin Project and inadvertently pioneered the very first Initial Coin Offering (ICO). An ICO is a blockchain-based approach to fundraising which helps to fund the development of the initial protocol.
Eventually, Mastercoin evolved into the Mastercoin Foundation, which in turn transformed into the Omni Foundation with a rebranding in March 2015.
Omni Layer is neither a fork of Bitcoin nor its own network, but rather a meta-layer on top of Bitcoin. It is essentially a software layer built on top of the Bitcoin blockchain that enhances the features of Bitcoin through its own additional characteristics.
By providing smart contract capabilities, Omni Layer enables developers to create new customized cryptocurrencies, automate complex financial functions, and expand the Bitcoin network beyond its own currency in a decentralized and transparent way.
When describing the relationship between Omni Layer and Bitcoin, the common analogy used is of HTTP to TCP/IP. Basically, Omni Layer is like the HTTP application layer placed on top of Bitcoin’s fundamental TCP/IP layer.
Bitcoin was first launched with the “Genesis Block” and the Omni protocol keeps the theme going with its starting point in the blockchain, “Exodus Address”.
This is the bitcoin address that generated the very first OMNI tokens (then Mastercoins) back in August 2013. The Exodus Address is: 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P
Omni Layer allows tokenization and executing other smart contract features on the Bitcoin network and benefits from its technology without the hassle of building a whole new blockchain.
Bitcoin performs “basic” logical operations, these are the rules that maintain the ledger. The Omni Layer adds customized logical operations on top.
In March 2014, Bitcoin added the OP_RETURN field which enabled adding meta-data to a bitcoin transaction. Using this available space Omni can attach the details of smart contracts and smart properties without altering the foundation layer.
By “piggy-backing” on the Bitcoin ledger, Omni benefits from its hashing power and the security of Bitcoin’s Proof of Work consensus mechanism.
Omni Layer is the ideal tool for creating and trading in custom currencies. It also enables blockchain based crowdfunding, by collecting cryptocurrencies in a secure, trustless, decentralized, and peer-to-peer manner, with no intermediaries.
The OmniDEX allows anyone to post an “order” to buy or sell without a middleman. When an order is matched, the transaction is executed. For example, a seller can propose a transaction to the network, specifying a currency and a sum. Then, anybody who wishes to buy (and has sufficient funds to do so), can immediately complete the transaction directly on the network. The entire process is done peer-to-peer, without any intermediary.
The Omni Layer acts as a bridge between altcoins, smart contracts and smart properties and the Bitcoin blockchain. It makes it easier to create and trade in customized cryptocurrencies. According to the Omni Explorer, there are currently 881 properties available for trading.
The Omni Layer protocol serves as a crowdsourcing platform much like Kickstarter, except in a decentralized way. It empowers ideas and innovations by providing the means to necessary funds without the interference of a third party. Participants can send bitcoin or tokens directly to an issuing address, or create their own ICO on the Omni Layer.
One of the most popular tokens by market cap is the proxy coin MaidSafeCoin. It has been created to support the development of the SAFE Network, SAFE stands for Safe Access For Everyone. The MAID coin allows pre-purchase of the network’s native currency: Safe Network Tokens. Once the network is complete, owners can swap MaidSafeCoins for Safe Network Tokens at 1-to-1 ratio.
Tether (USDT) is by far the most popular token on Omni Layer and has a long relationship with protocol, going back to the inception of the Mastercoin Foundation.
Brock Pierce, co-founder of Tether was one of the original members of the Foundation while Craig Sellars, another Tether founder, was the Foundation’s CTO.
The Mastercoin/Omni Layer protocol has been the technological foundation for the Tether token, ever since it was launched on the Bitcoin network in 2014.
All Tether tokens are stablecoins, pegged 1-to-1 with a matching fiat currency and backed 100% by Tether’s reserves. Tether protects traders from the high volatility of the crypto market, where cryptocurrencies can rise or fall by 10-20% within a single day.
Tether tokens have been updated to also work with Ethereum, EOS, Tron, Algorand, and OMG blockchains. The popular cryptocurrency is currently third in the market with a market cap of over US$82 billion (as of April 2022).
Omni Layer elevates the Bitcoin blockchain above being a “simple” single cryptocurrency platform. It also gives altcoins a solid foundation and a level of decentralized security that other smaller blockchains struggle to provide.
Omni Layer is just one of the supported features by Crypto APIs. You can check this page to find out more about the supported blockchains, tokens, layers and standards.