Osmosis (OSMO)

The first IBC enabled AMM DEX within the Cosmos ecosystem.

Basics

• Based in:
• Started in / Announced on:
• Testnet release:
• Mainnet release: 6-2021

History

• Inspired by Balancer, Osmosis will support unique liquidity-provider strategies with multi-asset pools, weighted pools, and liquidity bootstrapping pools (LBPs)

Audits & Exploits

• Bug bounty program can be found [insert here].

Bugs/Exploits

• From their Twitter (9-6-2022):

"Thankfully, the swift and decisive action taken by Osmosis validators and community members allowed scope of exploit to be relatively small. While detailed calculation is still in progress, the total amount overdrawn is estimated at around $5M. All losses will be covered. A small number of wallets were responsible for the majority of exploited funds, and we are confident that we will have a high recovery rate from these wallets. The bug itself was simple, and involved incorrect calculation of LP shares when adding and removing liquidity from pools. The core development teams contributing to Osmosis take full responsibility for this oversight."

• One of the Osmosis validators, FireStake, came out (9-6-2022) confessing they had turned $226 into ~$2M before panicking and coming clean. "We were thinking about our family's future, and not the future of our community".
• From Junonaut (8-6-2022):

"A critical bug has been found on $OSMO which could have potentially drained all liquidity pools. It has been discovered after a post on the subreddits /r/CosmosNetwork and /r/OsmosisLab. The chain was halted under immediate emergency to avoid further damage."

Governance

DAO

• Has Flipside and Reverie as some of their professional delegates (30-11-2022).
• From a commissioned report by Messari (14-7-2022):

"According to Flipside Crypto, it takes about 22 days on average for a wallet to engage with governance, and only 7% of wallets holding OSMO have never voted. Deeper analysis of governance participation by number of wallets shows a left-skewed data set. Roughly half of all Osmosis wallets participated in 10% or less of submitted proposals. That’s equivalent to about 20 proposals. The other half is more active, ranging from 10% up to 100%. A very select number of wallets (134) achieved perfect attendance. Surprisingly, there was one specific participation rate that was an outlier: more than 7,750 wallets participated in 80% of all proposals, but go up or down a few percentage points and it falls back down to a few hundred. Those wallets likely belong to members of the internal team, active outside investors, or those delegating with a large bloc."

Token

Utility

• The OSMO token will be used (14-6-2021) for staking, governance, and as liquidity in trading pairs.

Technology

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].
• The V1 core AMM logic is basically a “clone” of Balancer, re-written in the Cosmos SDK.

Implementations

• Built on: Cosmos

How it works

• From a commissioned Messari report (16-2-2023):

"Osmosis is a sovereign decentralized exchange (DEX)-focused app-chain in the Cosmos ecosystem, meaning it simultaneously serves as a blockchain and an application. The application operates similarly to other automated market making (AMM) functioning DEXs – liquidity providers (LPs), which are responsible for supplying liquidity to asset pools where traders can make trades from. It’s the same model for Uniswap or Balancer, though more similar to the latter as Osmosis places a high priority on offering asset pool customization. Tweaks to market-maker functions, swap costs, token weighting, and more are all parameters that can be changed within the DEX. Additionally, Osmosis has introduced new features such as superfluid staking that allows users who provided liquidity in certain pools to also stake to help secure the network. In the future, Osmosis will also offer maximal extractable value (MEV) mitigation and capture, stable pools, and more."

• From Figment (6-2021):

"Osmosis is a highly customizable AMM allowing for the creation of diverse liquidity pools, self-governing frameworks, and unique bonding curves. One of the most compelling aspects of Osmosis is its proposed reversed staking derivatives design."

Fees

• From a commissioned Messari report (16-2-2023):

"Proposal 354: Implement a Minimum Transaction Fee (Signaling) – Initially published in September, voting concluded on November 10 with 99.6% of votes in favor. Prior to this proposal, Osmosis had no protocol-level minimum gas fee, which allowed users to transact on the network for no. This made it very intuitive for new users transacting on the network, as they did not need to bridge a native token. An unforeseen vulnerability of this was that Osmosis could be the victim of DDOS attacks (where malicious users clog the network with spam transactions). The minimum fee was eventually decided to be 0.0025 uOSMO and can actually be paid in an equal value of any token, not only OSMO. This protects the network from DDOS attacks, while still not costing the end user any significant amount."

Upgrades

• V14, Neon Upgrade got deployed 23-1-2023.
• Introduced a stable swap AMM (8-12-2022).
• From a commissioned report by Messari (12-10-2022):

"The Oxygen Upgrade aims to “breathe life” into the Osmosis developer ecosystem through four distinct features: TWAP pricing, upgraded Interchain Accounts Module, Stargate Queries, and expedited proposals for emergencies."

Staking

• From their blog (28-2-2022):

"Superfluid staking allows Osmosis liquidity providers to stake the OSMO in their LP shares (GAMM). Because superfluid staking adds to the security of the chain, superfluid positions also earn staking rewards on top of the usual fees and liquidity mining incentives."

Validator Stats

• From a commissioned Messari report (16-2-2023):

"QoQ, the number of OSMO staked increased by 9.6 million OSMO to 210.3 million total OSMO staked. This was an increase of 4.8% QoQ, and resulted in 41.7% of the total outstanding OSMO supply staked by the end of Q4. The number of validators in the Osmosis validator set increased in Q4, from 135 to 150 following a passing governance proposal."

• From a commissioned report by Messari (14-7-2022):

"Osmosis finished Q2 with 135 validators providing security to the chain, up 14.4% from the previous quarter. That rounds out the Nakamoto Coefficient to 7, up marginally from last quarter’s value of 6."

Privacy Method

• From Bankless (15-10-2022):

"Osmosis is developing a private mempool with threshold decryption. These private transactions cannot be seen by nodes until after they are executed, making front-running much more difficult as well as allowing limit orders and other future/contingent transactions to be put on-chain privately. Similarly, appchains can reserve the first slot in their blocks for protocol-controlled arbitrage and liquidations: a necessity for the health of lending and trading protocols, but which on monolithic chains tends to become an MEV game, leaking value from the app to third parties. Osmosis will instead be directing these healthy, non-user-harming arb profits back to the DAO."

Roadmap

• Can be found [Insert link here].

Usage

• From a commissioned Messari report (16-2-2023):

"Average daily active users (DAUs) on Osmosis grew 9.7% QoQ, rising from 22,700 in Q3 to 24,900 in Q4. This is a 32.5% decrease from the all-time high of 36,900 DAUs in Q1 2022. With that said, measuring the adoption of L1 networks should be done on a larger time scale; compared to a year ago the average DAUs have risen 134.9% from 10,600 in Q4 '21 to 24,900 in Q4 ’22. Each month in 2022 saw over 300,000 IBC transfer transactions into Osmosis. Currently, Osmosis has the most peers of any Cosmos chain with 50 peers. Osmosis’ top three peers by the number of transactions into Osmosis for Q4 are Evmos with 251,000, Cosmos Hub with 192,000 and Bostrom with 149,000.

Over 50% of transactions on Osmosis are swaps and IBC transfers. To access the liquidity of Osmosis, users transfer assets into Osmosis and swap or users swap for their desired asset and transfer out of Osmosis.

Governance participation is also a significant proportion of the transactions on Osmosis. Accounting for 10-20% of the total transactions, this is not only due to high participation in governance but also a high number of proposals submitted – there were 54 proposals submitted in Q4, alone."

• From a commissioned report by Messari (14-7-2022):

"Almost all metrics took a hit in the aftermath of Terra’s collapse; volume, liquidity, and user counts were all down to various degrees."

Projects that use or built on it

• From a commissioned report by Messari (12-10-2022):

"Currently, there are 53 projects building on Osmosis. They will bring decentralized perpetuals, CDP-based composable collateral, yield optimization, and lending markets to the ecosystem. Circle, the second largest stablecoin issuer, announced it will be launching a Cosmos-native USDC in 2023, signaling a larger interest in the Cosmos ecosystem."

Competition

• According to its docs, Osmosis aims to differentiate itself from other AMMs by offering customizable bonding curves suitable for different situations.
• From Bankless (25-3-2022):

"Osmosis is most similar to Balancer, in that it allows for the creation of highly customizable, multi-asset pools, but also incorporates elements from other AMMs while bringing unique features of its own to the table. For instance, each liquidity pool is “self-governing,” with liquidity providers having governance rights over its parameters. Like Curve, LPs must lock their tokens to participate in governance, with voting power, and boosted liquidity mining rewards, proportional to the length of the lock period."

Team, Funding, Partners

Team

• Full team can be found [here].
• Sunny Aggarwal; Co-Founder of Osmosis and Sikka, a builder and lead researcher at Cosmos since 2017 while working at All In Bits.
• Dev Ojha; co-founder and has been in the Cosmos ecosystem since 2017 while working at All In Bits.
• Chjango, Shelly Chang, Jim Yang; have been in the Cosmos ecosystem since 2017 while working at All In Bits.
• Founders include former Cosmos core dev & former co-founder of Keplr wallet, the most popular wallet in Cosmos eco (10-4-2022).
• Has Flipside and Reverie as some of their professional delegates (30-11-2022).

Funding

• From The Defiant (5-1-2022):

"Osmosis raised a $21M in a token sale in October led by Paradigm"

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