Osmosis: An Overview

Osmosis: An Overview

June 27, 2024

Overview

Osmosis (OSMO) is a DEX on Cosmos, launched in June 2021. It offers customizable liquidity pools and supports cross-chain transactions via IBC. OSMO tokens are used for staking, governance, and earning rewards. As of June 25, Osmosis has $123 million TVL and a $370 million market cap.

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What is Osmosis?

Osmosis (OSMO) is a decentralized exchange (DEX) platform built on the Cosmos blockchain and launched in June 2021. It facilitates automated market-making (AMM) for trading digital assets, enabling users to create liquidity pools and swap tokens directly without a third party. 

Osmosis’ main feature is the ability to adjust the parameters of liquidity pools, such as the swap fee and the bonding curve, allowing for greater flexibility and optimization in liquidity management.

How does Osmosis Work?

Osmosis operates using AMMs, similar to other DEX platforms, but with enhanced customization options. Users can create or join liquidity pools by depositing pairs of tokens, facilitating token swaps on the platform. The liquidity providers earn rewards from swap fees and additional OSMO token incentives. The platform uses the Inter-Blockchain Communication (IBC) protocol to enable cross-chain transactions, enhancing bridging across different blockchains within the Cosmos ecosystem. 

The exchange is fully customizable, giving users more control and flexibility to stake and earn interest.  Besides earning interest on their idle assets, users can participate in the governance of the decentralized exchange, taking part in decisions or proposals for the protocol's development.

OSMO is the native token of the Osmosis network, used primarily for staking to secure the chain. As a PoS token, OSMO is inflationary, with a maximum supply of 1 billion tokens. 

OSMO tokens also allow for superfluid staking, allowing users to stake tokens while providing assets to a liquidity pool simultaneously. This means users earn rewards for securing the blockchain and receive transaction fees from liquidity pools. The first pool to enable superfluid staking is the ATOM/OSMO pool, the highest-volume staking pool, including both OSMO and Cosmo’s ATOM token.

Osmosis Stats (As of June 25)

  • Total Value Locked (TVL): ~$123m

  • Total Circulating Market Cap: ~$370m

  • Token Max Supply: 1bn OSMO tokens

  • Token Circulating Supply: 667m OSMO tokens

Recent Cosmo News

The Osmosis DAO has endorsed a proposal to create a zero-fee Bitcoin bridge to the Cosmos ecosystem via Nomic, which will eliminate bridging and transfer fees for Nomic Bitcoin (nBTC) transactions between Nomic and Osmosis. 

Disclaimer: The information provided in this research paper is for educational and informational purposes only. It does not constitute financial advice, investment guidance, or any solicitation to buy or sell financial instruments. The views expressed herein are those of the authors and do not necessarily reflect the opinions of Kollectiv.

2024