Osmosis is a highly-customizable, Cosmos-based cross-chain AMM that enables new DeFi asset types to be created, like options and dynamic fee markets that adapt to periods of high volatility. On June 14th, Sunny Aggarwal, Josh Lee, and Dev Ojha joined us to answer all of our Osmosis questions.
- Osmosis will be the first IBC enabled AMM (Automated Market Maker)
- The public launch for Osmosis is set for June 19th
- The OSMO token will be supported on the Keplr wallet
- Inspired by Balancer, Osmosis will support unique liquidity-provider strategies with multi-asset pools, weighted pools, and liquidity bootstrapping pools (LBPs)
- The OSMO token will be used for staking, governance, and as liquidity in trading pairs
- At launch, only staked OSMO will be used to vote on protocol and economic policies such as allocating liquidity mining rewards, and the base network swap fee
The Osmosis Network
Osmosis is a highly-customizable, Cosmos-based cross-chain AMM. Osmosis will be used to make tailored, efficient AMMs with its built-in tool-set. Users will create diverse liquidity pools with custom parameters. The V1 core AMM logic is basically a “clone” of Balancer, re-written in the Cosmos SDK. These custom parameters enable users to deploy many new strategies such as token weight ratio, custom swap fee rates, new bonding curves, and more.
Fostering Blockchain Interoperability
Osmosis will be one of the first IBC enabled AMMs in the Cosmos ecosystem. The IBC (Inter-Blockchain Communication) element is one of the biggest developments on Cosmos and allows Osmosis to communicate with other blockchains that have implemented the standard.
Osmosis is looking to add compatibility to the Ethereum ecosystem as soon as the Gravity Bridge is ready on the Cosmos Hub. Currently, to add Ethereum compatibility, the Osmosis Team is debating whether to use the Cosmos Hub’s Gravity Bridge or deploy directly through Osmosis. However, they are planning to lean on the Osmosis community for this decision.
“Our plan is to plug in as soon as the Gravity Bridge codebase is finalized.”Sunny Aggarwal
Liquidity Pool Governance
At launch, individual pools will not be self-governed. The Osmosis Team intentionally removed self-governed LPs for the V1 launch of Osmosis, and all pools will specify a “future governor” which sets who governs the pool (implemented in a future update).
“We would like to see patterns of how liquidity forms and how users interact with the different pools and provide time for the community to provide ideas and feedback on how the LP governance should be developed.”Josh Lee
The options for “future governor” are:
- Blank (no governor)
- Address (single address or multisig acting as a dictator)
- LP Token, time period: the LP tokens can also govern the pool, with a time period lockup caveat
- Other token, time period: Another token acts as governor for the pool, with a time period lockup caveat
The OSMO Fairdrop
The Osmosis fairdrop is looking for strong alignment and support with the Cosmos Hub community. The OSMO “fairdrop” rewards Cosmos Hub accounts that actively participate in staking. More details on checking your airdrop eligibility here.
While eligible users automatically dropped 20% of the fairdrop, there are four missions to complete within the OSMO platform to receive the remaining 80% of the fairdrop. Users can: make a swap, add liquidity, stake to a validator, and vote on a governance proposal (with each action unlocking 20% of the airdrop, respectively).
“Recipients have 2 months to complete the tasks in order to receive their full amount. After that first 2 months, the claimable amount decreases linearly over 4 months. At the end of 6 months, all unclaimed tokens are put into the community pool.”Sunny Aggarwal
What coins will be ready at launch? Future plans for supported coins?
At launch, all 7 IBC chains will be available (ATOM, AKT, IRIS, DVPN, XPRT, REGEN, and CRO). Other chains can plug in their assets premossionlessly through IBC; however, Osmosis has created a standard called “assetlists” similar to Ethereum’s “tokenlists” to ensure there is only one official channel per asset.
The OSMO Token
The OSMO token is a decentralized governance token that enables users to vote on protocol upgrades, allocate liquidity mining rewards for liquidity pools, and set the base network swap fee. The OSMO token will be supported on the Keplr wallet.
The Osmosis Team is currently working on a system called “reverse staking derivatives” which will enable liquidity pools of OSMO pools to stake (and also vote with) their liquidity pool shares. With this being a new concept, the main consideration is properly assessing how the risk should be measured and bound to the chain itself. For example, if an LP holds 10 OSMO, and stakes 9 OSMO, there is a 10% risk-discount for volatility within a given epoch.
“The plan is to use staking as “the final” spot for your tokens, so the chain doesn’t sacrifice on security.”Dev Ojha
Validators will not be required to establish the IBC connections needed to move assets in and out of Osmosis. The Osmosis Team is working with partners to ensure that Osmosis and other chains will have highly available relayers.
Beyond the typical Cosmos SDK parameters, the key difference in Osmosis governance responsibilities is the liquidity incentive allocation, and more frequent software upgrades.
“We want governance to take a more active role in choosing what to add for the chain, and to feel the freedom to iterate and change core protocol economics.”Dev Ojha
At genesis, the voting period is a quick 3 days to ensure the community can activate liquidity incentives for early pools as soon as possible. After this early period, the Osmosis team will recommend a proposal to increase the voting period to something longer.
Osmosis is currently working with a team called Imperator to put together the analytical backend for Osmosis, similar to“uniswap.info”. This UI will show historical price data, liquidity information, and volume. On top of this, there will be an API for users to query and work with this historical data.
Osmosis is also putting together a user-friendly interface that includes standard deposits and withdrawals similar to centralized exchanges.
“Rather than leaving the burden of cross-chain IBC transfers to the users to figure out, users can simply ‘deposit’ their assets from their other chains to Osmosis (which would be a IBC transaction in the back). A similar user flow to how you would deposit funds into an exchange.”Josh Lee
The Osmosis Team is currently around 10 people, but they are looking to grow! Osmosis is currently looking for research, frontend devs, client library builders, designers, and more. Here is a list of research directions the Osmosis team will be exploring.
Feel free to join our Staking Hub Telegram group if you haven’t already.