Network

【Network Introduction】Osmosis

9 Mins read

Basic Information

Established Time:

Announced in October 2020 and launched in June. 19th, 2021

Issue Time: Feb. 18, 2021

Country: Central Region, Singapore

Coin: OSMO

Market Value: $1,996,184,261

Current Price: $5.72

Raise Situation: Airdropped 50% of OSMO tokens to ATOM stakers

Circulating Supply: 349,039,712 OSMO

Total Supply: 325,000,000 OSMO

Max Supply: 1,000,000,000 OSMO

Explore: https://www.mintscan.io/osmosis

All-Time High: $11.25 (Mar 04, 2022)

All-Time Low: $1.24 (Jul 20, 2021)

Network Detail

  • Brief Introduction

Osmosis is Layer-1, Proof-of-Stake (PoS) blockchain built using the Cosmos SDK that has optimized its design to be a sandbox for automated market makers (AMMs).

The chain enables developers to design and deploy customized AMMs by using its various modules and leveraging Osmosis’ on-chain governance system. Osmosis’ native token, OSMO, grants holders the right to vote on proposed network changes and earn rewards for helping secure the network. Its first application, also called Osmosis, is an AMM that features ATOM and OSMO as its initial base trading pairs.

  • Link Tree

WebsiteTwiiter 丨RedditMedium 丨GituhubTelegramDiscord

  • Network Description

Osmosis is an AMM protocol created using the Cosmos SDK. The project was announced in October 2020 and launched in June. 19th, 2021. Its core developers include Sunny Aggarwal, Josh Lee, and Dev Ojha. Osmosis’ vision is that rather than aiming for a one-size-fits-all strategy for AMMs and their liquidity pools, it could provide a sandbox for AMM development. The protocol enables developers to iterate on new, customized AMM designs by using the existing liquidity pools and modules already running on the network. It also features an on-chain governance system that allows each AMM pool’s stakeholders (i.e. liquidity providers) to control and direct their pools.

Osmosis was the first Cosmos-based chain to popularize IBC transfers. IBC transfers had been available for several months before but there was little actual demand from the connected chains; therefore, the volume of IBC transfers was extremely low. Being the first AMM on Cosmos, Osmosis offered the ability to trade and earn rewards through liquidity provision.

  • Features

The Osmosis decentralized exchange will include three key features:

Self-governing liquidity pools

Liquidity pools (LPs) on Osmosis are completely customizable via governance. According to the Osmosis team, nothing in the underlying structure of Osmosis’ AMMs is hard‐coded. LP providers can vote to change all of the pools’ parameters, including curve algorithms, TWAP calculations, swap fees, token rates, reward incentives, and more.

Superfluid staking

When users deposit any two supported tokens into an Osmosis liquidity pool, they will be able to stake their liquidity shares to validators on the tokens’ chains. Therefore the deposited asset will not only earn its share of fees from the liquidity pool’s swap transactions, but will also earn rewards from helping secure the chain, allowing users to simultaneously provide liquidity to the Osmosis AMM and still participate in the native ecosystems of the tokens they hold by staking. For example, an OSMO<>AKT pool’s LP tokens will be able to secure both the Osmosis and Akash networks.

MEV resistance

Osmosis was conceived with the goal of MEV (Maximal Extractable Value) resistance at its core and it includes solutions to help limit MEV. You can learn more about Osmosis’ vision for preventing MEV in Sunny Aggarwal and Dev Ojha’s interview with Zero Knowledge.

  • Network Status

https://www.mintscan.io/osmosis

  • Staking Pool

Mintscan – Chain explorer by COSMOSTATION

Cosmos chain explorer powered by Cosmostation, Block explorer for Cosmos-SDK based networks made with love &…

www.mintscan.io

Backers

  • Team

Sunny Aggarwa (Co-Founder of Osmosis)

Aggarwal worked as a Research Scientist at Tendermint in 2017. In 2018, he founded Sikka, a blockchain infrastructure company focused on participating in protocols and networks for the decentralized internet. Sikka currently operates a Top 5 validator on the Cosmos Hub, Kava, and Akash networks.

Josh Lee (Co-Founder of Osmosis)

Lee was Aggarwal’s colleague at Tendermint 2019. Then, he founded Chainapsis, which built Keplr wallet. Keplr is a powerful wallet for Cosmos and more.

  • Partners & Investors

Funding

  • Financials Overview

Refer: https://www.crunchbase.com/organization/osmosis-foundation

  • Investors
  • Founding Rounds

Technolgy

  • Code

Homepagehttps://github.com/osmosis-labs/osmosis

Amount of Contributors: 59

https://github.com/osmosis-labs/osmosis/graphs/contributors

Fork:154 https://github.com/osmosis-labs/osmosis/network/members

Submit language:Go (98.4%)

  • Tech Knowledge

Cosmos IBC

The aim of Cosmos is to construct blockchain bridges that will allow previously isolated chains to connect and communicate. The IBC (Inter-Blockchain Communication) protocol is what’s used to create these bridges. IBC is a Cosmos SDK module that chains can integrate and use to bridge to other IBC-enabled chains.

AMM Customizability

Osmosis modules allow developers to customize their exchanges and price curves based on various parameters, including swap costs, token weights, and TWAP computation. The network serves as a sandbox for AMMs, where developers can experiment with new time dependencies, volatility indexes, and off-chain oracles as inputs for their product. Project teams can also use these modules to create additional DeFi asset types or protocols like options and dynamic fee markets.

  • Tech Advantages
  1. Osmosis adopted and implemented an IBC module at launch, establishing connections with various Cosmos chains in the process, including the Cosmos Hub, Akash, and Iris Network. Users of these chains can send their tokens to Osmosis through IBC channels and provide liquidity to their token’s respective pools. The Osmosis team also simplified the IBC transfer process by abstracting the channel creation setup process.
  2. The network allows new developers to leverage existing IBC connections, order flow, and liquidity. Therefore, teams don’t have to create and bootstrap liquidity for a new AMM from scratch, eliminating the need to spin up a new AMM for each contract or module upgrade.

Ecosystem-Governance

Governance Type: Delegated On-Chain Vote

Governance is identified as a critical piece of the Osmosis ecosystem by their team, citing that the rate at which Osmosis will be adding new features will rely on the active participation of the community in passing protocol upgrades. In this spirit, Osmosis is self‐described as being “designed such that the most efficient solution is reachable through the process of experimentation and rapid iteration by leveraging the wisdom of the crowd.”

Any OSMO holder can participate directly in Osmosis governance via the Osmosis app or CLI, and any OSMO holder may submit a new governance proposal by submitting a small deposit which functions to prevent spam. Delegators inherit the vote of the validator they are delegated to unless the delegator actively submits a vote themselves, which overrides their inherited vote.

The forums for discussion are held on their telegram and discord channels but anyone can make a proposal even without any discussions. Proposals are made on mintscan.io and the cost of submitting a proposal is 2,500 OSMO (although there is a proposal right now to lower that number to 500). There is a 2-week deposit period followed by a 3-day voting period. In order for a vote to pass, a simple majority is needed (>50%) and a quorum of 20% is needed (20% of staked OSMO for a proposal pass). Thereafter the developers will change to code to meet the proposal’s ruling though this is not always needed as proposals can be submitted to spend funds from the Community Pool or release airdrop funds etc.)

5% of tokens released per epoch (daily) on Osmosis are directed to the Osmosis community pool. This pool is governed by community governance, and any OSMO token holder may submit a proposal for a vote to improve or build the ecosystem. An initial request for proposals published by the Osmosis team encouraged community members to submit governance proposals to develop pool‐level analytics, expand the chain’s infrastructure, improve governance tooling, and more.

Economic Model

  • Launch & Initial Token Distribution

Refer: https://messari.io/asset/osmosis/profile/launch-and-initial-token-distribution ; https://news.coincu.com/70636-what-is-osmosis-osmo/

Osmosis launched with an initial supply of 100 million tokens. The team airdropped 50% of OSMO tokens to ATOM stakers (based on a snapshot of the Cosmos Hub chain on Feb. 18, 2021). The other half of the initial token supply went to an on-chain treasury called the Strategic Reserve. This allocation will be controlled by a multisig DAO, initially composed of members of the development team. The team intends to expand membership to community members down the line.

According to the team, the DAO should use the Strategic Reserve to provide grants or make strategic investments in projects teams that would improve the adoption of the Osmosis protocol.

Liquidity Reward Mining: 40.5%

Developer Vesting: 22.5%

Staking Reward: 22.5%

Community Pool: 4.5%

Strategic Reserve: 5%

Airdrop: 5%

  • Token Functions

The Osmo token is a governance token that provides a decentralized coordination method for token holders to decide the strategic direction and all future changes to the Osmosis protocol. It is anticipated that Osmo will be primarily used in the following functions (although governance may choose to add or remove some of the functions):

  1. Voting on protocol upgrades
  2. Allocating liquidity mining rewards for liquidity pools
  3. Setting the base network swap fee

The team and community have also deployed OSMO tokens as part of the network’s liquidity mining program. Users can earn OSMO tokens by depositing liquidity into Osmosis pools. Liquidity mining is a popular growth hack for incentivizing liquidity, making AMMs a more attractive venue for traders.

  • Supply Schedule

General Emission Type: Inflationary

Precise Emission Type: Decreasing Issuance

Capped Supply: Yes

Competition

Refer: https://www.crunchbase.com/organization/osmosis-foundation/org_similarity_overview

Validator

  • Validator Nodes Introduction

Validator nodes are the nodes that participate in Osmosis’ consensus, propose blocks, and verify blocks proposed by other validators. At genesis, validator nodes are only expected to participate in consensus. However, over time, validators will be able to incur more responsibility in the ecosystem, such as acting as price oracles or bridges.

Osmosis’ other node types are:

Full nodes, used to interact with the Osmosis blockchain

Archival nodes, used to store the full historical state of the chain

Seed nodes, used to help nodes find and connect to peers

Sentry nodes, used to stand between a validator and the rest of the network, ferrying messages and protecting the validator from DDoS (distributed denial of service) attacks

At launch 100 validators are included in Osmosis’ active set, determined by total OSMO staked. While there is no minimum self-bond to activate a validator on Osmosis, to be in the active set a validator must have more stake than the 100th validator in the network.

The active set can eventually scale to 125 via governance proposals. A validator’s chance of being selected to perform work, and to earn rewards for doing so, is also determined by the overall weight of OSMO staked to the validator including both self-bonded stake and delegated.

Those holding any amount of OSMO may delegate their tokens to an active validator to help secure the network and earn a portion of the rewards. Validators set a commission fee charged to all delegations pro rata; fees range from a minimum of 5% up to 100% of total rewards earned by the delegators, depending on the validator’s goals. As with most Tendermint‐based protocols, a validator also specifies the maximum commission fee they could ever charge, along with the maximum rate of change in the commission fee per day (e.g., setting a 1% maximum change rate means the validator can increase or decrease their fee by 1% per day).

There is a 14 day unbonding period for delegation, during which time the unbonding OSMO does not earn rewards but is eligible for losses due to slashing. Delegators may redelegate to a different validator one time with no unbonding period; any subsequent redelegations made within 14 days of the first redelegation are subject to a 14 day redelegation period. Delegators also have full voting rights within Osmosis’ governance.

  • Reasons for running Osmosis Nodes

1. Governance plays a crucial role in Osmosis’ success. Pool composition, pricing curves, supported assets, swap fees, and more are all determined via governance, so having an active voice is crucial to those who are invested in the network. Running a validator provides an outsized voice in governance as delegators inherit the votes of their validators by default.

2. Future releases of superfluid staking modules can directly increase the potential for active validators to earn rewards, as liquidity providers will be able to simultaneously stake their LP shares.

3. Osmosis’ deep liquidity and easy access to Cosmos‐based tokens make it an attractive target for DeFi builders and exchange integrations. First movers as participants in the ecosystem will benefit from early‐stage high returns and an outside portion of transaction fee rewards.

4. Validator operators can attract delegation from their community to increase overall stake and move up in the active set, increasing the likelihood of being selected to perform work and earn rewards and increasing revenue from operator fees for providing the service of validation.

  • Risks of participation on Osmosis

Slashing is enabled in Osmosis. A validator committing a slashable offense will result in loss of funds and missed rewards for both the validator operator and any delegators who have staked their OSMO to that validator.

Though there is no slashing for downtime, after 50 hours of downtime validators are jailed and must wait for a cooling period (60 seconds) to elapse before submitting an un‐jail transaction to rejoin the active set. While jailed, validators are not eligible to participate and earn rewards. However, a delegator may choose to redelegate their stake to a new validator at any time during which the validator to which they were delegated is jailed.

Double‐signing results in a 5% slashing penalty deducted from the validator’s overall stake, including self‐bonded and delegated tokens. The validator is also jailed and is not eligible to submit an un‐jail transaction, effectively removing the validator permanently from participating in the network.

Related Readings

https://messari.io/asset/osmosis/research

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