Osmosis ($OSMO) - The ATOM token you know but don't
Did you know that $OSMO has the leading Volume & TVL in $ATOM? Did you know that its developer base has grown substantially? Are you aware that Cosmos' DEFI eco is growing rapidly? 🚜 Read on!
Project: Osmosis / Token: OSMO / Docs
Messari + Token Terminal + Defi Llama + Osmosis Zone + Explorer + Flipside
Preface:
Osmosis is a DEX appchain within the Cosmos ecosystem. Which means that has sovereign control over how the dApp runs, the fees that must be paid and the customization of its pools. It also means that it’s an L1 for protocols to build atop.
It has the highest volume + TVL amongst the IBC (Inter-Blockchain Communication) projects and is therefore deemed the current liquidity hub of Atom. Development has been steadily increasing, with 66 protocols having deployed to the chain. With Mars Protocol having very recently launched we could easily see this ecosystem come back to life.
$OSMO is furthering their commitment to innovation within the AMM space by following Uni V3’s concentrated liquidity models, with what will surely be their own improvements. DApp development to make these strategies automated is already underway.
Has the Cosmos ecosystem already started re-gaining traction? Let’s discuss👇
Tokenomics: [ as of 01/29/23 ]
Is a fair launch project. Operates similar to BTC’s emissions halvenings every 4 years but instead utilizes a thirdening every year. The LP incentives are quite high, though changes to the structure of the AMM via Concentrated Liquidity, should increase earnings to LPs which should therefore decrease token incentives.
The FDV is at $1B now, with an FDV/TVL over 5. Not the greatest, but if you’ve been watching the markets recently there seems to be little care for these valuations. Seems the market is pricing in short term performance over long term financials.
Quick history:
Founded in Jan 2021 by the Osmosis Labs team, whose 3 founders are all from the Tendermint team; which was responsible for the underlying Cosmos architecture.
Was first cosmos appchain to see significant volume and is largely responsible for the kickstarting DEX activity within IBC.
Fast future:
Mars Protocol
Lend, borrow and earn
Launched Feb 1st
Red Bank with “outposts” on Osmosis to follow in coming weeks. Utility utility utility 🚜
Concentrated Liquidity
Similar to UniV3 / JoeLB except with some UX innovations
Will mean less LP incentives (better protocol health) as fees replace.
Financial primitives =
Perpetuals, Collateralized Debt Positions (think MKR), Yield Optimizers and Lending markets.
Interfluid Staking =
Will allow for 50% of $ATOM from LPs to be staked to the Cosmos network, adding security for its network, not just from $OSMO to Osmosis’.
How it works / What is does:
Custom AMMs
Dynamic adjustments of swap fees
Multi-token liquidity pools
Ability for =
token fundraisers
interchain staking
options markets
Staked Liquidity
Sovereign control of pools
Weighted voting on Osmosis direction
Provides consensus layer with additional security, what they call “Proof of Useful Stake”.
Whereby users can stake portions of their LP (w/ OSMO) into the staking contract, increasing network security and garnishing extra APY.
Interfluid staking underway (use of ATOM as well for Cosmos staking security).
Bridging
Axelar’s Satellite.money: EVM + IBC support
Finances:
Fees =
Transaction Fees are paid to OSMO stakers
Swap Fees are given to LP token holders of the affected pool
Exit Fees are paid to the remaining LP holders of the affected pool
MEV capture and redistribution
Treasury =
Strategic Reserve
Community Pool
Team:
Founders =
Josh Lee: Cofounder of Kepler Wallet also
Location = Osmosis Labs, Singapore
Team =
24 employees on LinkedIn
Investors = $21M Raise via ICO
Robot Ventures, Nascent, Do Kwon, Figment, Paradigm
Developer Activity = [ Github ]
Developer Report =
273 monthly active
Audits(s):
Certik Audit still in progress; has been for sometime
Grant for Osmosis ecosystem projects to receive audits prior to launch on mainnet.
Social [ as of 01/30/23 ]
Twitter: 150k
Discord: 20.5k
Competition: [ Mapofzones.com ]
Will be releasing a Cosmos Ecosystem Comparative Analysis ASAP 🚜 Follow or subscribe so you don’t miss it!
Kujira:
Deep research link here; tldr full suite defi appchain
According to mapofzones.com, KUJI has over 2x the number of transactions than Osmosis.
Is to web3 what stripe is to mobile/internet applications
Huge ecosystem
OKX Chain:
Highest DAU in cosmos space
CherrySwap is 1st AMM on OKC
Canto:
Receiving a lot of buzz lately, largely due to its high inflation rate and large rewards. Defi dApps on the protocol are incentivized by Canto allowing them to offer no fees to users. Canto’s price has appreciated 500% in January
DEXs:
Injective: most rapidly increasing volume within the space. Notable backers like Binance and Jump. Already 132 mcap rank.
Gravity DEX
Partnerships / Ecosystem:
Mars Protocol $MARS
Launching the lending/leveraged defi protocol as we speak.
Will operate outposts on the different IBC chains, with Osmosis as the first.
Makes sense given that Osmosis has the most liquidity within the cosmos ecosystem. This will directly benefit Osmosis by giving additional utility to the liquidity within the protocol → alas liquidity begets liquidity 🚜
Will have “rovers” which will enable defi users to borrow up to 100% of their collateral.
Quasar $QSR
Automated strategies for the Osmosis (and IBC ) ecosystem. Ie hedge funds, custom ETFs, VC DAOs, treasury management. Improvement on Yearn protocol
Will be able to make Osmosis’ “uni v3” styled concentrated liquidity more profitable for “non-advanced” users.
To be airdropped on mainnet later this year. Future $DOT integration
Osmosis Founder invested in, along with Polychain Capital.
Misc =
Beaker for ease of cosmwasm app deployment on Osmosis
ICNS: IBC Nameservice (think ENS)
Claim your ICNS via Twitter profile here (Invite link helps me 👀)
Skip: MEV auctioneer. Can allow L1 blockchains to recapture toxic flows and bring value back to its stakers. Will be included in OSMO V15.
Quicksilver: Bringing Liquid Staking to Osmo (after Stargaze NFT)
Bullish:
Twitter =
Emperor Osmo on automatic staking & Mars integration
Highly ranked on cryptofees.info 🚜
Governance controlled from the beginning
Fair launch community token
Mars Protocol launching which means additional utility for Osmosis LPs.
According to Electric Capital, Osmosis ranks very well on the developer side of things, with an 85% increase in full time devs over 1 year.
According to mapofzones.com Osmosis has:
Highest volume within Cosmos’ IBC network 🚜
2nd highest DAU, losing only to OKX Chain
Extremely helpful discord community
According to Quasar “IBC will be the interoperability layer connecting blockchains, and Osmosis will be the liquidity layer and connective tissue tying it all together” 🚜
USDC launching to Cosmos is beneficial to the whole eco
Is able to capture MEV as an appchain and deliver wherever, like back to LPers. Uniswap is not able to do this because its an app built on top of Ethereum, not an L1 itself
Bearish:
Twitter =
Nothing negative but then not a lot of people discussing outside of the Cosmos ecosystem personas.
Poorly laid out information; no formal documents that clearly outlines the protocol in its entirety.
Though the discord community is super helpful for pointing you to the info that is spread around
High LP incentivize emissions
Will be reduced with Concentrated Liquidity upgrade
$5M protocol exploit in June 2022
Already MCAP rank 86 with an FDV slightly over $1B
OSMO Represents over 50% of the TVL within the protocol.
Due to the Superfluid staking, which allows for delegation of 50% of OSMO to PoS validators. This is a good thing though and the “Interfluid” staking of ATOM will help to decrease this number.
Conclusion
The Cosmos ecosystem is burgeoning, with development high and dapp innovations strong. With projects like dYdX providing a prime example of why protocols are choosing Cosmos (your chain your rules is too enticing to turn down). Couple that with Circle’s launch of native USDC and things are really starting to shape up.
Which is important, because the entire interconnected chain is still recovering from the Terra Luna fall out. As recently reported by Blockwork’s 0xResearch podcast, Osmosis’ liquidity is nowhere near where it was and is very much in need of new volume.
There is however several advancements in the IBC pipeline that have the potential to swing things in Atom and Osmosis’ favour. Lending through Mars and automated LPing though Quasar are just two.
So it begs the question, has this narrative already taken shape while you were sleeping? With Osmo, Cronos, OKC & dYdX all having FDVs over $1 Billion. Not to mention new entrants to the IBC space have already had large valuation appreciations, think Cantos & Injective.
This is what I think.
The Atom ecosystem is ready, a properly connected and modular blockchain. And Osmosis’ first mover advantage as the liquidity appchain is sure to keep it relevant. I will look to hold and stake it (decent chance Atom goes through another airdrop season). But I am also looking further into the IBC world, specifically at these protocols =
Celestia: EVM-IBC Modular network & scalable DA layer 🚜 Not launched
Injective: Helix CLOB Spot/Perp Dex
Mars Protocol: Lending / Leverage
Kujira: Multi-utility Defi Hub
Inter Protocol: Decentralized stablecoin $IST launching thru Agoric
Nothing in this report should be misconstrued as financial advice. Any investments should be taken at the sole discretion of the reader and/or counter party.
As always, dig deep and DYOR.
Made with love,