When it comes to AMM (Automated Market Maker), some outstanding examples of AMM are PancakeSwap on Binance Smart Chain or Uniswap on Ethereum. Have you ever thought about which AMM stands out in the Cosmos ecosystem?
In this article, we would like to provide to you all the details about Osmosis (OSMO) - the first AMM of the Cosmos ecosystem. Let’s find out together to discover more about Osmosis.
What is Osmosis?
Osmosis is a cross-chain automated market maker (AMM) protocol built using the Cosmos SDK that allows developers to design, build and deploy their own customized AMMs.
Osmosis is one of the first Cosmos-based AMM DEX. Cosmos has the market cap among the 30 largest in the cryptocurrency market, so the growth potential of Osmosis in the future is enormous. Osmosis is inspired by Balancer, Uniswap and Curve Finance, so it has the advantages of all three mentioned AMMs.
How does Osmosis work?
Osmosis has IBC (Inter - Blockchain Communication) built-in from the start, allowing it to connect to the entire Cosmos chain ecosystem. Osmosis will integrate with non-IBC enabled chains later this year after integrating native Cosmos assets.
Osmosis may customize the curve algorithm the same as Balancer. Osmosis allows market participants to find an optimal equilibrium for bonding curves in different use-case liquidity pools. In other words:
- Uniswap defines cure algorithm by following a formula similar to x*y = k (constant number).
- Osmosis applies this formula by x*y = z (changeable number).
Time-Weighted Average Price (TWAP) is a reliable average price that can exclude short-term price fluctuation or manipulation from hackers. Uniswap is known for being the first AMM using this method. To avoid arbitrage risks, Osmosis employs flexible TWAP based on market volatility that makes users more beneficial.
Liquidity Provider Incentives: Osmosis allows third parties to easily add incentive mechanisms to specific liquidity pools.
Flexible Liquidity Pools: Osmosis is quite similar to Balancer in allowing users to flexibly provide liquidity to pools with different ratios (66/34, 90/10, 50/50). That makes more innovative AMM strategies suitable for fast-changing markets like DeFi.
However, you can only add 2 tokens to pools like Uniswap at this time because the capitalization of tokens in the Cosmos ecosystem is still low when compared to Ethereum. As a result, adding more tokens to liquidity pools is extremely risky for users.
As the Cosmos ecosystem matures, I believe Osmosis will consider updating a new feature that allows users to add more assets into liquidity pools.
What is OSMO token?
OSMO is the governance token of Osmosis. The OSMO token will be distributed only to network participants who contribute resources to the success of the Osmosis network such as liquidity providers, developers, stakers, and more. There will be no preminded OSMO token sales.
Detailed information about OSMO token
OSMO Key Metrics
- Token Name: Osmosis.
- Ticker: OSMO.
- Blockchain: Cosmos.
- Token Type: Utility & Governance.
- Total Supply: 1,000,000,000 OSMO.
- Initial Supply: 100,000,000 OSMO.
OSMO Token Allocation
- Liquidity Reward Mining: 40.5%
- Developer Vesting: 22.5%
- Staking Reward: 22.5%
- Community Pool: 4.5%
- Strategic Reserve: 5%
- Airdrop: 5%
OSMO Token Release Schedule
A total of 300 million tokens will be distributed in the first year. After 1 year, this will be reduced by 1/3, resulting in a total of 200 million tokens released in Year 2. In Year 3, a total of 133 million tokens will be distributed. And so on, until 1 billion tokens are distributed.
OSMO Token Sales
There will be no OSMO token sales in advance. The OSMO token will be distributed only to network participants who contribute resources.
OSMO Token Use Cases
- Protocol Incentives: Reward liquidity providers for their contributions in Osmosis by giving them a stake of the protocol.
- Governance: Active stakeholders and liquidity providers are actively engaged in the process of discussing, voting for protocol upgrades.
- Setting the base network swap fee in Osmosis.
How to get OSMO Token
You can get OSMO by swapping directly on the Osmosis Website.
How to store OSMO Token
According to Osmosis’ information, users should use the Keplr wallet for the best platform interaction. This is a wallet directly linked to Osmosis that allows users to store and receive OSMO tokens.
At the moment, Coin98 Wallet does not support storing OSMO Token, we will update this article as soon as Coin98 Wallet develops this feature.
Osmosis connects IBC-enabled chains. The protocol has plans to implement an ETH bridge later this year.
We will see the synergy between Osmosis and Cosmos HUB in developing an AMM as serviced infrastructure or a Hub AMM, contributing to many more AMMs will arise in the Cosmos ecosystem. Therefore, there will be many OSMO tokens used for many different purposes in DeFi.
Team, Investors, and Partners
- 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.
Is Osmosis (OSMO) a good investment?
- The Osmosis team is focusing on two main strengths: the first is AMM as serviced infrastructure, which is the ability to be flexible in changing parameters in AMMs. The second is cross-chain DeFi integration that will attract more cash flow and users in the future.
- Osmosis is one of the Cosmos ecosystem’ first AMM projects, so Osmosis has the advantage of being a pioneer compared to other competitors in the same ecosystem.
- Osmosis’ Total Value Locked (TVL) is currently about $450 million, which increased 8,000% in the last three months. However, Osmosis’ TVL is still low compared to the leading AMMs.
By looking at similar projects, you can compare Osmosis’s product quality and the possibility of future price increase. Other projects that also provide AMM services like Osmosis include:
- Ethereum: Uniswap, Sushiswap, Curve,...
- Binance Smart Chain: PancakeSwap, Biswap,...
- Solana: Raydium, Serumswap,...
- Polygon: Quickswap,...
- Avalanche: Pangolin, Trader Joe,...
- Celo: Ubeswap,…
With many AMM launched recently in the DeFi market, choosing one to invest in is not an easy decision. I believe that the detailed information provided above about Osmosis will greatly assist you in deciding whether or not to invest in Osmosis.
If you have any questions related to Osmosis, feel free to comment in the section down below!