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Osmosis: A Cross Chain DEX

By 2sats | 2sats | 2 Nov 2021

*obligatory not financial advice*

What is Osmosis?

Osmosis is a relatively new and very promising decentralized exchange that uses the Cosmos Hub to connect to different blockchains. Currently you can only trade a few crypto assets that are part of the Cosmos ecosystem, which includes chains like Terra and its LUNA token, but the goal is to provide a cross chain DEX that supports all kinds of coins and tokens like Ethereum and even Bitcoin. Osmosis is not DApp on Cosmos, but its own chain that is part of the Cosmos Hub.

This is a huge step towards decentralization for the entire crypto market because the easier it becomes to trade and bridge crypto, the less we will depend on centralized exchanges.




But not only will it support different blockchains and their assets, but it also has a unique governance model, that gives liquidity providers more voting rights specific for their liquidity pools. Other DEXes like Uniswap or Pancakeswap, don't offer the option to change parameters, like trading fees or the weight of the assets in the pool, for each different pool individually. Holders of their governance tokens can only make changes across the entire platform at once. Osmosis believes that liquidity providers should have more control over their provided tokens and it gives them the right to vote on changes of the pool based on how much of the liquidity is theirs.

As example, if you provide funds to the ATOM/OSMO pool, then you get to vote on how high the fees for this pool are. You can also vote how to weight the pool, if you want to hold 60% of the funds in ATOM and 40% in OSMO, then you can vote for this too and the automated market maker will consider this when making the prices. It is also possible for people that start a new pool to provide additional incentives for their liquidity providers, for example they could offer additional ATOM coins for people that join the pool.

Pools can be built in a way that consider data like time, volatility and off-chain oracle inputs. This gives pools much more freedom and will make it possible to create new kinds of DeFi tools, like dynamic fees that adapt to sudden spikes in volatility to counter impermanent loss for the liquidity providers.

It’s simply an awesome new DEX with very innovative features.



The OSMO Coin

OSMO is the native coin of the Osmosis chain that is being used for staking. It also gives its hodlers governance rights over the DEX. Liquidity providers can vote for parameters of their own pool, but OSMO holders can vote on general changes of the platform and it is used for platform fees.

The token was "fairdropped" to ATOM holders that held since before February 2021. Half of the genesis supply was airdropped that way, the other half became part of the strategic reverse for future development. The initial supply will be only be a tenth of the total supply of 1 Billion. The rest of the supply will be issued as staking rewards, developer vesting and mostly liquidity mining incentives for the next 9 years. The amount of new OSMO per year will be lowered by 33% each year.



OSMO will be highly inflationary in the beginning but its inflation will be constantly lowered until there is none. There have been no presales or early investors, the coin was entirely given as reward to network users, ATOM holders and developers.

As with other DEXes, the value of the coin depends on how much funds are locked in their pools, since Osmosis could connect to pretty much any other blockchain, its amount of possible funds has pretty much no limit. OSMO has lots of potential.



Using Osmosis and getting OSMO

OSMO is not available on most other exchanges yet. So, if you want to get some you would have to use Osmosis. The best way to do that is with the KEPLR browser wallet. In order to make a swap there, you first need to deposit a coin like ATOM or LUNA under the asset tab, only after that can you swap them or use them for providing liquidity.



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