Osmosis is a layer1 built on Cosmos that has surpassed 500 million TVL by far. Many protocols have been launched on Cosmos and there are several swaps, including Gravity Dex (Emeris) and Junoswap. Given the competition, Osmosis invented "super fluid staking". I want to report the differences immediately:
1) Staking: you put your tokens in staking on chain and earn rewards because you provide voting power to a validator who validates transactions and can vote in governance (DAO). Your tokens will remain locked
2) Liquid Staking: it is always a staking on chain. However, here you get a liquid derivative that can be used in DeFi for farming. In this case I put Solana in staking for example and obtain a liquid derivative: mSOL. In this case mSOL generates the interest of staking and in addition I can put it to farm in DeFi in a liquidity pool
3) Super Fluid Staking: this is the novelty introduced by Osmosis. I provide liquidity in a pool (for example Atom / Osmo or Luna / Osmo) and earn: trade fees, farming (by Osmo) and an additional reward deriving from Osmo's staking on chain. You will read 54.66% + 16% (example). 54.66% is farming for providing liquidity (trade fee + Osmo farming), while 16% represents Osmo's staking on chain rewards divided by 4 (now 66%/4=16%)
I remember that Osmosis from the first day of his birth has created a DAO (Governance) where decisions on his protocol are made. To participate it is sufficient to have Osmo in staking (on chain).
Now, staking on chain pays 65%. How does the liquidity pool work? If you put $ 1000 in an Atom / Osmo pool you will have to split:
-500 $ in Atom
-500 $ in Osmo
You get 0.3% trade fee, 54.66% farming and 16% super fluid staking (65% staking on chain / 4 = 16% super fluid staking). Obviously if you intend to participate in Super Fluid Staking you will have to choose a validator.
Why is staking on chain divided by 4? Because you get rewards on 50% of the pool forming Osmo (Osmo is already 50% of the pool and of this 50% you get rewards on 50%).
HOW OSMOSIS WORKS
For those who have never used it, Osmosis is a dex (AMM) and a farming platform, with the only difference that it uses the Cosmos IBC. Basically, I buy Atom from an exchange, I transfer it via the Cosmos network to Keplr wallet (address starts with Cosmos1) and then I connect my Keplr on Osmosis. In "asset", I find Atom and I press on "deposit".
At this point I use the IBC that connects Cosmos Hub with all its layer1s (including Osmosis) and after a few minutes I will have my Atom. In the internal swap I take my Atom and sell half of them for Osmo (example). In "pools", I find my favorite pool and hit "add liquidity". Having added the liquidity, all I have to do is click on "start earning", choose the release time (1, 7 or 14 days) and finally check the box to participate in Super Fluid Staking. Once this is done I will have to choose the validator. What are the risks? The main risk is validator slashing if it misbehaves.
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