One of the most important Cosmos SDK chains supporting development and growth is Osmosis. Osmosis is a decentralized Automated Market Maker (AMM) that has grown extremely fast since its inception. With the ability to connect and trade across a multitude of tokens within the Cosmos IBC, the inclusion of incentivized liquidity pools (not to mention the incredibly user-friendly and beautiful interface), Osmosis is at the top of the list when it comes to a useful platform for trading and providing liquidity across the Cosmos Ecosystem.
There are a number of decentralized exchanges (DEX) that have gained popularity recently, including Uniswap (Ethereum), Pancakeswap (Binance Smart Chain) and many more. Osmosis is the most popular DEX in the Cosmos ecosystem by a big margin and with good reason. The User Interface (UI) is simply beautiful and a breeze to use, even for the newest users of DEX’s. The trading fees are low to nil and the rewards for providing liquidity can be lucrative to say the least. Supported Cosmos SDK tokens can be traded seamlessly, and the transaction speed is almost instantaneous. No more waiting around for a transaction to make it onto the chain like you find on some other slower DEX’s.
Liquidity Bootstrapping Pools
Recently, Osmosis has begun providing a liquidity bootstrapping pool (LBP) service, which allows new projects launching within the Cosmos Ecosystem to find their price organically and functions like a reverse dutch auction over a period of 3 days, allowing the market to set the initial price of a new token.
Another function of Osmosis is providing liquidity through the use of liquidity pools which provide funding for trades to occur and offer incentives to those who choose to provide said liquidity, by adding their tokens into a chosen liquidity pool. Incentivized pool users are rewarded daily with the OSMO token and some pools are externally incentivized by the project whose token is in the pool, providing triple rewards (OSMO/External token/trading fees).
The OSMO token is also used as a governance token. As a typical Cosmos SDK proof of stake (POS) chain, governance is completely decentralized and anyone holding OSMO can vote in governance proposals. The community is extremely active and governance votes happen very often. In a typical week there will be 2-4 governance votes on topics ranging from upgrades, weekly incentive adjustments, pool incentive additions and more.
In the next episode I will discuss in detail how to use Osmosis and why it plays such a vital role in the development of the Cosmos Ecosystem. There are links below to the Osmosis app and their Telegram chat.
N.B. If you find yourself getting deeply involved in the community, you will find that there are many chat groups on Telegram spawned from the Osmosis chat with a large community of people consistently brainstorming new and innovative ideas about the crypto space and the future of blockchain technology use cases. Getting involved and tracking down these chat groups is highly recommended if this is something that interests you.
I’ll be deep diving into more chains and aspects of the Cosmos ecosystem over the coming weeks and months so subscribe if you haven’t already to keep up to date with everything Cosmos
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Interesting. This is the first time I am hearing about Cosmos. Sounds like it might be time to investigate the chain. What are the top projects and what wallets does it interact with?
Have not heard about osmosis before, but definitely something to dig into!