Osmosis (OSMO) serves as a decentralized exchange (DEX) within the Cosmos ecosystem, which is a network of independent and interoperable blockchains linked securely through the Inter-Blockchain Communication Protocol (IBC). Osmosis also supports assets from Ethereum and Polkadot, bridged into its system. Initially adopting Balancer-style pools, Osmosis is transitioning to a concentrated liquidity model, aiming to enhance both trading and liquidity offering experiences.
As an appchain DEX, Osmosis controls its entire blockchain stack, unlike DEXs tied to a parent chain's code. This autonomy has allowed for innovations like Superfluid Staking, which enhances Proof-of-Stake security by enabling the OSMO in liquidity provider (LP) positions to contribute to chain security while earning staking rewards. The flexibility of appchains also facilitates features like a transaction mempool shielded by threshold encryption, significantly reducing harmful miner extractable value (MEV) on the platform.
Osmosis envisions a DEX and trading suite that natively connects various chains via IBC, including Ethereum and Bitcoin. To expand its trading capabilities, Osmosis invites external developers to craft a specialized DEX ecosystem encompassing lending, credit, margin, fiat on-ramps, DeFi strategy vaults, NFTs, stablecoins, and more—providing both the functionality of a centralized exchange and the minimized trust of decentralized finance.
Who Founded Osmosis?
Osmosis was founded by members from two key teams within the Cosmos community: Sunny Aggarwal and Dev Ojha from Sikka validator and Tendermint, and Josh Lee and Tony Yun from Keplr, the Interchain Wallet.
Among the investors backing Osmosis is Paradigm, a digital asset investment firm with investments in numerous other blockchain projects and protocols such as Uniswap, Maker, and Coinbase.
What Distinguishes Osmosis?
Osmosis stands out in the automated market maker (AMM) money market sphere with three distinguishing features.
Firstly, it offers customizable liquidity pools. Unlike Uniswap, where liquidity providers (LPs) are limited to a two-token pool with equal ratios, Osmosis allows for liquidity provision in pools with multiple tokens and varying ratios. Osmosis argues that participants in a mature DeFi market, like arbitrageurs and LPs, require a flexible system to identify and capitalize on opportunities by adjusting parameters. Thus, Osmosis allows LPs to modify aspects such as slippage and transaction fees.
Coordination among participants is equally important. On Osmosis, liquidity pool shares not only represent fractional ownership but also grant a right to influence strategic decisions, encouraging long-term commitment and defending against possible vampire attacks from rival protocols. Therefore, LPs with significant involvement have a greater say in the pool's strategic direction, reflecting the level of risk they assume.
Lastly, Osmosis introduces the concept of "AMMs as serviced infrastructure." With the growth in DeFi product complexity, AMMs have faced challenges:
* Compromising on efficiency with non-optimal bonding curves.
* Bearing the risk of constructing custom AMMs for optimal performance.
Osmosis addresses this by allowing AMM developers to define bonding curve values while leveraging existing infrastructure through Osmosis's solutions.
How Many Osmosis (OSMO) Tokens Are Circulating?
OSMO functions as the governance token for the Osmosis protocol and has a total supply capped at 1 billion tokens. At launch, 100 million OSMO were made available, divided evenly between airdrop recipients and a strategic reserve. Tokens are released at the conclusion of each daily epoch, adhering to a "thirdening" schedule, where issuance decreases by one-third annually. During the first year, 300 million OSMO will be distributed, followed by 200 million in the second year, and 133 million in the third, continuing in this pattern. The newly issued tokens are allocated as follows:
