About Osmosis
Osmosis is an advanced multichain automated market maker (AMM) protocol that allows developers to design, build, and deploy their own customized AMMs on top of Osmosis. It uniquely offers deep customizability to AMM builders and allows users to create their own custom liquidity pools or duplicate existing ones with tailored parameters, unlike most AMMs with set pools with designs determined by the platform.
Who founded Osmosis?
Osmosis Labs was founded by Josh Lee and Sunny Aggarwal. They raised $21M for the platform’s development during their October 2021 token sale led by Paradigm. Since then, its popularity has soared, hitting a TVL (Total Value Locked) exceeding $1.8 billion at its peak.
Features of Osmosis
The Osmosis Proof-of-Stake blockchain is built with the Cosmos SDK and powered by Tendermint, making it interoperable with other chains in the Cosmos ecosystem via IBC.
By design, Osmosis operates as an AMM laboratory, acting as a testing ground for experimentations to optimize AMMs for DeFi. This fosters breakthrough innovations it needs to move its mission forward and become a hub AMM. It is built for and governed by liquidity providers.
Cross-chain via IBC
Osmosis is designed to be interoperable via IBC (Inter-Blockchain Communication), allowing it to connect to the entire Cosmos ecosystem and its billions’ worth of digital assets and with non-IBC enabled chains, i.e., Ethereum and other smart contract platforms.
Customizable Liquidity Pools
The beauty of Osmosis’ customizability is that its underlying structure is not hard coded. Key parameters like swap fees or token weights are adjustable for each liquidity pool. Components like the curve algorithm and time-weighted average price (TWAP) calculation can also be adjusted. As such, liquidity providers can optimize earnings from fees and staking rewards by accounting for market volatility and other factors.
Self-Governing Liquidity Pools
Osmosis liquidity pools are self-governing, meaning stakeholders can vote on changes to a pool’s rules. They can vote to adjust TWAP calculations, fees, curve algorithms, rewards, and incentives. The platform’s governance feature supports diverse pools representing users’ strategies and risk tolerance.
To encourage long-term liquidity commitments, incentives can be weighted towards those who commit longer with more rewards and voting power.
Superfluid Staking
A creative innovation in the Osmosis protocol is ‘Superfluid Staking,’ which allows users to stake tokens while providing liquidity to pools. The first Osmosis pool to offer superfluid staking is the ATOM/OSMO pool, the largest Osmosis staking pool.
Typically, staking tokens are locked tokens, and liquidity providers cannot secure networks if they choose to participate in DeFi. With superfluid staking, users can earn staking rewards and liquidity pool fees simultaneously, increasing a user’s yield potential and expanding the utility of the OSMO token. However, these tokens cannot be used in governance for voting and can only be delegated to one validator.
Users are able to delegate to Stakewithus and compound their rewards in the superfluid pool by authorizing the compounding feature with us on the Unagii App. More details on how to stake in the section below.
About Osmosis (OSMO) Token
The OSMO token is Osmosis’s native governance and staking token to secure its chain. The token was fairly distributed to those who contribute to the network, like liquidity providers, developers, and stakers. The OSMO token is primarily used for:
- Network Fees
Setting the base network swap fee.
- Incentives
Liquidity mining rewards for liquidity pools, where eligible pools are selected by OSMO governance participants.
- Staking & Rewards
OSMO can be staked to help secure the network and earn rewards as incentives.
- Governance
OSMO allows stakers to draft, submit, and vote on governance proposals related to managing the Osmosis network.
Staking OSMO
Staking is locking up your OSMO tokens to help validate blockchain transactions for network security. Those who choose to stake can delegate their tokens to validators like Stakewithus and earn rewards as an incentive.
Things to note
- Inflation
OSMO is inflationary, in that new tokens will be minted and entered into circulation over time through a combination of staking rewards (25%), liquidity mining incentives (25%), developer vesting (45%), and community pool (5%). The inflation will be cut by 1/3 every year, starting from 300 million tokens released in the first year. This will allow OSMO to reach an asymptotic max supply of 1 billion. This inflationary rewards policy incentivizes OSMO holders to stake and provide liquidity.
- Auto-compound
Rewards earned are not auto-compounded. To do so, stakers must manually claim, and re-stake rewards earned to do so - note that gas costs will apply for each transaction. Alternatively, tools such as ReStake, which is available on Unagii App, can be enabled to help Unagii users auto-compound rewards.
- Unstaking
There is a 14-day unbonding period when unstaking OSMO from the network. Stakers can unstake anytime but will not earn rewards and will be susceptible to slashing during unbonding.
- Risks
Staking risks do apply, including slashing involved for downtime and double signing.
- Non-custodial
Staking is non-custodial, and you always hold control over your OSMO. Validators do not have access to your delegated assets.
How to stake OSMO
There are several ways to stake OSMO tokens, primarily with a Web3 wallet to a validator directly or on their platform.
Keplr Wallet
- Set up Keplr wallet (if you do not have one), and connect Ledger (if you have one)
- Click “Stake” or go to the Keplr Staking Dashboard and connect wallet
- Select Injective chain
- Select a validator (Stakewithus) to delegate tokens to
- Enter the desired amount of OSMO to stake
- Confirm and approve the transaction
Unagii App
Staking on the Unagii App platform delegates tokens to our Stakewithus validator. Rewards earned are paid per-block basis, and users may manually claim their rewards and restake them to compound their returns. Enabling auto-compound via REstake by Eco Stake is also available on the platform.
- Connect wallet (Keplr / Ledger / Keystation)
- Go to the Osmosis page
- Click “Stake”
- Enter the desired amount of OSMO to stake
- Select gas option
- Confirm and approve the transaction
Note: A delegation commission fee is required to be paid to Stakewithus for staking as part of the transaction.
Guide to Osmosis governance
Governance is a critical component of how Osmosis evolves. Active network stakeholders will be responsible for proposing, vetting, and passing protocol upgrades to decide the protocol's future, including every implementation detail. Staked OSMO holders are eligible to vote on governance proposals.
Proposals can be drafted, submitted, and voted on through platforms listed in the infographic below.
The Osmosis Ecosystem
Several teams, like Autonomy, Void, Apollo, and Mars Protocol, are building on and with Osmosis. Many more projects have also announced incorporating their projects into the Osmosis DEX suite, such as bridges, tools, NFTs, and more.
The Osmosis ecosystem will also function as an Interchain incubator. Projects will find product-market-fit on Osmosis, launch their token, and graduate as their own appchain. They'll have more control and flexibility to customize their blockchain stack while retaining users.
With Interchain security on the horizon, Osmosis (and chains that adopt it) intends to introduce Interfluid Staking, allowing staking tokens from other chains to be staked in Osmosis liquidity pools where the other tokens can be used to secure other zones. This will help bolster those chains' security by staking rewards from other chains and earning Osmosis liquidity pool rewards.
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