ShapeShift DAO — Validating on Osmosis
The ShapeShift DAO is excited to announce its participation in the Osmosis protocol as an Osmosis Validator. This is aligned with ShapeShift values as it facilitates connections across the entire Cosmos chain ecosystem with the promise of integrating other chains in the future while remaining open source in its code and governance. ShapesShift has a vested interest in seeing the Osmosis project through and helping it grow. The ShapeShift DAO is currently building out an integration to support Osmosis functionality in both web and mobile apps, read the full proposal here.
Generating Revenue Through Validating On Osmosis!
Having participated in the Cosmos ecosystem since 2017, it was no coincidence ShapeShift was naturally drawn to participate with their Osmosis Validator. Since ShapeShift decentralized into a DAO, validating continues to be one of the most essential parts of the ShapeShift Tokenomics Workstream. Within one month of Validator operation, the ShapeShift DAO attracted over 1.5 million ATOMs from delegators which in turn generated almost 1,200 ATOMs from commission — more details here. The first payment to the DAO was sent on November 30th, 2021 with a deposit of about 23,000 UST sent directly to the Gnosis Safe on the Ethereum blockchain — transaction details. The 2nd Cosmos Validator payment was sent directly to the Gnosis safe. 33,288 UST was deposited. The 2nd payment was ~11,500 more UST (~53% more) — details here.
Osmosis Network Background
Osmosis is one of Cosmos’ first decentralized proof of stake (PoS) Automated Market Maker (AMM) protocols for the Tendermint system — meaning it specializes in Interchain Defi. Unlike typical smart contract‐based AMMs, Osmosis is built using the open‐source Cosmos SDK. Osmosis’ goal is to enable developers to customize and deploy AMMs in the Cosmos/Tendermint ecosystem and to innovate in liquidity pools by using Osmosis’ governance processes and interoperable builder toolkit. As a decentralized exchange (DEX), Osmosis nurtures a heterogeneous and interoperable cross-chain trading experience. Simply put, Osmosis is currently the most dominant procedure on Cosmos, accounting for roughly 40% of the total inter-blockchain transfers and has the largest potential to grow even larger.
Osmosis — following the lead of Cosmos and parallelling values from ShapeShift advocates and encourages self-sovereignty and accessibility through its governance system. Inter-blockchain communication (IBC) compatible blockchains (such as Cosmos, Regen, Akash, and more) can be seamlessly swapped on Osmosis; there are currently no fees on Osmosis, meaning trades and transfers on the Osmosis chain are free. .
Learn more about Osmosis here.
How Does This Work And How Does It Benefit ShapeShift?
As a PoS (Proof of Stake) network, Osmosis is secured by validators who produce blocks for the blockchain and earn block rewards in exchange for providing these services. This means that holders of OSMO (the native token of the Osmosis Network), can take part in network governance and receive rewards — similarly to how ShapeShift operates with its native FOX token. Validators can then stake their own OSMO or be delegated tokens from other OSMO holders.
Validator nodes are the nodes that participate in Osmosis’ consensus, propose blocks, and verify blocks proposed by other Validators. At genesis, Validator nodes are only expected to participate in consensus. However, over time, Validators will be able to take on more responsibility in the ecosystem, such as acting as price oracles or bridges.
At launch, 100 Validators were included in Osmosis’ active set, determined by total OSMO staked. The genesis of the Osmosis chain was 2021–06–18. As of the writing of this article, Osmosis has opted to include 118 validators (proposal #114) — an increase from the original 100. While there is no minimum self-bond to activate a Validator on Osmosis, to be in the active set a Validator must have more stake than the 125th Validator in the network. As of writing this article, it requires a minimum of 25,491 OSMO (about $242,000 USD) to be in the top 118 Validators. A Validator’s chance of being selected to perform work, and to earn rewards for doing so, is also determined by the overall weight of OSMO staked to the Validator including both self-bonded stake and delegated.
Those holding any amount of OSMO may delegate their tokens to an active Validator to help secure the network and earn a portion of the rewards — this is precisely what ShapeShift is doing. As some background, Validators (such as ShapeShift) set a commission fee charged to all delegations pro rata; fees range from a minimum of 5% up to 100% of total rewards earned by the delegators. ShapeShift’s Osmosis Validator currently charges 5% and distributes that to the DAO treasury and TaxiStake in a 70% (DAO) / 30% (TaxiStake) split minus $2600 / month for operating and maintenance costs for a 12 month period from February 1, 2022 through and including January 31, 2023. Having this additional diversification of revenue sets the DAO up for the best long-term sustained success and monetary stability.
Costs to the ShapeShift DAO
TaxiStake has been paid 10,000 FOX for the initial setup and creation of an Osmosis Validator. Successful Validator operation requires continuous operational attention from multiple highly skilled individuals. We feel confident partnering with TaxiStake as their continued positive results with other Validator programs has given us confidence in their abilities to ensure that the program does not run a deficit.
The Osmosis project presents an opportunity for DAOs and other organizations to participate as Osmosis Validators. Osmosis will help facilitate connections across the entire Cosmos chain ecosystem as well as integrate with non-IBC enabled chains in the future — something ShapesShift has a vested interest in seeing through and helping grow. The ShapeShift DAO continues to be grateful for the expertise and consistency that TaxiStake can provide. Osmosis — much like the majority of the Cosmos network — relies on a strong community which is something that ShapeShift is excited to be a part of. The continued diversification of the Shapeshift DAO’s treasury and general income streams make the ground on which the DAO operates more stable,which gives more room for continued growth and expansion.