An Introduction to Osmosis: The Largest Interchain DEX
In every network, DEXs play an integral part to facilitate on-chain token swaps. In an ever-expanding ecosystem of interconnected apps and services like Cosmos, DEXs will hold a major role in this ecosystem.
Enter Osmosis, an automated market maker (AMM) protocol for interchain assets that allows developers to build customised, sovereign liquidity pools. Built using the Cosmos SDK, Osmosis utilizes Inter-Blockchain Communication (IBC) to enable cross-chain transactions. The goal for Osmosis is to provide the best-in-class tools that extend the use of AMMs within the Cosmos ecosystem beyond traditional token swap-type use cases.
Through this article, we will learn about Osmosis app features and what you can do in their app as a user.
Introduction to App Osmosis Zone
This is what the homepage looks like. To start, you first connect your Keplr Wallet.
Swap
Swapping is an activity of exchanging assets with one another. For example, you can easily swap your $ATOM token to $OSMO on Osmosis. The entire transaction happens on-chain without a third-party intermediary. In traditional finance, this might be a bank, broker, or exchange.
In decentralized exchanges like Osmosis, they don’t use order books, or at least not yet. Instead, they use smart contracts to create liquidity pools for different tokens. This is where the liquidity for swaps comes from.
Pools
In Osmosis, pools are where users can provide liquidity on their preferred tokens. To motivate users to come and provide liquidity, Osmosis rewards the liquidity providers with a portion of the fees paid for transactions on the liquidity pool. And it is through this relationship that liquidity provision is rewarded and keeps the system running.
Providing liquidity has the risk of impermanent loss, and when it happens, the loss of value sometimes could be greater than the rewards itself. Therefore, to further maximize the incentive for the users, the Osmosis team introduce Bonded Liquidity and Superfluid staking. You can check on the APR provided for each pool, and decide your strategy.
Assets
On this page, we can see the total assets of an account that is stored in the Osmosis chain. Users can make deposits, withdrawals from/to any IBC-connected chains in the Cosmos ecosystem.
Stake & Vote
By clicking on the Stake tab, you will be redirected to the Keplr dashboard, where you can choose the validator and stake your $OSMO token.
By clicking on the Vote tab, you will be redirected to the Keplr dashboard, where you can see the active governance proposals and vote on Osmosis proposals.
Stats
The stats tab will take you to https://info.osmosis.zone/
On this page, you can find overview information of Osmosis, like total volume, liquidity, and many more. The information on this page is helpful for conducting deeper research on tokens and obtaining detailed statistics on each liquidity pool.
Now you know the basic features of the Osmosis DEX. With a simple yet clear UI/UX from Osmosis, it is a fun experience for new users who wish to enter a Web3 app.
This article is made only as a guide and cannot be seen as financial advice. We assumed that when you are following this guide, you have already done your own research on the token and all the risks that might happen.
