Why We Should Focus on Osmosis, the First Comos Based DEX
Hello. This is FIRMACHAIN.
Today we will take a look at Osmosis, the first decentralized exchange developed on the Cosmos network. Osmosis is a project that specializes in multichain connection using IBC(Inter Blockchain Communication) interchain protocol, a technology useful for achieving scalability.
Why, then, is FIRMACHAIN focusing its gaze on Osmosis at this point?
We believe most of the blockchain/crypto market participants are familiar with the term DeFi (Decentralized Finance) regardless of whether they have directly experienced DeFi or not.
The term itself is quite self explanatory. Decentralized Finance.
Even though many different financial services can be derived from DeFi, the most common form of DeFi projects nowadays are loaning out stablecoins while receiving crypto assets (token/cryptocurrency) as collateral or receiving rewards by being a liquidity provider.
Osmosis is the first DeFi project developed on the Cosmos network. Specifically, Osmosis is a DEX (Decentralized Exchange).
Whereas CEX has an intermediary or a manager who controls and provides exchange services, DEX is a P2P exchange where assets can be traded between users without involving an intermediary or a manager.
Early stage DEXs were built using the order book system of CEXs. With the passing of time however, DEX trading systems developed into the form of AMM (automated market maker) or DEX aggregator.
Osmosis is built using the AMM protocol. Developed based on Cosmos SDK, the project adopts a superfluid staking system.
Since IBC (Inter-Blockchain-Communication) is embedded, Osmosis can be connected with the rest of the Cosmos ecosystem (i.e. other projects developed based on Cosmos SDK). Additionally, users can participate in Liquidity Pools formed between heterogeneous networks or can create their own pools to obtain fees.
Liquidity Pool is a digital pile of cryptocurrency locked in a smart contract. Liquidity Providers (LPs) receive transaction fees for creating a pool and additionally can receive rewards and other internal/external incentives based on the LPs level of contribution to the Osmosis ecosystem.
Please note that users face the risk of Impermanent Loss (IL) from using DeFi or DEX services.
Why should we focus on Osmosis?
Osmosis is expected to become the liquidity hub, which connects a number of different assets within the Cosmos ecosystem.
As a result, not only users who are interested in Cosmos based projects but also those who are interested in the blockchain industry in general, must focus on the next steps of Osmosis.
Heterogeneous chain networks connected via IBC allow users to conveniently swap tokens thus resulting in a highly competent liquidity pool, the primary driving factor behind the rapid growth of Osmosis.
Osmosis was born as a crosschain native project and therefore can be connected not only with Comos based projects but also with smart contract platforms such as Ethereum based ERC-20 tokens and non-IBC supported chain networks such as the bitcoin network by using a customized pegging technology.
Additionally, users can not only swap tokens but also can design their own AMM which always leaves room for a more competitive pool design. For your information, most other AMM protocols have pre-set parameters such as pool algorithm, transaction fees etc.
All Osmosis users can customize parameters such as the type of tokens, the ratio between tokens that form the pool, the relative weight of the tokens, transaction fee etc when building their own liquidity pool. In the near future, features such as fee customization for liquidity removing behavior or customizing the pool’s algorithm will also be supported by Osmosis.
Flexibility on top of Scalability?!
One of the most prominent advantages of Osmosis is that, as an interchain project, it is extremely flexible.
DEXs such as Uniswap must go through Curve Finance when in need of a stablecoin and in order to decrease the risk of impermanent loss such protocols always use a Balancer which makes the whole process much more cumbersome. In Osmosis however, users can flexibly adapt each of the features according to the respective pool’s needs while other parameters can be adjusted through governance proposals.
Furthermore, Osmosis allows users to adapt successful projects such as Curve Finance, Uniswap, OpenSea etc. that were developed on Binance Smart Chain (BSC) or Ethereum or allows user to fork the aforementioned projects to develop a new project on Osmosis. Such features make Osmosis a scalable yet flexible project.
Finally, with the launching of EVMOS mainnet — an Ethereum Virtual Machine (EVM) compatible plug-in chain — the use cases for IBC ecosystems are expected to increase dramatically.
Superfluid Staking, a method of staking the OSMO tokens that underlie the LP positions, is expected to expand in the future to what Osmosis calls Interfluid Staking, a feature that offers superfluid staking to other chains where the other tokens can be used to secure other zones. This would bring the benefits of superfluid staking to any IBC network that votes to enable it, which would allow the IBC networks to bolster their security by offering native staking rewards from other chains on top of Osmosis liquidity pool rewards.
Not a Coincidence
We believe FIRMACHAIN’s participation in the Osmosis ecosystem is crucial. Not only can FIRMACHAIN become a more liquid project but also can accomplish our goal to grow into a comprehensive blockchain platform.
As we’ve already mentioned in our roadmap announcement, if FIRMACHAIN is able to add liquidity by listing on DEX, we believe we could also indirectly help satisfy the needs of the market participants in the DeFi market. This ultimately would lead FIRMACHAIN’s ecosystem to become more vital.
Connecting Osmosis will allow FIRMACHAIN holders to become LPs in other blockchain networks and/or become active participants in the Cosmos ecosystem.
FIRMACHAIN will expand its reach not only to CEXs but DEXs as well in order to become liquidity providers in the wider blockchain industry. We will strive our best to become firstly a contributor to the Cosmos ecosystem and secondly a project that could be applied to non-IBC networks.
Thank you.
Disclaimer
This posting was written based on the information disclosed by the respective projects. We do not, in any way, guarantee the accuracy nor the completeness of the information provided herein and any and all investment related decisions must solely be made at the discretion of the individual making such decisions. The contents in this posting cannot, in any way, be used as legal evidence in case of investment related legal or any other conflicts.
For more information about FirmaChain, or partnership inquiries, please contact us at contact@firmachain.org. Those who wish to join the FirmaChain team, please contact us at info@firmachain.org.
About FIRMACHAIN
FIRMACHAIN originally aimed to transfer all paper based social and legal activities onto the blockchain to introduce transparency and prevent document tampering and forgery. Maintaining the fundamental value of trust, the FIRMACHAIN team is now turning its gaze to becoming a comprehensive blockchain platform. Our goal is to provide business entities and FIRMACHAIN holders with useful blockchain based services that are useful yet fun to engage with thereby satisfying the team’s goal to become a ‘Utilitainment’ (Utility + Entertainment) platform.
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