Osmosis Updates from the Lab, September 7: Osmosis v12, Serotonin

Osmosis Updates from the Lab occurs on alternating Wednesdays at 1 PM EST (5 PM UTC) on the Osmosis Zone Twitter Space. Replays are available on the Osmosis YouTube channel or the podcast.

Welcome back to the lab!

Sunny called in this week from New York City, where he has been working next to developers from Penumbra, Figment, Reverie, and Stride, whose liquid staking ATOM derivatives have quickly gained liquidity on Osmosis in the ATOM/stATOM pool ($5.3m total). Cosmos teams shipping: you love to see it!

Osmosis v12 Upgrade

This latest chain upgrade will be released in the next couple of weeks, once the remaining blockers are finished and DAO governance approves. It is a more feature rich upgrade than the relatively minor v11, “Scambuster,” aimed at reducing spam attacks on Osmosis governance and external incentive gauges.

Osmosis v12 will include the following new features:

• TWAP module: a much-anticipated addition that will provide time-weighted average prices on Osmosis and beyond. These tamper-resistant, on-chain price feeds will enable, for example, cross-chain/atomic swaps powered by CosmWasm smart contracts.
• Interchain Accounts: this relatively new SDK module, incompletely enabled in v10, is now being switched on. It will allow an account (or its associated contracts) on a controller chain to register and control accounts/contracts on host chains. Many Osmosis Ecosystem teams are eager to put it to use: Quasar (yield strategies, starting with dollar-cost averaging), Apollo (yield strategies), Mars (lending and credit), and many others. The Osmosis DeFi explosion is almost here.
• Stargate Queries (whitelisted): these queries — named for the IBC-enabling “Stargate” Cosmos upgrade — let CosmWasm contracts fetch data from SDK blockchains. While this ability is necessary to enable certain aspects of interchain smart contracting, it can be dangerous, since certain queries can yield non-deterministic results. If those results are written to the chain, it can cause validators to disagree about the blockchain state, preventing them from reaching consensus until two-thirds of stake can again agree. The Juno halt in April was caused by just such disagreement, caused by a deliberately bad Stargate query (see tweet below). Therefore, Osmosis Stargate Queries will be whitelisted to allow only those queries that cannot produce non-determinism. This safety mechanism is being upstreamed so that all chains can use Stargate Queries without fear.

These new v12 features will not be immediately noticeable in the Osmosis trading experience, but will instead turbo-charge Osmosis ecosystem development.

Looking farther ahead, v13 will feature the long-awaited stableswap upgrade to the AMM, which the Stride team is helping to complete, since lowering price impacts in their like-asset Osmosis pools benefits all parties.

Serotonin Marketing

The Osmosis Ministry of Marketing has contracted with Serotonin to plan and execute a cohesive marketing, branding, and PR strategy. Luke Katz (Dir. of Business Development) and Elise Ransom (Managing Partner) stopped by to tell us more. Serotonin, founded roughly two years ago, is led by Amanda Cassatt, previously CMO of Consensys, who brought a number of team members with her. The team now has more than 60 members, covering the Americas, Europe, and SE Asia, and they have worked with over 50 blockchain protocols, notably Polygon, Sotheby’s Metaverse, Protocol Labs (Filecoin, IPFS), and Osmosis Ecosystem member, Quasar.

The details of this arrangement will become clearer as the teams begin collaborating over the next month, in particular with account lead, Robin Lim. In broad strokes, their team wants to help expand the reach of Osmosis beyond Cosmos, growing our imprint as leaders in the broader crypto space. Potential tools to achieve this include blogs, social media, community strategy and development, hackathons, AMAs, growth marketing, paid influencers, and the like. They expect to see a noticeable impact within two months, and even more tangible results after that, as measured by media mentions, earned speaking engagements, and protocol usage.

Question Time

Wen Swap Fees to Stakers?
There is no mechanism for this, since the swap fee mechanic, based on Balancer v1, has not changed since genesis. Pool fees are set by the pool creator, as described in the Osmosis Token Distribution. However, the DAO could propose a fee switch, perhaps a tax on the already collected swap fees, similar to Balancer v2’s Protocol Swap Fee.

The potential trade-offs are familiar: value capture vs. user acquisition and incentivizing liquidity vs. chain security. Value capture could potentially hurt user acquisition in exchange for relatively small amounts of revenue, particularly when fees are likely to approach zero, as they have in tradfi. Further, reducing LP incentives could lead to lower liquidity and worse trading UX. Still, with concentrated liquidity, this will be less of a concern. In any case, it seems likely that mature protocol revenue will come not from fees but from protocol-led arbitrage and liquidations, as well as auctions for the first slot in the block. For more on these methods of value capture, check out Sunny’s talk at the recent Nebular Summit.

Wen Wosmo NFTs?
There is an entire subteam working to pack in as many fun features as possible. It will be worth the wait, since it is the only NFT project of its kind.

WosmoNFTs have an innovative mechanism by which every wallet gets a base Wosmongton. This base can then be customized with accessories based on the history of the wallet. So, if you provide liquidity to a certain pool at a certain time, or get a certain airdrop, or do a certain number or type of transactions, stake on different chains, etc. you can earn different accessories. Your WosmoNFT will be your Cosmos identity, and it will allow Cosmos to feel more like a home to users. (John Patten, Osmocon)

Wen Superfluid Staking for ION/OSMO?
Already, in the few days since our meeting, a proposal for this has been put on Commonwealth!

Speaking of ION, mainnet staking is now live. (If you staked during their testnet, you will need to stake again.) Currently, ION stakers have the right to make and vote on ION governance proposals. There are none as of yet, but there is likely to be a flurry of activity once ManyThings/Alphaworks releases more information about their planned DAI-like stablecoin, and once the ION treasury receives its Prop 120 airdrop claw-back funds, 16,572 ION from the Osmosis Community Pool.

Governance Corner

Not much has been proposed since the last recap. Prop 326 to incentivize OSMO/BLD passed, and there have been a pair of Regular Incentive adjustment proposals.

A loan swap proposal from Axelar will be going on chain soon. They propose that the DAO lend $1m worth of OSMO from the community pool to bootstrap AXL liquidity on Osmosis (likely at the end of September), similar to the innovative and highly successful loan to Stargaze for the same purpose. The loan will be repaid in one month with $1m worth of AXL. Since Axelar is an important partner to Osmosis, it would seem to be in the best interest of the DAO for them to have a strong token launch and deep liquidity.

Speaking of Axelar, in their last update they added a heavily requested security feature: bridge rate-limiting. This feature caps the dollar value of tokens that can leave the bridge in a given time period —no docs are currently available showing the implementation, but Sunny estimated (from memory) that it was probably in the neighborhood of $5m every 6 hours. This is excellent news. If the bridge contracts are hacked, the bridge can be shut down with minimal damage, since the most that can be stolen is $5m. This is well within the capacity of the various stakeholders to absorb with very little risk of assets de-pegging. As Sunny says, this is the sort of security knowledge and fast execution that put Axelar over the top in the Osmosis bridge-off.

That’s it for this week! If you would like to participate in the front-end team’s market research for the upcoming order book trading interface, let them know here.

And, finally, if you’re on the fence for Cosmoverse, September 26–28 in Medellin, Colombia, Osmosis is throwing a joint party with the Mars Protocol team, and the 2-day HackWasm hackathon is taking place immediately after the conference.

Enter the laboratory at Osmosis.zone, the first decentralized exchange powered by the Cosmos SDK and IBC. See our published lab reports at the Osmosis blog, our bench notes at Github and help plan future experiments in our Commonwealth

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