Cosmos Ecosystem Spotlight #1: Osmosis
Overview:
This is the first article of many from me that looks at the Cosmos Ecosystem. Cosmos is a vast network of blockchains that unites its zones under the interchain principle. As a zone, Osmosis functions as both a DEx and a unique blockchain that intersects with most of the other major zones within the Cosmos Ecosystem. At the time of writing, it has the highest transaction throughput of any zone in the Cosmos according to Map of Zones. This shows that the project has a lot of potential. It is currently compatible with the Keplr, Leap, Cosmostation and XDeFi wallets. Swaps are extremely quick and affordable and there seems to be a lot of potential for the OSMO token. In combination with a wallet like Keplr or Leap, it is a good place to start for those that want to go beyond simply staking the Atom token or other popular tokens such as INJ. The DEx provides access to all of the major tokens in the ecosystem such as Atom, TIA, Kava, SCRT, Stars, Stride, AKT, UMEE, MNTL, INJ, Kuji, NTRN, MARS, GRAV, SEI, CANTO and AXL. Through Axelar and Gravity Bridge it also offers access to stable coins such as USDC, USDT and DAI. Further, it supports other major tokens and the native assets of other blockchains such as BNB, Matic, AVAX, DOT, FRAX, LINK, FTM, FIL and CRO. So there is a lot to dive into here and it offers somewhat of a unique service in the Cosmos.
DEx Features:
The first feature that the DEx offers is the swap feature. Once your tokens are transferred to the Osmosis blockchain via the IBC protocol (see assets below) it is extremely easy and affordable to swap tokens using the DEx.
Under the assets tab, you can easily see which tokens are currently in your wallet on the Osmosis chain. From here, it is very easy to deposit and withdraw assets from other IBC chains.
It is also possible to stake your OSMO tokens on the DEx itself. Here, it is recommended to stake with a validator that is outside of the top five validators. This helps to maintain the principles of decentralization and to prevent whales from gaining significant control of the supply of the OSMO token.
Liquidity pools are provided and act as probably the best way for users to profit from the trades that take place on the Osmosis DEx. Some pools offer high APRs but I would be sure to only invest in pools with tokens that you are confident have a long term future. Personally, I invest in the OSMO/ATOM pools because these are two native tokens with a proven track record in the ecosystem. Lots of exciting new tokens such as TIA and DYM can also be pooled here as well. I would recommend paying attention to the lock feature on some pools. These are in place to securely manage the liquidity that moves through the protocol. While this does offer an element of security because it is harder for whales to manipulate the pools, it can be inconvenient when removing liquidity if you wish to diversify into different pools or withdraw your funds entirely.
Margin services are offered in conjunction with the Mars Protocol and perpetuals are available via Levana. Liquidity pools are available and according to DeFiLlama they have a TVL of over $USD 200 million at the time of writing. This is quite impressive for an app chain outside of the Ethereum Ecosystem.
Potential:
For those looking for a moonshot, the OSMO token and Osmosis DEx are not for you. This is a DEx/app chain that is more suitable for investors that are looking for a DEx with reliable throughput. It survived the crypto winter of 2022–2023 and continued to build through the bear market. This is a very positive sign for long term stability and something that should be taken into consideration when choosing to invest. As a place to trade tokens, it contains all of the major tokens of the ecosystem and connects well with bridging services such as Noble, Axelar and Gravity Bridge. The recent partnerships with Mars and Levana show the intention of the team to grow their influence in DeFi further during the coming years. Overall, I am bullish on the project and think that it is well placed for future growth.
In all of the Cosmos projects that I invest in, I feel that they are currently undervalued with respect to the technology, user experience and potential that they offer. Everything works really well when investing on Osmosis. It has a very loyal community and seemingly a very reliable flow of liquidity that is perhaps aided by the lock feature on the liquidity pools. If you are looking to invest in Cosmos, and do not want to simply stake the ATOM token, then this is the place to get started. The interoperability of the Cosmos Ecosystem is unparalleled and Osmosis is at the very center of this interoperability.
Like all investments in DeFi, you need to do your own research and be responsible for the money that you invest. However, if you are willing to take the plunge into The Cosmos, this offers everything that you need to stake tokens, dive into liquidity pools and with its connection to the Mars protocol, lend out stablecoin tokens such as axlUSD. It is a good place to implement the simpler investment strategies. So far as DeFi protocols go, it has an excellent track record. With the success of other blockchains in the space such as DYDX and Injective, it is my belief that the Cosmos will continue to grow. Accordingly, as the pioneering DEx in the space to my mind, I feel that Osmosis will continue to lead the pack for some time.
Find out more:
The Crypto Dad — Osmosis DEx Video Tutorial
Alt Crypto Gems — Video Tutorial
Disclaimer: this is NOT financial advice. I’m a cow and I like to eat cereal. Any knowledge gained from this post is merely incidental and you are responsible for your own financial decisions. Make investments wisely and make sure to do your own research.
