ZKValidator validating on Osmosis in partnership with Chorus One
ZKValidator is delighted to announce that we will be a validator on the new Osmosis network with our new staking partner Chorus One, you can find out how to delegate to ZKValidator here. If you are yet to explore the technology behind the purple potion, Osmosis Network, then this post will provide you with an overview.
But first, let us introduce our new partner Chorus One!
Chorus One advances the Proof-of-Stake ecosystem with staking services, tooling and protocol building. We are very excited to join forces with this team of staking experts, researchers, and developers. The project was founded by Brian Fabian Crain and Meher Roy, well known as hosts on the popular and deeply influential, technical blockchain podcast Epicenter. As fellow podcasters-turned-validators (Anna’s also the co-host of the Zero Knowledge Podcast), the partnership has come about quite organically. What’s more Chorus One, like ZKV, has a focus on supporting new technology development, with their work on liquid staking, bridges and interoperability tools. Going forward we will be working with Chorus One as our staking partners for both Osmosis and Cosmos.
Previously, the ZKV had been working exclusively with Bison Trails as our staking partner. But in the spirit of decentralization, we felt it would be important to also join forces with an additional technical partner. This allows us to expand and evolve in a way that best reflects our mission of bringing ZKPs to the networks we work with. We will maintain our relationship with Bison Trails, as their support and expertise has been a core part of the success of our business and we are very proud of the work we have done together so far. We will add to this our new partnership - one that offers us a chance to explore and evaluate additional networks where the Chorus One team have unique experience. An example of such a network is Osmosis!
So what is Osmosis?
At its core, Osmosis is an automated market maker (AMM) and decentralised exchange (DEX) built on the Cosmos SDK as a chain of the Cosmos Hub. Yet Osmosis has advanced features that differentiate it from other AMMs such as Uniswap, Curve and Balancer. Before delving deeper into Osmosis’s functionality, we will first take a step back and explore what an AMM is and how they are fundamental to the DeFi and crypto space.
What is an AMM?
Transactions on the stock market or with physical assets require both buyer and seller to agree on a price for the transaction to take place. AMMs enable transactions to be executed without such permissions through the use of liquidity pools, bypassing the need for buyer, seller interactions. Liquidity pools are large stores of tokens provided by the users of AMMs. Transactions through an AMM tap into these liquidity pools and the price for buying and selling tokens is determined algorithmically. Users that deposit their own tokens into a liquidity pool are financially rewarded to incentivise growing liquidity pools because the larger the liquidity pools of different tokens are, the easier it is to trade between pools.
How is Osmosis different from other AMMs?
There are three main product features of Osmosis that differentiate it from existing AMMs: its interoperable cross-chain functionality, customisable liquidity pools and its liquidity pool governance and incentive structures.
The first ever cross-chain interoperable AMM
From launch, Osmosis enabled transactions between all chains in the Cosmos ecosystem. Inter-blockchain communication (IBC) functionality has never before been utilised with an AMM and is a notable innovation that will certainly advance the DeFi space. For example, on the landing page of the Osmosis app, the default exchange is between OSMO, the governance token of Osmosis, and ATOM, two fungible tokens that exist on their own sovereign blockchains. According to the vision laid out for Osmosis back in February, the cross-chain operability of Osmosis will be developed further with future integrations to include non-IBC enabled chains such as ERC-20 tokens and Bitcoin chains.
Customisable liquidity pools and parameters
As the DeFi space continues to grow, so do the use cases for AMMs demanding a broader range of functionalities for different users. Liquidity pools have inherent characteristics, the proportion of different types of token in a given pool, this can be up to 8 for pools on Osmosis, and the fee for exchanging these tokens. Typically, AMMs have centrally determined these parameters through consideration of market conditions affecting the value of tokens in a given liquidity pool. Empowering users to set liquidity pool parameters enables Osmosis users to seek out new value creating opportunities. Bonding curves, mathematical equations defining the relationship between a tokens price and supply, can be created and optimised giving users ultimate flexibility and the ability to react quickly to market volatility.
User governed and incentivised liquidity pools
The ethos behind Osmosis is that it is built for liquidity providers (LP), those who deposit into liquidity pools, and therefore, it only seems right that it is governed by liquidity providers. The customizability of liquidity pools, noted in the previous section, allows LPs to vote on proposals to change liquidity pool parameters and to put forward governance proposals themselves. Being in possession of the native OSMO token permits participation in governance of the Osmosis protocol and distribution of OSMO tokens is done to incentivise stakeholders to participate and get on board with the strategic direction of Osmosis. OSMO token holders will, most importantly, decide which liquidity pools will be eligible for rewards, further aligning incentives for LPs to participate in governance.
The initial OSMO airdrop distributed 50 million tokens based on the number of ATOMs held by members of the Cosmos Hub from a snapshot on 18th February, according to a ‘quadratic fairdrop’. The quadratic fairdrop consisted of tokens being distributed in proportion to the square root of ATOMs held, with an additional 2.5 multiplier for staked ATOMs compared to unstaked ATOMs. After the initial airdrop, the long term strategy for OSMO token distribution is to assign tokens in the proportion of 25% for staking rewards, 25% for developer vesting, 45% for liquidity mining incentives and 5% to a community pool. Participation and interaction with Osmosis is rewarded to ensure governance is led by active stakeholders. Beyond the OSMO token, third parties can also incentivise locking tokens into pools for longer time periods, vital to the success of any AMM, through the applications incentive module.
Finishing Thoughts
Clearly the technology underpinning Osmosis is deserving of the excitement the application has generated in the Cosmos community and further afield. At ZKValidator we are thrilled to be involved with validating on Osmosis, made possible by our partners at Chorus One who provide us with the core validating infrastructure. Central to our own vision of supporting innovative privacy focused blockchain projects, we are excited to see how Osmosis progresses with future updates and are particularly looking forward to their work on private shielded liquidity pools.
