What is Osmosis (OSMO)?

Osmosis (OSMO) is a decentralized exchange (DEX) designed for the Cosmos ecosystem, a collection of independent and interoperable blockchains connected through the Inter-Blockchain Communication Protocol (IBC). Osmosis also supports non-IBC assets bridged from Ethereum and Polkadot.

Originally based on Balancer-style pools, Osmosis is transitioning to a concentrated liquidity model, aiming to offer a more sustainable and superior trading and liquidity provision experience.

As an appchain DEX, Osmosis has greater control over its blockchain stack compared to DEXs that operate on a parent chain. This fine-grained control has enabled the development of Superfluid Staking, an enhancement to Proof-of-Stake security. With Superfluid Staking, OSMO tokens in LP positions contribute to chain security and earn staking rewards. Additionally, appchains' customizability allows Osmosis to develop a transaction mempool with threshold encryption, reducing harmful Miner Extractable Value (MEV) on the platform.

Osmosis's vision is to create a cross-chain native DEX and trading suite that connects all chains through IBC, including major networks like Ethereum and Bitcoin. To achieve this goal, Osmosis has invited external developers to build a tailored DEX ecosystem comprising lending, credit, margin trading, fiat on-ramps, Defi strategy vaults, NFTs, stablecoins, and more. The platform aims to offer all the functionalities of a centralized exchange while providing the trust-minimization advantages of decentralized finance.

Who are the founders of Osmosis?

Osmosis was created by a team consisting of members from two key Cosmos teams: Sunny Aggarwal and Dev Ojha from Sikka Validator and Tendermint, as well as Josh Lee and Tony Yun from Keplr, the Interchain Wallet.

Among the investors in Osmosis is Paradigm, a renowned digital asset investment firm. Paradigm holds investments in numerous other prominent blockchains and protocols, including Uniswap, Maker, Coinbase, and many others. Their support adds significant credibility and potential to Osmosis as it aims to revolutionize cross-chain trading and liquidity provision in the cryptocurrency space.

What makes Osmosis unique?

The Osmosis blockchain protocol has three key strengths that set it apart from other AMM money market protocols.

First, Osmosis has customizable liquidity pools. Unlike Uniswap, where LPs can provide liquidity only to a two-token pool with an equal ratio, Osmosis allows for providing liquidity to pools with several tokens and unequal ratios. Osmosis argues that agents in a maturing DeFi market like arbitrageurs and LPs need a more flexible solution that allows them to self-identify opportunities and react to them by adjusting parameters. Thus, on Osmosis LPs can adjust factors slippage, transaction fees, and more.

Coordination between stakeholders is of equal importance, which is why liquidity pool shares on Osmosis are not only used to calculate the fractional ownership of a liquidity pool but also the right to participate in the strategic decision-making of the liquidity pool. This incentivizes long-term liquidity provision and prevents possible vampire attacks from other protocols. Thus, liquidity providers with more skin in the game get a bigger say in the strategic direction of the pool, which is in line with the bigger risk they're taking.

Finally, Osmosis introduces the idea of "AMMs as serviced infrastructure." With an increase in the amount and complexity of DeFi products, AMMs have had to:

Compromise efficiency and trade on AMM with non-optimal bonding curves.

Take on the risk of building a custom AMM to maximize efficiency.

Osmosis wants to remedy that by providing AMM creators with an option to define the bonding curve value function and reuse the rest of the infrastructure using Osmosis' products.

Explain the network security of Osmosis.

The network security of Osmosis (OSMO) is primarily ensured through its blockchain's underlying technology and consensus mechanism.

Osmosis operates on the Cosmos ecosystem, which utilizes the Tendermint consensus algorithm. Tendermint is a Byzantine Fault Tolerant (BFT) consensus protocol designed to provide high levels of security and reliability. It ensures that the network can reach consensus even in the presence of faulty or malicious nodes.

Osmosis utilizes the Delegated Proof-of-Stake (DPoS) consensus mechanism for transaction validation. In DPoS, token holders can delegate their voting power to elected validators who are responsible for validating transactions and securing the network. This consensus mechanism encourages participation and ensures a decentralized network, as token holders have a say in selecting validators.

Osmosis benefits from the interoperability of the Cosmos ecosystem through the Inter-Blockchain Communication (IBC) protocol. IBC allows Osmosis to connect with other sovereign blockchains within the Cosmos ecosystem, enabling secure and trustless communication between different chains.

What are the recent updates of Osmosis?

Osmosis Labs has announced the release of v16.0.0 - Magnesium, a major upgrade for the Osmosis blockchain protocol. This upgrade introduces several new features and improvements to enhance capital efficiency and overall functionality.

The key highlight of this upgrade is the introduction of "Supercharged Liquidity," a custom implementation of concentrated liquidity similar to Uniswap's UNIv3. With Supercharged Liquidity, liquidity providers on Osmosis will experience significantly higher capital efficiency, resulting in substantially increased swap fees. Traders will also benefit from reduced price impact on their large trades, leading to better execution prices compared to constant product pools.

The upgrade also introduces the CosmWasm pool module, enabling the creation and management of liquidity pools backed by CosmWasm smart contracts. This feature allows developers to build and deploy custom smart contracts that integrate with the existing pool types on the Osmosis chain, providing flexibility and upgradability without the need for chain upgrades.

Additionally, the upgrade includes the capability of multi-asset fee whitelisting, allowing transaction fees to be paid in any whitelisted asset. This enhancement streamlines the process of adding or removing additional fee assets via governance proposals.

The v16 upgrade is scheduled to take place at a specific block height, and users are advised that during the upgrade, the Osmosis DEX, staking, and governance features will be temporarily unavailable.

With these new features and improvements, Osmosis aims to offer its users a more efficient and versatile decentralized exchange platform, empowering liquidity providers and traders alike.

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