Osmosis is an app-specific chain built with the Cosmos SDK. It is also an AMM (automated market maker) that allows developers to build customized AMMs with sovereign liquidity pools.
What are the main features of Osmosis?
- The customizability of liquidity pools
Unlike traditional AMM such as Uniswap which usually limits the changeable parameters of liquidity pools, Osmosis enables users to launch and customize parameters of the liquidity pool, such as bonding curve, swap fee, number of token types, token weight, etc. These parameters can be set depending on the project needs, token characteristics, and market conditions. As anyone can create a pool with two or more supported assets, it can help the market to better find the fair price of assets.
In addition, customized AMMs are suitable for diversified decentralized financial products (such as anchor assets, derivatives, options, tokenized leveraged positions) to set up liquidity pools that meet their characteristics.
- Self-governing liquidity pools
In Osmosis, LP holders can participate in the strategic decision-making of the liquidity pool (such as parameter and incentive model adjustment ). To incentivize long-term liquidity commitments, longer-term LP holders are awarded additional voting power / additional liquidity mining revenue.
$OSMO is the governance token of Osmosis that allows token stakers to decide the future of the protocol, including every implementation detail. $OSMO will initially be used for the following (although the community is free to add or remove these functions):
- Voting on protocol upgrades
- Allocating liquidity mining rewards for bonded liquidity gauges
- Setting the base network swap fee
What is Superfluid Staking?
Apart from $OSMO staking, Osmosis also introduces Superfluid Staking. Superfluid staking allows users to stake their bonded LP tokens, which refers to LP tokens for $OSMO pairs that are bonded for an amount of time that is equal to or longer than the staking unbonding time (14 days). Bonded LP tokens are delegated to validators. It means that the LP holders will not only earn swap fees and liquidity mining incentives but also the staking rewards from inflation and transaction fees. Users can set their token percentage that is counted as superfluid staked. And the staked LP tokens will be subject to slashing at full value if the delegated validator misbehaves.
What is the History of Osmosis?
Osmosis was announced in February 2021 and launched on June 19, 2021. Its core developers include Sunny Aggarwal, Josh Lee, and Dev Ojha. In October 2021, Osmosis announced its $23 million funding led by Paradigm with participation from Robot Ventures, Nascent, Ethereal, Figment and Do Kwon, Terraform Labs’ CEO.
