Osmosis is the dark matter of COSMOS

5 min readFeb 12, 2022

Why OSMO is primed to be the most important protocol in the COSMOS ecosystem

Osmosis in its non-scientific definition means the process of gradual or unconscious assimilation of ideas, knowledge, etc — This assimilation of ideas is exactly what OSMO is to the COSMOS ecosystem.

There are many galaxies in the wide cosmos, but they all share a commonality — Osmosis

DEX’s are dime-a-dozen in the world of crypto, however, there’s something special about OSMOSIS that sets it apart from any other. What makes it special is the fact that it’s set up to provide liquidity to not just one blockchain, but an infinite amount through the IBC of Cosmos.

Decentralized exchanges (DEX) that are automated through automated market makers (AMM) are nothing new and many different iterations exist, some with more functionality than others. Some examples of DEXes powered by AMM are protocols such as — Curve, Balancer, Uniswap and Sushiswap etc. However, most of those protocols are usually limited to a few certain blockchains with no interoperability. In case you wanted to swap from one blockchain to another, you’d have to make use of a bridge instead, such as Synapse. What makes Osmosis stand out among other AMM/DEX protocols is the fact that it tries to truly open the market to a wide range of decentralized assets.

Are you interested in how Osmosis tries to do so? If so, follow along, anon — and let’s find out

What is Osmosis?

Osmosis(hereafter referred to as OSMO) is a next-gen AMM protocol that is built with the Cosmos SDK (Software Development Kit). This toolkit allows other devs to not just design, but also build and deploy their very own customized AMM on top of OSMO. It is designed to be able to efficiently reach solutions through experimentation and rapid iteration by using the power of decentralization. Each AMM pool’s LP providers are able to govern and direct their pools as they see fit.

UI/UX

Before we dig any further into the world of osmosis let’s take a look at the UI experience and how other protocols can learn from them.

The website has 6 primary buttons of which 3 of them are the ones you are going to be using the most (nevertheless, the other 3 do come in practical if you’re looking for specific things.

Trade

The trade window is where you’ll be swapping between different tokens, not just on a single blockchain, but rather between any token connected through the Cosmos IBC (Inter-Blockchain Communication protocol).

Pools

The pools are where you will be depositing your tokens either 50/50 or as a single asset LP. What’s special about Osmosis is that it also implements external incentive pools that operate on other DEXes (as we discussed earlier Osmosis is a framework for AMM/DEX). These pools hold a variety of different assets such as Juno, UST, Luna etc.

Assets

Now on most DEXs, you’d connect your wallet and then start swapping on whatever network you’re connected to. However, on Osmosis this works slightly different. You’re, of course, still going to connect with your wallet, in this case, Keplr. What makes Osmosis so incredibly unique, is the fact that you can deposit any tokens or coin that is connected through the Cosmos IBC, and then start trading with it. This means, that Osmosis facilitates transfers through a myriad of different blockchains all with their own token(s).

All of this is made available through the implementation of the Keplr wallet. Which, in my opinion, is one of the best wallets on the market currently. The lightspeed with which you are able to transact, stake and so on is incredible. It’s simple to use, and I highly recommend checking it out if haven’t already.

Osmosis’ place in the cosmos

Osmosis unlike most DEX’s has from the very beginning of its inception been designed with cross-chain assets in mind, thanks to the IBC. This means that Osmosis is able to serve a DEX and AMM for the entirety of the Cosmos ecosystem (giving access to $billions worth of assets), not limiting themselves to one or a few chains. Now, that all sounds fine and dandy, but what about chains outside of the Cosmos ecosystem? Well, Osmosis have a plan for those too.

Osmosis plans to integrate non-IBC chains too, such as Ethereum and their ERC20 standard, using the Althea Gravity Bridge (Cosmos-SDK blockchain providing the entire SDK community with a neutral bridge to Ethereum and eventually all major EVM chains)

The Future of Osmosis

Now, if all of that wasn’t enough to make you excited for OSMO, then let’s take a look at something that’s going to, quite possibly, blow your mind.

Let us take a look at the future of Osmosis. One of the goals of OSMO is to be more than just a customizable AMM/DEX, it wants more than that, it wants to connect the entire universe of blockchain not just as an AMM and DEX, but to also provide the possibility for a wide range of financial instruments.

Osmosis’ parameterizable inputs enable the creation of newer DeFi asset types like options, dynamic fee markets that adapt to moments of high volatility, work to mitigate undesirable outcomes like impermanent loss for liquidity providers (LP)

Ruled for the people, by the people

To take matters one step further Osmosis puts the governance of the protocol in the hand of those that provide liquidity to it. Instead of setting global parameters for the liquidity pools on the platform, it gives the power to those who provide it.

Governance must be a first-class process in AMM design so that liquidity is not forked away at the advent of every upgrade.

How to participate

If you’re interested in participating in the protocol, the easiest way is to become either an LP (liquidity provider) or buy the OSMO token.

OSMO enables the holders to decide the strategy and future of the protocol and from its minting has three major functions (however more can be added by governance proposals)

Voting on protocol updates
Allocating liquidity mining rewards for liquidity pools
Setting the base network swap fee