Research Summary
The report provides an in-depth analysis of Osmosis, a leading decentralized exchange (DEX) and liquidity hub in the Cosmos ecosystem. It covers the platform’s use case, adoption, revenue, tokenomics, governance, team, investors, competitors, risks, and audits. The report also highlights the potential growth opportunities for Osmosis amid the thriving Cosmos ecosystem.
Key Takeaways
Osmosis: A Leading DEX in the Cosmos Ecosystem
- Positioning in the Cosmos Ecosystem: Osmosis is the largest DEX and liquidity hub on the Cosmos Interchain, serving as the leading cross-chain DeFi platform for protocols built with the Inter-Blockchain Communication (IBC) protocol. The Cosmos ecosystem, with over 100+ chains built using the IBC protocol, is thriving, and Osmosis is well-positioned to benefit from its growth.
- Revenue Generation: In the past 30 days, Osmosis DEX generated $1.79 million in fees, placing it at the 43rd position overall and 8th among other DEXs. Transaction fees are paid by users to post a transaction on the chain and are distributed to $OSMO stakers on the network.
Tokenomics and Governance
- $OSMO Token: The $OSMO token serves as a governance token, granting staked token holders the power to shape the protocol’s future. It offers several key functionalities, including voting/governance, transaction fees, and securing the network. The OSMO 2.0 tokenomics upgrade implemented in 2023 resulted in reduced inflation and increased net yield.
- Decentralized Governance: Osmosis has a robust governance forum, with 642 total proposals submitted, 569 passed, 65 rejected, and 5 in progress. This decentralized governance allows the community to vote on proposals.
Team, Investors, and Competitors
- Founding Team and Investors: Osmosis was founded by Sunny Agarwal and Josh Lee in 2021. The Osmosis Foundation raised a total of $21m through its Initial Coin Offering in October 2021, with investors including Paradigm, Robot Ventures, Nascent, Ethereal Ventures, and Figment Capital.
- Competitive Position: Osmosis is the 8th largest DEX in terms of Total Value Locked (TVL) according to DefiLlama. However, it is the biggest and most established DEX on the Cosmos ecosystem, giving it a significant competitive advantage.
Risks and Audits
- Security Risks: In June 2022, Osmosis experienced a $5m exploit of the protocol. Validators halted the chain upon discovering the issue, and the team swiftly rectified it, covering all losses. CertiK had audited the project, but the vulnerability was not discovered.
Actionable Insights
- Monitor the Cosmos Ecosystem: Given Osmosis’s positioning in the Cosmos ecosystem, tracking the growth and development of the ecosystem could provide insights into potential growth opportunities for Osmosis.
- Understand the Role of $OSMO Token: The $OSMO token plays a crucial role in the Osmosis platform, serving as a governance token and a means for transaction fees. Understanding its functionalities and the impact of the OSMO 2.0 tokenomics upgrade could be beneficial.
- Assess the Governance Structure: Osmosis’s decentralized governance structure allows the community to vote on proposals. Evaluating the effectiveness of this governance structure and the types of proposals being passed could provide insights into the platform’s future direction.
- Consider the Competitive Landscape: Osmosis’s position as the largest DEX in the Cosmos ecosystem gives it a competitive advantage. However, understanding the competitive landscape, including other DEXs in the ecosystem, could provide a more comprehensive view of Osmosis’s market position.
- Review Security Measures: Given the past exploit of the Osmosis protocol, reviewing the platform’s security measures and audit results could be crucial in assessing potential risks.
