Osmosis is what’s known as an application-specific blockchain (appchain). That means that, while it’s an independent proof-of-stake network with a native governance token ($OSMO), it’s tailored specifically to function as a decentralised exchange (DEX) application.
Osmosis bills itself as “the premier DEX and cross-chain DeFi hub within the Cosmos ecosystem”, enabling crypto investors to trade coins and access liquidity pools for a broad range of tokens from multiple blockchains built using Cosmos. The DEX uses an automated market-maker (AMM) model.
There are over 50 blockchains in the Cosmos ecosystem including high profile projects such as BNB Chain, Cronos, Injective, Celestia, Sei, Akash Network, Axelar, Terra Luna and Luna Classic. Osmosis DEX also supports swaps and liquidity pools for a number of non-Cosmos tokens like Ethereum, Solana, Avalanche, Polkadot and bitcoin.
The DEX is lauded for its user experience, described as bringing the ease of a typical centralised exchange to DeFi, which has been notoriously complex in the past. Unique features include customisable liquidity pools and ‘superfluid’ staking, which lets users stake OSMO tokens they use to provide liquidity.
Osmosis also has its own ecosystem of related decentralised applications (dApps) that integrate with its DEX capabilities to provide different trading options, margin, lending, yield vaults, stablecoins, fiat on-ramps, non-fungible tokens (NFTs) and more.
Osmosis Growth Linked to Cosmos
Osmosis was built using the Cosmos Software Development Kit (SDK), a tech stack that simplifies the process of building a custom blockchain solution. All blockchains built using the Cosmos SDK tools are interconnected through the Cosmos Hub network and its Inter-Blockchain Communication (IBC) protocol, which facilitate communication, data-sharing and transactions between chains in a scalable, secure way.
The future of Cosmos as a leading interoperability network is in doubt. In 2022, one of the largest Cosmos-based projects—Terra ($LUNA) blockchain—spectacularly crashed when its algorithmic stablecoin UST depegged from the US dollar, affecting liquidity across the ecosystem and wiping out over US$50 billion in market valuation.
After infighting within the project’s community in 2023, a Cosmos co-founder launched his own fork of Cosmos Hub and announced plans for a separate token called AtomOne ($ATOM1). In July 2024, the new Terra blockchain experienced a security breach due to an unpatched vulnerability in the IBC protocol. Some builders have publicly switched ecosystems and criticised the Interchain Foundation—which maintains the Cosmos project—on social media about a lack of transparency and hostility towards developers.
In August 2024, founding partner of crypto VC firm Delphi Ventures and host of the Hivemind podcast, José Maria Macedo, said the lack of a unifying token meant that launching a project on Cosmos didn’t offer the same community-driven momentum as other ecosystems like Solana: “Because if your token succeeds on Solana, it’s bullish Solana. There’s like another great project on Solana and, and like everyone can share for you. When you launch as a Cosmos appchain, you start at zero, right?”
He predicts that the Cosmos SDK would continue to offer value as a tool for developers but that undifferentiated chains in the ecosystem “will die”, adding: “There’s nothing to unite them other than the fact that they use this stack, but that is a huge problem.”
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