Feb 8, 2023


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Strengths and Weaknesses


  • Inter Blockchain Communications (IBC) - as a multi-chain DEX, Osmosis works with other blockchains through the IBC protocol
  • Enhanced Incentives and Rewards -the Osmosis blockchain offers Superfluid Staking, which increases users' ability to profit from their $OSMO
  • Protection against arbitrage bots - thanks to Osmosis threshold encryption, pools are private, and others do not see opportunities to manipulate prices
  • Fast and cheap transactions - Osmosis handles up to 10,000 transactions per second with prices in range of cents USD


  • Marketing - like the Cosmos ecosystem, they could be better known among users of the crypto world
  • Temporal protection - unstaking is temporarly protected. When staking, you can choose from 1 day to 14 days, and when staking an $OSMO coin, the unstake period is 21 days

Basic Information

Osmosis blockchain runs on the Proof of Stake (PoS) consensus.

The Osmosis blockchain is created using the Cosmos SDK to optimize the function for the Auto market maker (AMM). This blockchain is ideal because it allows developers to design and build customized AMMs using the various governance systems of the Osmosis blockchain and its modules.

Osmosis was the first Cosmos-based blockchain to popularize IBC (Inter Blockchain Communication) transfers. IBC transfers were available months before, but actual demand from connected blockchains was low. The Osmosis blockchain has brought a revival to this sector.

The Osmosis blockchain is a product of Osmosis Labs, which was founded by Sunny Aggarwal and Josh Lee.

Functioning of the Chain

The basis of Osmosis is:

  • IBC ( Inter Blockchain Communication) protocol
  • Tendermint core
  • Cosmos SDK (software development kit)

IBC protocol allows communication between two or more blockchain networks by communicating with and connecting different servers.

IBC enables the creation of an interchain account that will be the same across all blockchain networks that support it. This connection enables you to stake, trade, or participate in DeFi protocols across multiple blockchain networks from a single location.

Osmosis - IBC protocol

All blockchain networks connected to IBC have a Tendermint core. Together with the Cosmos SDK, these are the building blocks of the network. With the same foundation, these blockchain networks can communicate easily, as the IBC takes data from one blockchain, wraps it, and unpacks it on the other blockchain in the correct format. This communication is possible despite different programming languages, due to the same core.

The Osmosis blockchain is further divided into modules that are linked together:

  • Epochs
  • GAMM
  • GOV
  • Incentives
  • Lockup
  • Mint
  • Pool incentives
  • Superfluid staking
  • Token factory
  • TWAP
  • Fees

Epochs determine the start time of other modules. One epoch lasts 14 440 blocks, which corresponds to one day.

GAMM: The Generalized Automated Market Maker module provides a system for creating and interacting with liquidity pools (LP) on the Osmosis blockchain.

  • Pool creation: When a pool is initially created, 100 LP tokens are stamped and sent to the pool creator's address.
  • Connecting to the pool: To join a pool, the user enters the amount they want to put in. GAMM calculates how many LP tokens the user will receive. The calculation takes place at the time of transaction processing (verifying that there are enough tokens at the address). Once verified, GAMM LP tokens in the pool are stamped and sent to the user's address. Connecting to the pool using a single asset is also possible.
  • Exiting Pool:  To leave the pool, the user specifies the minimum number of tokens they want to select. Unlike joining a pool, an exit fee is then paid. Once the assets are withdrawn from the pool,  GAMM LP tokens are burned. Exiting the pool using a single asset is also possible.

GOV: The governance module enables $OSMO coin holders to participate in a community-driven decision-making process.

Iniciatives: The Iniciatives module provides yields to stakers.

The proceeds to be given to the stakers are stored in the gauge, and are distributed in individual epochs to stakers who meet the conditions.

There are two types of gauges: permanent and non-permanent.

  • Non-permanent tokens are distributed evenly over the epoch when the gauge is active.
  • Permanent distributes all tokens at once and stores them elsewhere. This is mainly used to distribute stamped $OSMO coins to LP token stakers.

Permanent coins remain after the distribution period, but non-permanent coins are burned.

Lockup: The module provides an interface for users to lock tokens (also known as bonding) into modules in order to obtain incentives. After adding tokens to a pool and converting them into LP tokens via the GAMM module, users can lock these LP tokens with a specific duration to start earning rewards.

To unlock these LP tokens, users must start the unlock timer and wait for the original unlock time to expire. After the unlock time expires, users can turn the LP tokens back into their tokens.

Mint: This module is responsible for flexibly creating assets to reward validators, offer incentives to people who provide pool liquidity, provide resources to manage Osmosis, and pay developers to maintain and improve the Osmosis blockchain.

Pool incentives: The module is separate but related to the incentives module. When a pool is created using GAMM, the pool incentives module automatically creates individual metrics in the incentives module for each lock duration that exists in that pool. The module also takes the pool incentives distributed from the gov module and distributes them among the individual incentive gauges.

Superfluid staking: This module enables a form of liquid staking. Instead of providing liquidity to a linked asset, Superfluid staking takes the linked liquidity from the asset and stacks it into the blockchain (called Proof of Useful Stake). An $OSMO coin represents the value of its share of LP tokens that are staked and delegated to validators, resulting in the security guarantee of the consensus layer also being based on GAMM LP shares. The $OSMO coin is minted and burned as part of the superfluid betting.

superfluid staking
Superfluid staking

Token factory: This module allows any account to create a new token with the name factory / {creator address} / {subdenom}. Since tokens have a namespace based on the creator's address, this allows the minting of tokens to be permissionless as there is no need to deal with name duplication. A single account can create multiple denoms by providing a unique subdenom for each denom created.

TWAP: The Time Weighted Average Price module allows you to run TWAP for each AMM (Auto Market Maker) fund.

Fees: The fees module allows nodes to easily support many tokens for use as fees, while allowing node operators to specify fee parameters for only one "base" asset. This is achieved by having the module maintain a list of allowed tokens that can be used as fees, each with certain associated metadata. This metadata is then used with the "spot price calculator" provided to the module to convert the granted fees to their equivalent value in the base denomination. Only metadata and the spot price calculator are currently supported using the GAMM fund ID and the GAMM administrator.

Cosmos SDK - This is a software package that is based on a modular philosophy. This means developers can plug in different modules to create the necessary blockchain network, regardless of programming language.

Tendermint Core
- This helps developers by having several built-in basic settings to make programming faster and easier. With Tendermint, developers don't have to start coding from scratch.

There are many DEXs on the market that work with AMM, like Uniswap and Curve.
Osmosis differentiates itself from them by having more control over DeFi, allowing the personalization of liquidity pools and deploying a custom AMM.

Therefore, each liquidity pool on the Osmosis blockchain is somewhat self-contained, similar to a DAO in that liquidity providers can set their own rules.

This solution seems to be better than what incumbent brands like Uniswap and Curve are providing.

Development History


  • In October, Osmosis Labs announced the launch of  the Osmosis blockchain development


  • In June, the Osmosis mainnet was launched
  • In October, Osmosis Labs raised 21 million USD  in an initial coin offering (ICO) from Do Kwon, Ethereal Ventures, Figment, Nascent, Paradigm, and Robot Ventures
On July 8 2021, the Osmosis blockchain was halted due to a bug in the LP. This flaw allowed attackers to withdraw 50 % more invested funds from LP. After discovering the bug, Osmosis Labs spoke with the network validators, and the entire blockchain was halted for less than two days. Osmosis Labs reported that several users had exploited the bug, but 4 users were responsible for 95 % of the stolen funds. Among them was network validator FireStake, who apologized to the community, returned the 2 million USD he stole, and declared the end of validation. In total, 5 million USD was stolen. The bug was fixed after two days, and the blockchain started running again.  Osmosis has promised to return stolen liquidity to LP from its sources if it fails to track down the remaining users who participated in the attack.


Osmosis chain team
Josh Lee

Josh Lee is the co-founder of Osmosis Labs and co-founder and CEO of Chainapsis. Previously, he was an ecosystem development analyst at Ignite. In addition, he is involved in the development of the Keplr wallet.

Osmosis chain team
Sunny Aggarwal

Sunny Aggarwal is the co-founder of Osmosis Labs. He studied at UC Berkeley, worked on blockchain technologies, and founded the Blockchain at Berkeley organization.

In the summer of 2017, he was introduced to the Cosmos blockchain, which intrigued him so much that he dropped out of college to work on the BFT Tendermint engine as a researcher. He co-founded Sikka, one of the Cosmos blockchain's largest validators.


$OSMO is the native coin of the Osmosis blockchain.

As a governance coin, $OSMO coin allows holders to decide the project's future direction.

OSMO coin and its use:

  • Payment for transactions
  • Reward validators
  • Staking
  • Voting

Proposals for changes to the blockchain are submitted here, and the cost to submit a proposal is 1,600 OSMO (Anyone can submit a proposal). This is followed by two weeks for deposits and three days for voting. More than 50% of the votes are required for a proposal to pass, and a minimum quorum of 20%.

The developers modify the blockchain if the proposal passes to meet the proposed criteria.

There are 512,862,994 $OSMO coins in circulation (12 Jan,2023) and 440,000 addresses. Of these, the first 12 addresses have a total of 150 million $OSMO coins (29.4 % of the total supply).

The level of decentralization here is debatable, as those major addresses could come together and force through any proposal they wanted.

Revenue & Tokenomics

Osmosis Labs issued 100 million $OSMO at the inception of the OSMO coin, split evenly between airdrops and the strategic reserve.

The overall distribution of $OSMO looks like this:

  • The reward for liquidity mining - 40.5 %
  • Developer vesting - 22.5 %
  • Rewards for staking - 22.5 %
  • Community pool - 4.5 %
  • Strategic reserve - 5 %
  • Airdrop - 5 %
Osmosis chain distribution

The Osmosis blockchain releases newly created coins on a "thirdening" schedule. The system is similar to bitcoin halving, where the issuance of new coins is halved every 4 years.  Osmosis will reduce the distribution of new coins by 1/3 each year (after 365-day epochs).

OSMO Schedule:

  • Year 1: 300 million OSMO coins will be issued
  • Year 2: 200 million OSMO coins will be issued
  • Year 3: 133 million OSMO coins will be issued
  • Year 4: 89 million OSMO coins will be issued

Subsequent years will issue 1/3 less coins than the previous year until the maximum supply of 1 billion $OSMO coins is reached.

Osmosis chain issuance per day
Issuance Per Day

New coins will be distributed subsequently:

  • Rewards for staking - 25 %
  • Developer vesting - 25 %
  • Liquidity mining reward - 45 %
  • Community pool - 5 %
Osmosis chain: token release schedule
Release Shedule

The total number of $OSMO coins will be 1 billion.

512,862,994 $OSMO are currently in circulation (as of 12 Jan,2023)

The airdrop of $OSMO coins at network launch was for all $ATOM coin holders who had an $ATOM at their address as of 18 Feb 2021. All 50 million $OSMO were distributed in proportion to the balance of $ATOM at the addresses or staked coins. Osmosis called this airdrop the "Fairdrop".

The Uniqueness of the Chain

CosmWasm system integration:

Confio, a developer tools company, developed this system for interblockchain smart contract integration supporting the CosmWasm engine. This gives Osmosis access to new resources, as CosWasm has one of the largest developer ecosystems outside of the Ethereum blockchain.

Liquidity Pool Customization:

Osmosis pools are flexible. Unlike Uniswap, Balancer, or Curve, Osmosis pools are variable. As a result, Osmosis DEX encourages liquidity providers to experiment with different MM settings as they see fit.  

Pool parameters, including swap costs, initial token weights, and the calculation of the time-weighted average price, are set by pool creators. The LP token holders then handle the management of the pool. Voting rights are distributed according to the size of the tokens in the pool.

Osmosis encourages such experimentation, as new variations can yield innovative solutions.

Other exceptions include superfluid staking and IBC, which was described above.

Combining these features and implementing them in a DEX is a fantastic opportunity for Osmosis’ users and the entire Cosmos blockchain. Moreover, the combination of cheap, fast transactions makes Osmosis a big player in the future shaping of the crypto world.

How the Network is Secured

The blockchain's security is taken care of by 130 selected validators with the most staked $OSMO coins.

Osmosis uses ‘slashing’ to monitor the correct functioning of the validators to discourage fraudulent behavior.

When fraud is proven, the slashing feature burns a portion of its staked assets based on the severity of its nature.

  • Inactivity: an inactive validator is defined as not participating in consensus for more than 28 500 blocks in a row (approximately 48 hours). A validator is considered inactive, trapped, and removed from the active set. It can then submit a transaction to undo the imprisonment (thereby confirming its activity) and rejoin validation.
  • Double signing of blocks: it is very harmful to the blockchain and thus, is penalized significantly more. Double-signing burns 5 % of a validator’s total stake, and becomes tombstoned making it ineligible to be an active validator ever again.

When selecting a validator, keep an eye on their history to see if they are honest, otherwise, you may lose some of your assets. For example, if a validator is removed from the active set and becomes a "gravedigger," all their delegated coins will return to the original wallets. You can find some helpful information here.

Interchain security: this is a solution to the problem of securing new blockchains, which will allow validators of more extensive blockchain networks to provide security for small blockchain networks. Once interchain security is in place, there will be no need for validators for Osmosis. Instead, Cosmoshub will provide all security.


Validator node:

Minimum hardware requirements to run the Osmosis node:

  • CPU 8-core X86 or X64
  • 32 GB RAM
  • 1 TB of free storage

You then go to the link, which will guide you through the first run of the node.

Benefits of having your own node:

  • Collecting fees from delegates for staking
  • Direct participation in the running of the blockchain
  • Splitting the rewards


If you want to avoid running your own node, you can delegate your assets to a specific validator. How to stake your assets:

  • Go to the website
  • Connect your wallet
  • Select the validator that suits you
  • Delegate your coins

Delegate Benefits:

  • No hardware required
  • Easier setup
  • Passive income

When selecting validators, choose only active ones, otherwise you will not receive any rewards, as the validator will not participate in the blockchain validation.

Road Map

The Osmosis blockchain has yet to release an official Road Map. Instead, it is letting the community decide the future direction of the entire blockchain.

You can follow the development of the blockchain at these two links, which detail what votes have been taken, and their subsequent implementation on the blockchain:

Before its launch, Osmosis published an article detailing the general direction of the blockchain. You can read it here.


The Osmosis blockchain is a cross-chain DEX that runs in the Cosmos ecosystem.

Two applications run on the Osmosis blockchain:

  • Osmosis - DEX
  • ION DAO - Synthetics

Osmosis provides grants to improve the blockchain.

Here you can see the list of grants and how to apply for it.


The Discord has a friendly atmosphere, and any question is answered quickly. The Osmosis developers and the discord administrators are very active.

Twitter is used to inform followers about news and organize AMAs.

They also post educational and informative videos about current events and conference recordings on YouTube.


The main partners of the Osmosis blockchain include:

Osmosis joins investment firm Paradigm’s other DeFi portfolio members such as Maker, Synthetic, Uniswap, Optimism, Coinbase and BlockFi.

Where to Buy

$OSMO coins can only be bought on a few centralized exchanges (CEXs).

When buying on a decentralized exchange (DEX), use Osmosis directly:

When buying on a CEX, always check if it supports $OSMO coin. $OSMO is the 89th largest cryptocurrency by market cap and is therefore not supported by small CEXs.

For example:

Supported Wallets

Ledger Nano X - The most widely used hardware wallet (HW) on the market. The most popular cryptocurrency wallet in the world.

Trust Wallet - software wallet (SW)

Keplr Wallet - software wallet (SW)

When using the Cosmos ecosystem, we recommend using the Keplr wallet, which is the best choice for DeFi built on the Cosmos blockchain.

Analyst Opinion

After the arrival of Osmosis in the Cosmos ecosystem, it became the biggest DEX in a short space of time. With its multi-chain design and innovative features, we are talking about a next-generation DEX that will be a thorn in the side of classic single-chain DEXs in the future.

Whether it is airdrops, which are abundant on Osmosis and will only increase in the future, or LPs, which will offer a decent interest and strengthen the network liquidity, Osmosis a competitive project for the future development of the Cosmos ecosystem and of crypto as a whole. There is the potential for future addition of other tokens outside the Cosmos blockchain (ERC20 tokens), thereby bringing cheap, fast transactions to other blockchains.

My personal experience with Osmosis has been very positive and I see a lot of potential for growth for the entire blockchain. One of the biggest issues is the low awareness among the crypto community, which is not yet tapping into the potential of the entire Cosmos ecosystem or the Osmosis blockchain.

Ondřej Tittl


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