- Osmosis provides a vast spectrum of options for consumers in association with Cosmos
- Osmosis promotes interoperability between both, IBC and Non-IBC
Osmosis DEX is an Automated Market Maker (AMM) built on the Proof-of-Stake consensus. It is constructed solely for the Cosmos ecosystem, a blockchain network that consists of different blockchains at the user’s disposal. It enables the blockchains to interoperate without letting them lose their independence, originality, and governance. Even though the blockchains are operating on Cosmos, they are independent in governing themselves.
Osmosis as a DEX, renders interoperability among various blockchains on the network with the help of the Inter-Blockchain Communication Protocol (IBC). it provides a decentralized design for simplifying relatedness among the blockchains. Osmosis allows IBC-compatible blockchains and lets the user integrate non-IBC blockchains such as Ethereum and Polkadot.
How is Osmosis related to Cosmos?
Cosmos is a blockchain ecosystem that provides an independent ecosystem to multiple blockchains without controlling their governance. Osmosis as a decentralized exchange could benefit from Cosmos’s interoperability by offering users a broader set of swapping options. This is not the only attribute that sets Osmosis apart from other DEXs. Given below are some of the factors which provide Osmosis an edge over other DEXs:
- Frictionless staking with its OSMO token – If we talk about staking, it’s a freeflow process on Osmosis. Osmosis enables the users to liquefy their tokens in a liquid pool as well as stake them in various staking pools on the DEX to make it more secure. To put this in simpler terms, if a user deposits 2 different tokens supported by Osmosis, it enables them to stake their token on the chains of those respective tokens. In return, the user is awarded a fraction of transaction fees for liquefying Osmosis’s Automated Market Maker (AMM) as well as rewards for staking their tokens to strengthen the blockchain.
- Tolerates leniency in competitive pools – Osmosis lets its users decide swap fees, rewards, and token rates, this helps in maintaining liquidity in the market. This layer of modification lets the users of Osmosis make their own game strategies for the market as well as adapt to market conditions more quickly. This ensures their success.
- Allows modification of liquidity pools to maintain stability in the market – Osmosis is way different from other DEXs. One major problem faced by almost every DEX is volatile liquidity. This happens because ideally, everyone will stake their tokens in the pools that would provide the highest returns which eventually results in extreme volatility across the AMM. Osmosis allows its user to create a liquidity pool of their own along with options to customize. The users who provide the liquidity to the pool get to vote on the changes to be made, if any.
- Promotes interoperability and composability – Using Cosmos’s blockchain, Osmosis helps promote composability and interoperability among the blockchains. Osmosis is designed in a way that can handle all 47 blockchains on the Cosmos network. This means a wide spectrum of options is available for the users to choose from. And the ecosystem of Cosmos roughly provides a marketplace worth approximately 59 billion USD.
To conclude, it can be said that Osmosis is the new-gen DeFi network that is the answer to the limitations of other DEXs and make the user experience a more simplified process.