Osmosis Revamp

• Osmosis has recently undergone a revamp that has introduced new tokenomics and supercharged liquidity.
• The new tokenomics are designed to incentivize long-term holding and reduce volatility.
• The supercharged liquidity feature is designed to improve the efficiency of the Osmosis AMM.

The automated market maker and decentralized cryptocurrency exchange Osmosis is preparing for its v16 Magnesium upgrade, which will introduce supercharged liquidity pools and new tokenomics for its token OSMO.

What is Osmosis? 

Osmosis is a decentralized exchange (DEX) built on the Cosmos SDK that allows users to trade tokens on the Cosmos ecosystem. Recently, Osmosis underwent a revamp that introduced new tokenomics and supercharged liquidity. In this article, we will explore these changes in detail and discuss their potential impact on the DeFi space.

Tokenomics 

Introducing supercharged liquidity pools has also enabled the protocol to revamp the tokenomics of its native token, OSMO. Osmo 2.0 is designed to reduce inflation and realign emissions to favor stakers over liquidity providers.

A contributor to Osmosis who goes by “Emperor Osmo” told Blockworks that the updated Tokenomics model will upgrade Osmosis from being an incentives-driven DEX to a volume-focused DEX. Reduced emissions, combined with increased capital efficiencies, will focus on volume and not liquidity depth. This is essential.

The new tokenomics of Osmosis are designed to incentivize long-term holding and reduce volatility. The OSMO token is used for governance and liquidity provision on the platform. Under the new tokenomics, users who stake their OSMO tokens for longer periods of time will receive higher rewards. This is designed to incentivize long-term holding and reduce volatility by reducing the amount of OSMO tokens available for trading.

In addition, the new tokenomics introduce a buyback mechanism that uses a portion of the fees generated by the platform to buy back OSMO tokens from the market. This is designed to create a price floor for OSMO tokens and reduce selling pressure.

Supercharged Liquidity 

Supercharged liquidity is Osmosis’ take on concentrated liquidity, which allows users to specify pool positions and grants flexibility over the use of assets.

The supercharged liquidity feature of Osmosis is designed to improve the efficiency of the automated market maker (AMM) used by the platform. The AMM is responsible for determining the price of assets on the platform based on supply and demand. The supercharged liquidity feature introduces a new algorithm that improves the efficiency of this process by reducing slippage and improving price discovery.

In addition, the supercharged liquidity feature introduces a new fee structure that reduces fees for users who provide liquidity to pools with low trading volume. This is designed to incentivize users to provide liquidity to less popular pools and improve overall liquidity on the platform.

Liquidity providers will also have the ability to secure positions across an entire price range. This means that liquidity providers (LPs) can benefit from swap fees while also earning staking rewards using their OSMO tokens.

The first supercharged liquidity pool set to be introduced alongside the v16 upgrade will be the DAI/OSMO pool. The upgrade will occur on July 13 at around 12 pm ET, if the proposal passes, and is supposed to take approximately 30 minutes, with the network shut down over that half hour span.

Conclusion 

The recent revamp of Osmosis has introduced new tokenomics and supercharged liquidity that are designed to improve the efficiency and stability of the platform. The new tokenomics incentivize long-term holding and reduce volatility, while the supercharged liquidity feature improves the efficiency of the AMM and reduces fees for users who provide liquidity to less popular pools. These changes have the potential to make Osmosis a more attractive option for DeFi users looking for efficient and stable trading options.