Osmosis: Q2 Update

When crypto natives think of Cosmos DeFi, they immediately think of Osmosis. Although the largest Interchain DEX does not share the “Cosmos Hub” name, in many ways, Osmosis is the Hub of the ecosystem. With the second largest active user base in the Cosmos, the most IBC transfers, and the most liquid markets, Osmosis is the most successful Cosmos chain to-date.

Despite being in the midst of a deep bear market and OSMO at all-time lows, Osmosis continues to expand its product suite, leverage its appchain architecture to create novel MEV solutions, improve its tokenomics, and fund the development of new security models that will benefit OSMO tokenholders. We dive into Osmosis’ recent developments and what to look forward to in the coming quarters.

Transforming into a DeFi Hub

While known for being a DEX appchain, in February 2022, Osmosis added permissioned CosmWasm with its “Carbon upgrade.” By being permissioned, this allows Osmosis governance to decide which applications it wants deployed on the chain to prevent spam and low-value applications hurting the overall user experience. Permissioned CosmWasm was the first step required for Osmosis to grow beyond its DEX origins and become a full DeFi Hub with lending/borrowing, yield farming, perpetual futures, stablecoins, and more.

The first major protocol to deploy an Outpost (CosmWasm smart contracts) on top of Osmosis was Mars protocol, which we wrote about extensively here. Mars offers both lending/borrowing and leveraged yield farming on top of Osmosis. Since its launch in February 2023, Mars’ Osmosis outpost has become one of the largest lending protocols in the Cosmos ecosystem with over $7M in TVL, second only to Umee with over $13M. Today, Mars accounts for ~6% of total Osmosis TVL, which we expect to grow as native USDC launches in the Cosmos and Mars becomes a natural source of leverage in the ecosystem over time.

The Osmosis community has also approved Kado to implement fiat on/off ramp smart contracts on top of Osmosis to easily onboard new users and allowed Calculated Finance to bring automated trading strategies to Osmosis users. In the future, we also expect a decentralized stablecoin protocol, Membrane Finance, to launch on Osmosis, as well as multiple perpetual futures protocols like Margined Protocol and Levana.