Context
There have been recurring discussions about a potential path where OSMO would effectively be phased out or merged into ATOM.
I want to propose a clear alternative direction.
In my view, merging or eliminating OSMO in favor of ATOM is a structurally flawed approach:
- It forces agreement on a conversion rate that neither side considers fair
- It transfers value under disputed assumptions rather than creating new value
- It risks weakening both ecosystems instead of strengthening them
Instead of resolving the underlying issue, it repackages it.
Core Thesis
The problem is not that OSMO exists.
The problem is that its tokenomics currently create persistent sell pressure.
If that is fixed, the rationale for eliminating the token largely disappears.
Proposed Direction (for discussion)
Rather than merging with ATOM, Osmosis could transition to a highly aggressive anti-inflation model:
- ~70% → buyback & burn (or long-term protocol lock)
- ~20% → staking rewards
- ~8-10% → treasury (active, yield-generating)
- ~0-2% → liquidity incentives (only critical pools)
Why This Is a Better Alternative
1. Solves the actual problem (sell pressure)
The current system incentivizes:
earn → sell
A strong buyback & burn model shifts this toward:
emission → market demand → supply reduction
This directly addresses price pressure without requiring external restructuring.
2. Avoids forced value negotiations
A merger requires agreeing on:
- relative valuation of OSMO vs ATOM
- exchange ratios under current market conditions
Both sides will naturally view those terms as unfavorable.
This creates:
- governance friction
- perceived loss of value
- long-term dissatisfaction
An internal tokenomics fix avoids this entirely.
3. Preserves sovereignty of both systems
Osmosis and Cosmos Hub serve different roles:
- Osmosis → application-layer DEX
- Cosmos Hub → base-layer security & coordination
Merging tokens blurs these roles without clear benefit.
A stronger OSMO allows:
- clearer separation of concerns
- healthier interdependence instead of consolidation
4. Creates real value instead of redistributing it
A merger redistributes existing value.
A burn-driven model:
- reduces supply
- introduces structural demand
- aligns token with protocol performance
This is value creation, not value transfer.
Expected Trade-offs
This approach is not without cost:
Short-term:
- lower liquidity incentives
- reduced farming activity
- potential drop in TVL
Long-term:
- reduced inflation
- stronger holder alignment
- improved price stability
Open Questions
- What is the lowest sustainable staking reward that maintains validator health?
- Should buybacks be fully burned or partially locked as protocol-owned liquidity?
- How aggressively can liquidity incentives be reduced without harming UX?
Closing Thought
If OSMO is underperforming due to its tokenomics, the solution should be:
fix the tokenomics
-not eliminate the token through a merger that both sides are likely to perceive as unfavorable.
A 70% buyback & burn model is one possible direction to explore.
Curious to hear thoughts from validators, LPs, and the broader community.