Sometimes I just have an envy to write and then I open a document and I do. This time it’s about Osmosis so I’m sharing it here.
Where I come from with this: I am at heart a Bitcoin maximalist. I believe it is the most native financial asset of the Internet. Bitcoin is a dumb network. It destroys and creates units of coin in order to transfer value, and that’s mostly all there is to it. As such, the Cosmos philosophy is something that joins a lot of bitcoiners as it doesn’t try to capture anything or overcome a previously existing system while entitling each to their sovereignty with the freedom to explore and experiment.
Osmosis has become a de-facto hub of such sovereign zones and I think it’s an important project. My personal favorite zone (or chain) has been Penumbra for reasons I won’t discourse about in here, but it’s fair to say that its price discovery since Mainnet would have been much more complicated without Osmosis.
I’ve been following the developments of Osmosis since the airdrop was teased in February 2021 and more largely reading about cryptocurrencies since mid-2017. With that in perspective, here’s how I see the state of Osmosis today:
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1) On being Permissionless instead of Permissioned, accepting evolution and App integration
There have been plenty of discussions about having or not having permissionless CosmWasm on the Osmosis chain. A debate about safety, liveness, security and many concepts that all have their relevancy. I don’t have a magic argument or a ‘gotcha’. In general, I stand against restrictions as they limit growth, sometimes in unpredictable ways. Let me illustrate with another chain: the Cosmos Hub.
Last June, Informal introduced Partial-set security (PSS) allowing chains to run without requiring the vast majority of the validator set, but any potentially number of them instead. Three months later, zero (0) chains had launched. A project called Dungeonchain said they would launch, but they didn’t. In October, launching a chain became permissionless, and 2 weeks later Dungeonchain did, despite not being experts with the cosmos tech stack. (EDIT: Dungeonchain launched with Spawn piloted by Reece Williams, showing the obvious synergies between that and stream swap as explained in 2)) I believe many more are coming; I’ll explain more again in 2).
What projects or apps have not launched on Osmosis because there was a barrier to entry? This is a known unknown, and a really positive one to miss out on. When it comes to dangers of permissionlessness and the current upsides of having a pre-approved publishing address, here’s what I said previously in https://forum.osmosis.zone/t/permissionless-cosmwasm-v2/436/10:
‘‘the best integration these approved devs can bet on is getting an hyperlink somewhere on the main interface, leading them to another website. Meaning: users need the same due dilligence as when they use a permissionless chain. If anything, they are probably less careful than ethereum or solana users.
I believe permissioned uploads and governance gate-keeping prevents growth while protecting from no significant danger. If a malicious actor really wants to deploy on osmosis, they’ll find a way.’’
With sophisticated actors like North-Koreans, I don’t believe requiring a forum thread process and a public github prevents them from getting a publishing privilege if they wanted to.
Yet, being permissioned doesn’t put a nail in the coffin of Osmosis’ potential and I can understand it in the event where the contracts (or apps) that do go through the gate-keeping get a great integration on Osmosis Zone. But they don’t. I would like to see coherence.
Either white-listed apps should get a great integration on Osmosis Zone to upgrade the user experience or everyone should be allowed to publish contracts in exchange of a fee that prevents spam or bloat. The current in-between is unproductive.
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2) On Capital formation and a broad Cosmos killer app
Blockchains outside Bitcoin have been first and foremost about organizing new markets. (Akash has a compute market, Tron has a USDT market, Ethereum has a yield market etc.)
Capital formation is the bread and butter of new markets. When a market actor prices something in a specific asset and demands it, it creates a whole new dynamic and creates new markets. Capital formation is that, but for creating or launching a new asset. It is a market that is used to create another market.
Ethereum rose and almost flipped Bitcoin twice in 2017/2018 because every new project was raising capital through ICOs. We can see a lot of stuff about those, including their poor quality. But the mechanism was a true innovation that pushed blockchains forward. It is afterall with the funds from an ICO that Cosmos relies on today still with the maintenance of the CosmosSDK, CometBFT and IBC.
Solana has had one of the most impressive comebacks in 2023 which can be attributed in great part to the memecoin market, which is first and foremost a capital formation market! Before trading live, most of these have to go through a bonding curve on Pumpdotfun after which they ‘graduate’.
The same experiment should be conducted for Cosmos chains, and what better place to do it than Osmosis ? There’s a twist though: cosmos facilitates the creation of new chains, and like Reece Williams said yesterday: ‘’We need more chains. Not to scale blockspace, but to scale ideas.’’ while presenting Spawn, a new interface to launch cosmosSDK chains ( x.com)
Coupled with Streamswap, an app that allows to ‘stream’ a given asset for another one, this allows a capital formation market for new chains! There’s already work being done for these two projects to integrate with each other, on top of Streamswap working on a much more complete version of their app. Streamswap recently encountered success with SPICE and DGN which also resulted in success for Osmosis by bringing liquidity and decent volume.
Spawn and Streamswap need a third player, a liquidity layer. Osmosis Zone is well positioned to be that entity on the condition that it integrates these elements neatly in its app. A well-integrated asset/chain creation app coupled with a formation market and DEX would create an incredible dynamic such as seen in other ecosystems. Meme tokens and smart contract assets created on Osmosis, new chains created with Spawn and brought to distribute and trade on Osmosis. This is an opportunity not to be missed.
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3) Feature development and trading (limit orders, 1-click trading, Bitcoin)
For new Osmosis ‘products’, I see things evolving in three stages: Feature → Integration → Distribution
In 2024, there has been the introduction of ‘smart accounts’, which has so far resulted in the introduction of ‘1-click trading’ and of limit orders, which allows to buy or sell in specific markets (such as BTC/USDC) with no slippage and no fee other than the gas fee. I believe these two elements to be well thought out and necessary features for the future of Osmosis. But there’s a problem:
The face of Osmosis Zone is a swapping widget, allowing to go from one asset to another without manually selecting liquidity or pools.
Limit orders are usually coupled with visual charts that allow to see the price moving in real time to better understand where the order can realistically be placed. Osmosis, despite being a place of exchange, effectively doesn’t have charts despite launching 3.5 years ago. There are if one goes through the asset page, but they are very limited in scope and timeframes.
1-click trading allows user to go much faster, skipping the signing window or even the Ledger hardware handling. But is it really necessary? I would argue that it is very much not necessary for swaps, as those are mostly not time-sensitive. Power users doing arbs do not use the interface but automated programs and most users (I guess) don’t mind having a pop-up before swapping as they don’t actively trade their portfolio every hour or every day. HOWEVER, 1-click trading is very much necessary in a limit order system when coupled with a trading interface as placing an order can become time-sensitive. Osmosis currently does not have such a trading interface and seriously hinders the discovery of these 2 features that I know took many months to develop.
The popularity of such neat trading interfaces can no longer be discounted with the recent rise of Hyperliquid and its highly performant perpetual futures DEX (or CEX wrapped as a DEX, but that’s another debate).
With the upcoming mainnet release of Nomic allowing Osmosis to tap into non-custodial bitcoins, there’s a opportunity to develop a new market and get more users + liquidity.
Again: Feature → Integration → Distribution
Limit orders and 1-click trading are superb features, but their poor integration restricts their growth and they rightly deserve a new trading interface akin to the ones CEXes or now even DEXes have. Coupled with a Bitcoin market, Osmosis could relentlessly communicate about having BTCUSD trading with no fee for makers and
real limit orders (which I think would be a first for BTC DEXes) becoming a de-facto place to trade non-custodial BTC
