The Cosmos eco-system has been booming lately, with a seemingly never ending array of new projects launching, all linked by the magic of the Inter-Blockchain Communication Protocol (IBC). I've posted a number of times about various projects like Osmosis, Sifchain and Akash to name a few. My most recent post looks at a number of airdrops for new projects launching soon.
However, I've had a couple of people contact me asking how to get started, so I figure a beginners guide is in order.
Step 1.
First thing to do is buy some ATOM. This should be fairly easy to accomplish, with ATOM being on nearly every CEX, plus existing in wrapped form on Ethereum, Binance Smart Chain and no doubt other EVM's I guess. Other options to shift funds into the Cosmos eco-system now also include LUNA, UST, CRO to name a few. Any of these tokens can be brought in as the on-ramp to the Cosmos, but I'll focus on ATOM for simplicity.
Step 2.
The next thing to do is get a Keplr wallet. It is not the only option, but it is the most integrated and easiest to use for staking and participating in liquidity pools. It works like Metamask, as a browser extension. There are mobile options if you are mobile only, including Keplr's own mobile wallet and Cosmostation, but the best and easiest is Keplr browser extension in my opinion.
Step 3.
Once you have your wallet set up, withdraw or bridge your ATOM's from wherever you acquired them from into your native Cosmos wallet in Keplr. Be careful if you bought wrapped versions, they will need to be converted to native. I have been using Binance Bridge to shift funds from BSC to native ATOM, but it is closing down very soon. However you go about it, getting your ATOM's in your native Keplr wallet is the goal. It is highly recommended, if you plan on staking ATOM, that you Do Not use CEX's to stake. Take full control and move your ATOM to self custody. Most Cosmos eco-system airdrops exclude exchange validators and CEX's from their drops, so self custody is definitely the way to go.
Step 4.
The next step depends on what you are planning to do with your new investment.
Option 1 - Stake your ATOM's.
If you simply want to stake ATOM, and earn an estimated 11.5% yield on your funds, then this can be done simply through Keplr. Click the "Stake" button in your wallet, and a new webpage will open up. Choosing a validator is really up to you. I like to split my stake between a couple different validators. Best if you see the big exchanges there, ignore them. They usually don't participate in governance or chain upgrade processes, and generally don't do much for the eco-system beyond listing the tokens.
Option 2 - Trade to something else and stake.
Here is where you will need to connect to one of the DEX's. Osmosis, Emeris (also known as Gravity DEX) and Sifchain are your options. Personally, I use and recommend Osmosis as it has the best liquidity and thus slippage from this selection, but the choice is yours.
Connect your Keplr wallet to the DEX (I'll assume Osmosis for the rest of this guide). Then click on Assets. To trade on Osmosis, first you need to import your tokens. Click on deposit, and it will read how much liquid you have in your connected ATOM wallet. Then simply input how much you want to deposit to Osmosis and approve the TX popup from Keplr. Don't forget to keep a small amount in your wallet for gas (0.1 ATOM will give you plenty for many TX's)
Behind the scenes, what is happening is that your ATOM's are being shifted via the IBC protocol from the Cosmos chain, onto the separate Osmosis chain. A small percentage of TX's very occasionally fail, and will be refunded after a while, but most succeed within a minute or two.
Then you go to the Trade tab, select your From and to choices and make the trade. Note, no OSMO is needed, the platform has set 0 gas, unless you use the high fee option which is not necessary.
Once you have your desired token, then simply go back to the Asset page, and withdraw. The tokens will be sent within a few minutes into the native chain and wallet for that coin. For example, if you wanted to buy AKT, have gone through the whole process above, then simply swap to your Akash wallet in Keplr and your AKT should be there very soon. Again, if there is an issue, the TX will refund back to Osmosis, and you will have to try again. This is rare, but does happen. Don't freak out, the refund will go through, but may take up to a couple of hours in some cases.
Option 3 - Liquidity providing.
There are options for Liquidity pooling on Emeris, Sifchain and Osmosis. As a bonus feature, Sifchain has pegged ETH tokens on it, Gravity Dex (via Emeris) lives on the Cosmos chain with possibly the best security profile, and Osmosis offers excellent APR for bonded liquidity in a vast array of pool. I've used all three in the past, but personally focus on Osmosis these days. Choice is yours, but that's my preference.
To add to an LP on Osmosis, simply look through the list of incentivized pools on the POOLS tab. Quickly check the pool by clicking on it, to make sure it is a 50/50 pool. Most are, but some are not (e.g. the ION/OSMO pool is 80%/20%). Once you know the ratio you need for your chosen pool, then go to SWAP tab, and trade your assets for what you need. Then move back to the pool page, and select ADD/REMOVE liquidity for your selected pool. Process that TX, and then refresh the page.
In order to earn the juicy yields shown, there is one more step. You have to select the bonding period and bond your LP shares. The choices are 1 day, 7 days and 14 days. This is not how long your tokens are bonded for - this is how long it will take to un-bond when you want your money back liquid. Keep this in mind, as the yields for longer bonding periods are obviously higher, but if you are likely to need those funds in a hurry, they will be locked for up to 2 weeks. The 2 week bonding return is enticing, but it depends on your time preferences and risk appetite. A key risk is if there is a major adverse event for one of the tokens, you could be stuck in your position and experience significant Impermanent Loss. However, if you have the appetite for risk, and confidence in your chosen tokens, then the longer bonding will offer the best APR.
One other thing to plan for the future, if you intend to keep LP positions for a while is the upcoming development of "Superfluid staking". The TLDR of this is that once launched (expected late this year or early 2022) OSMO bonded in LP's (presumably the 2 week bonding) will be considered staked, and earn staking rewards as well as the liquidity incentives. Coming SoonTM
Once your Liquidity is bonded, then every 24 hours some new OSMO will appear in your wallet. Some pools also have incentives from other projects added to the bonding gauges, and thus you could earn multiple different tokens from these positions. For example - The OSMO/JUNO pool will earn daily OSMO and JUNO payouts. With no gas fees, it is easy and cheap to compound your daily income. Alternatively you can use the income to build other positions, or whatever else you like.
That's it really, if there is anything you get stuck on in that process, hit me up and I'll try help. Please note, nothing in this post is financial advice, please do your own research.
Thanks for reading, sorry its a bit wordy for a guide. Feel free to ask any questions in the comments here.
Cheers,
JK.
Check these links for more content about the Cosmos eco-system: