The Osmosis Foundation has announced a fundraising sale from its treasury, raising $21 million from some prominent crypto investors. This is the first sale by the foundations treasury, and is highly significant for many reasons outlined in this article.
What is Osmosis?
Osmosis is a Cosmos SDK based AMM platform, running on its own blockchain and utilizing the Inter-Blockchain Communication protocol (IBC). It was launched to build a Dex, with high flexibility and interoperability with any other chain that implements the IBC protocol. Launched in June 2021, it has already seen significant growth and community acceptance, with a recent ATH liquidity on the Dex of over $600 million, and trade volume topping $50 million in a day. With an ever growing list of tokens listed, including the recent addition of LUNA and UST, along with upcoming bridges to Ethereum and Bitcoin. This early growth is likely to continue into the future.
Importantly, Osmosis was launched without any seed round, or early investors. The community of ATOM holders could participate in an Airdrop, and the token distribution commenced with high inflation rewards for stakers and Liquidity Providers. The fact that there is no seed investors to date is an important distinction from other new protocols and projects in this space. There are no early investors looking to dump their bags after a token unlock, growth has been in the communities hands from day one.
Who has invested?
This fundraising round has been launched with tokens in the Osmosis Foundation treasury. A number of notable crypto investors are involved, with Paradigm being the lead. Paradigm is an industry leader, with significant investments in a number of Ethereum based DeFi platforms. It counts as a co-founder Fred Ehrsam, who was also the co-founder of Coinbase. For more information about Paradigm, and the role they play in backing disruptive crypto companies, protocols and currencies, here is a link to their website.
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Having an investment from the caliber of Paradigm is a great milestone in the progress of Osmosis. This in fact represents the first investment the firm has made in a "non-Ethereum" based AMM. Another notable investor in this fundraising round is Do Kwan, the CEO of Figment and Terraform Labs. Do Kwan has been active in the Osmosis community, in particular regard to how best to incentivize LUNA and UST pools on Osmosis. In a tweet thread on the topic, he expressed the following:
But I think if the Terra Community Pool is funding incentives, 1) the funds should be spent intelligently to maximize $UST adoption on Osmosis, 2) be done for the right reasons
First off, I think $LUNA incentives should be used to create a matching program for incentives for all pairs that use $UST as a quote currency.
As for how much to each pool, think initial pools to be funded should be:
OSMO-UST
LUNA-UST
USDC-UST
The fact that Do Kwan is actively participating and providing input into Osmosis governance, as well as encouraging LUNA incentives to promote the adoption of UST on Osmosis is another great sign for the project as a whole, and another vote of confidence in the platform by an industry leader.
Wen OSMO pump?
Now to the all important question, Is OSMO a good investment. The above links to industry leaders are a great sign for the protocol. TVL growth has been progressing nicely, currently comfortably over half a billion dollars.
Current metrics for OSMO are:
- Price: $5.37
- Market Cap: Just over $1.1 billion.
- Rank: 102 on Coingecko
- ATH: $7.61 on Sep 20, 2021
My opinion is that OSMO will likely move higher, once the incentive structure for LUNA and UST is finalized. Demand has been seen to steadily increase as new chains and tokens link in, however the addition of Terra assets will likely accelerate this process. Luna is a top 10 asset, and UST one of the leading decentralized USD stablecoins. The pool of capital likely to come to Osmosis over the coming weeks will - in my opinion - see OSMO in high demand.
The roadmap for the coming months for Osmosis contains two significant enhancements. The first being an improved model that takes away any possibility for front-running and manipulation of transactions. This will give traders confidence that the platform is secure, and safe to use for larger transactions without any potential front-running.
The second upcoming development is for me the most exciting. Superfluid staking is on its way. What this means is that investors will no longer need to choose between staking their OSMO and providing liquidity with it. OSMO added to liquidity pools, provided it then bonded, will still be eligible for staking rewards and governance participation, along with the LP rewards. This unique offering will set Osmosis apart from most AMM's, and will add a high degree of appeal to the OSMO token. Earning staking and LP rewards at the same time will greatly enhance the returns from OSMO, and bring significant new demand onboard.
Also on the horizon for Osmosis is the bridge to Ethereum, as well as a bridge being built (externally to Osmosis) to BTC. Bringing Bitcoin onto Osmosis, bridged over onto the IBC network opens up a whole new real of opportunity and value capture for Osmosis. If Osmosis can capture even a small portion of the market for BTC in liquidity pools, the benefit to the platform will be significant.
None of the above is financial advice, please do your own research.
Personally, I am restructuring my holdings in the Cosmos eco-system to significantly increase my holdings in Osmosis LP's. My personal plans involve doubling my assets being deployed on the platform, which will mean around 50% of my crypto portfolio will be on Osmosis. As I said, nfa, dyor, this is just my personal thoughts.
Other LeoAlpha posts:
- Thorchain Raisethecaps post by Khal.
- Rune up 60% post by Khal.
- How does Cosmos (ATOM) work? by @finguru