Osmosis: The Interchain Dex

Osmosis is the premier DEX and DeFi hub for the interchain ecosystem. Founded by core developers of the Cosmos SDK, Cosmos Hub, and IBC, Osmosis is intended to serve as an appchain and DEX that rivals even the most robust centralized exchanges.

Launched shortly after IBC in 2021, Osmosis quickly became the first IBC-enabled application to achieve product-market fit, becoming the DeFi and liquidity center of the interchain ecosystem.

Beyond its native DEX, Osmosis hosts a growing ecosystem of DeFi protocols and third-party integrations, providing comprehensive offerings ranging from managed yield vaults to perpetual derivatives markets, and much more.

Osmosis consistently facilitates over 20% of all IBC transaction volume and is expanding beyond the Cosmos, integrating with protocols and providers like Wormhole, Axelar, Router Protocol, and Omnity, to increase Osmosis’ cross-chain capabilities.

How IBC Empowers Osmosis

Until IBC, the primary criticism of application-specific blockchains was the lack of interoperability. For Osmosis, IBC allowed for the chain to specialize in staying connected with the rest of the crypto world.

Osmosis has leveraged every part of the stack to improve and optimize its offering as a decentralized exchange while remaining compatible with a growing ecosystem of IBC-connected chains. It has also been a contributor and beneficiary of the incredible network effect that IBC offers — today, any chain that connects to IBC can instantly interface with a $20B ecosystem and access all of Osmosis’s liquidity through its IBC-enabled cross-chain swaps.

Why the Interchain Stack is Essential for Building a Leading DEX

Building an industry-leading DEX requires access to all parts of the stack. Every other framework out there constrains builders in ways that hamstring developers and often make critical features difficult to implement. The Interchain Stack is the only stack that makes every piece configurable without sacrificing interoperability. While other alternatives have covered a lot of ground in the past few years, their offerings are often too sparse, too constrained, or too incompatible with existing systems (in the case of the various rollup appchain stacks). The Interchain Stack is the only logical choice for building a production-grade blockchain with access to configure everything from the mempool to consensus logic safely.

The Premier Interchain DEX and DeFi Hub

Osmosis is the leading interchain DEX and DeFi hub for the interchain ecosystem and beyond. The Osmosis DEX is the primary application on the Osmosis blockchain, serving as a trading and liquidity center for assets from over 100 IBC-enabled blockchains and other popular ecosystems.

Beyond the DEX, Osmosis hosts a growing suite of DeFi applications, merging native tools with third-party integrations to offer a comprehensive DeFi experience that surpasses centralized exchanges. Osmosis aims to provide a seamless, user-friendly, secure, and decentralized trading experience.

Osmosis has cemented its position as the go-to DEX and DeFi hub in the interchain, facilitating over $35B in total trading volume and consistently leading in IBC transaction volume.

Alloyed Assets: Streamlining Asset Composability and Enhancing DeFi UX on Osmosis

One unique feature of Osmosis is the recently introduced Alloyed Asset system — an innovative solution for asset composability and improved DeFi UX.

Osmosis allows users to deposit assets from an ever-growing list of bridges and source chains. While this diversity is valuable, it also fragments liquidity and creates a UX nightmare.

For example, polygon.ETH.axl (ETH from Polygon via Axelar) is not fungible with ETH.axl (ETH from Ethereum mainnet via Axelar) on Osmosis, despite using the same bridge. This is confusing for users.

Osmosis drew inspiration from Coinbase’s streamlined system for managing assets from multiple sources. On Coinbase, all deposited ETH, regardless of its origin, is fungible and uniformly labeled as ETH, greatly simplifying the deposit/withdrawal and trading process.

Osmosis’s solution is the ‘Alloyed Asset’, which consolidates different versions of the same asset into a single, unified token. These Alloyed Assets, like Alloyed ETH and Alloyed BTC, will play an increasingly important role in the extended Osmosis ecosystem, as more assets from more source chains continue to land on Osmosis.

Learn more about Alloyed Assets on Osmosis: Alloyed Assets on Osmosis: Unifying UX and Solving Liquidity Fragmentation

Driving Innovation and Growth in the Interchain Ecosystem

Osmosis has, since its inception, been cut from interchain cloth. The founding team contributed foundational work to the Cosmos SDK and IBC prior to starting Osmosis, and Osmosis was one of the first serious projects to gain traction building on the Interchain Stack. Over the past several years, the Osmosis team has optimized and re-architected large swaths of the stack it’s built on and has upstreamed nearly all of these changes for the benefit of all.

As a product, Osmosis has always been the ecosystem’s liquidity hub, facilitating the launch, growth, and acceleration of nearly all projects built on the Interchain Stack. This has gone well beyond the primary DEX interface that most people use to interact with Osmosis — in fact, many chains have been able to unlock entirely new user flows by using Osmosis behind the scenes. For example, liquid staking protocols have used Osmosis’s cross-chain swaps to compound yield into the staking asset, and many protocols have adopted the Cosmos SDK’s fee abstraction module, which allows users to pay fees in any token that Osmosis has liquidity for.

Finally, Osmosis has made a tremendous effort throughout its lifetime to pull other interchain projects up with it. Many of today’s notable appchains (such as Axelar and Stargaze) only exist because the Osmosis protocol helped them bootstrap liquidity against millions of dollars of the community pool’s OSMO. This is as close as a protocol can get to putting its money where its mouth is — few other protocols can claim anything even close to the technical, strategic, and financial contributions Osmosis has made to the interchain.

Evolving into the DeFi Hub for All Digital Assets

Osmosis’s next phase will expand its reach beyond the Cosmos, increasing cross-chain interoperability by integrating more bridges and tools to accommodate an ever-growing list of assets across ecosystems.

As its cross-chain reach continues to expand, Osmosis will evolve from the Cosmos DeFi Hub — to the DeFi hub, for all digital assets.

This cross-chain expansion will initially focus on bringing BTC and BTC variants (from Bitcoin L2s and sidechains) into the interchain, to unify liquidity, decrease fragmentation across siloed networks, and provide an application layer for users who want to do more than just HODL their Bitcoin. Deeper integrations with Solana, Ethereum, EVM-compatible networks, and more, will also play an important role in bringing Osmosis cross-chain.

About Osmosis

Osmosis is the premier interchain DEX and DeFi hub for the Cosmos ecosystem and beyond. To date, the Osmosis DEX has facilitated over $35 Billion in trading volume, and more than 100 separate blockchains have connected to the Osmosis appchain via IBC. Osmosis is home to an ever-expanding suite of DeFi applications, merging native tooling with powerful third-party integrations to provide a one-stop experience that raises the bar over centralized exchange offerings.

Osmosis: The Interchain Dex was originally published in Interchain Ecosystem Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.