Osmosis: Diffusion Across the Cosmos Ecosystem

Introduction

Liquidity is the foundation upon which all else is built. Every prominent ecosystem has at least one DEX, and the current leader for Cosmos’ is the app-chain Osmosis. In this post, we evaluate the past performance of Osmosis and what makes it a flagship chain within Cosmos.

Osmo Performance

Despite the latest market drawdown, OSMO has outperformed other major peers over the last few months by a substantial margin. OSMO saw a modest pullback between November and mid-December alongside the broader market but has since bounced back much stronger than major peers (and most crypto assets for that matter) over the last couple of months.

After late January’s market dip, the relative strength of Osmo has been notable, especially since February hasn’t been the kindest month to some.

Cosmos Thesis Coming To Fruition

One factor behind Osmo’s price performance is the success of Cosmos, whose thesis of interoperable app-chains (i.e. zones) has finally come to fruition in recent months as zones started supporting IBC. Particularly in Q4 2o21, the market value of IBC-enabled L1 tokens has surged.

Thanks to its value prop as an IBC-enabled DEX zone, Osmosis has become a vital Hub within Cosmos, accounting for the largest IBC traffic amongst 37 zones with IBC support.

While total trading volume on Osmosis is still relatively small compared to other incumbents like Uniswap, total revenue growth (as measured by trading fees) has far outpaced its larger peers since the end of October (we should note this isn’t completely surprising given how much newer/smaller Osmosis is relative to the field). Trading activity on Osmosis really picked up steam heading into the new year, which caused the rate of growth in trading fees to accelerate as well.

Total Value Locked (TVL) on Osmosis has been on the rise since l