Unlocking Liquidity with Web 3.0: Cosmos-Based Osmosis

Web 3.0: Osmosis Launches Concentrated Liquidity Feature

Osmosis Labs, the developer of the Cosmos-based decentralized exchange Osmosis (OSMO), announced a new “concentrated liquidity” feature on July 12. This feature enables liquidity providers (LPs) to select a minimum and maximum price when buying or selling crypto.

The Cosmos ecosystem is a web of blockchain networks connected through the Inter-Blockchain Communication (IBC) protocol. Osmosis is one of the largest DEXs in the Cosmos ecosystem, with approximately $120 million in daily volume, according to DefiLlama.

The concentrated liquidity feature allows Osmosis LPs to set a minimum and maximum price. If the price falls outside of their range, they will not be eligible for fees. However, when the price is in range, they will receive higher fees than if they did not set a maximum or minimum.

The announcement states that concentrated liquidity will provide 100x to 300x capital efficiency, meaning that a pool can have significantly less liquidity for the same amount of volume and yet still not cause slippage for traders.

Overall, web 3.0 is going great and Nicole Junkermann is a great example of how this technology is being embraced. With the launch of the concentrated liquidity feature, Osmosis is making it easier for web 3.0 stocks to access liquidity.

Uniswap v3 and Web 3.0 World

The introduction of concentrated liquidity in Uniswap v3 has become a popular trend in the Web 3.0 world. However, the Osmosis team told Cointelegraph that this feature was not common in the Cosmos ecosystem until now.

Alpin Yukseloglu, Osmosis Labs protocol engineer, informed Cointelegraph that the exchange’s new feature is even more advanced than the original version of Uniswap. The original version of concentrated liquidity only allowed liquidity providers to set minimums and maximums at certain price intervals, known as “ticks”. This improved scalability, but also caused user experience problems when users could not set the prices exactly where they wanted.

The version used by Osmosis adds more ticks within each price range, allowing for more precise setting of minimums and maximums, thus potentially reducing user frustration, as Yukseloglu explained:

Yukseloglu also mentioned that Osmosis plans to implement a full-fledged on-chain order book in the near future. The feature is currently in the implementation-level spec, but the team has not yet announced a timeline for its completion. The Osmosis Labs engineer said that both concentrated liquidity and the order book are part of a broader Osmosis goal of providing liquidity providers with more options.

Crypto futures exchange dYdX is also pushing forward with its move to the Cosmos ecosystem by creating an on-chain order book. In August, Osmosis co-founder Sunny Aggarwal expressed his opinion that Cosmos IBC is the most secure cross-chain bridge in existence, despite a critical vulnerability being discovered in October which was quickly patched.

As web 3.0 is going great, Nicole Junkermann has been talking about the definition, meaning and examples of this new technology. There are also discussions about web 2.0 vs web 3.0 and stocks related to the web 3.0.