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Concentrated Liquidity: Osmosis on Cosmos allows LPs to choose asset costs
Decentralized swap platform Osmosis has introduced a brand new feature called “concentrated liquidity.” This feature allows Liquidity Providers (LPs) to select the minimum and optimal fees for purchasing or deploying cryptocurrencies. Osmosis is based on the Cosmos environment, a network of blockchain systems connected by the Inter-Blockchain Communication (IBC) method. According to DeFiLlama, Osmosis is among the largest decentralized swaps (DEXs) in the world, trading around $120 million daily. The new feature allows LPs to deploy resources at minimum or optimal cost. If the cost is below the minimum value or above the optimal value, fees will no longer be charged. …
Concentrated Liquidity: Osmosis on Cosmos allows LPs to choose asset costs
Decentralized swap platform Osmosis has introduced a brand new feature called “concentrated liquidity.” This feature allows Liquidity Providers (LPs) to select the minimum and optimal fees for purchasing or deploying cryptocurrencies.
Osmosis is based on the Cosmos environment, a network of blockchain systems connected by the Inter-Blockchain Communication (IBC) method. According to DeFiLlama, Osmosis is among the largest decentralized swaps (DEXs) in the world, trading around $120 million daily.
The new feature allows LPs to deploy resources at minimum or optimal cost. If the cost is below the minimum value or above the optimal value, fees will no longer be charged. However, if the price is within the recommended range, the LPs receive higher fees.
The concentrated liquidity leads to a 100-300x increase in resource performance. This means that a swimming pool requires significantly fewer resources for the same amount of resources, without resulting in any losses for investors.
This feature was first introduced on Uniswap V3 for DEXs and has now spread to the Web3 world. However, it is still relatively unusual within the Cosmos environment.
According to Alpin Yukseloglu, process developer at Osmosis Labs, Osmosis' model goes a step further than Uniswap's original model. It allows LPs to fine-tune cost factors and reduces potential customer dissatisfaction.
The Osmosis team also plans to launch an on-chain buying publication in the future, but does not yet have an exact timeline for this. Osmosis' goal is to offer wealth service providers more options.
Other companies, such as crypto futures replacement dYdX, also use the Cosmos environment for their own developments. Osmosis founder Sunny Aggarwal describes the Inter-Blockchain Communication (IBC) process as the most secure bridge protocol.
With the introduction of concentrated liquidity, Osmosis expands its offering for LPs and offers them more precise control of costs. It remains to be seen how this feature will evolve and what impact it will have on the decentralized swap market.