Concentrated liquidity: Osmosis on Cosmos enables LPS to select costs for assets

Concentrated liquidity: Osmosis on Cosmos enables LPS to select costs for assets

The decentralized swap platform Osmosis has introduced a brand new feature called "concentrated liquidity". With this function, Liquidity Providers (LPS) can select the minimal and optimal fees for buying or providing cryptocurrencies.

Osmosis is based on the Cosmos environment, a network of blockchain systems that are connected by the Inter-Blockchain Communication (IBC) process. According to Defillama, Osmosis is one of the largest decentralized swaps (Dexs) worldwide and acts about $ 120 million every day.

With the new function, LPS resources can provide minimal or optimal costs. If the costs are below the minimal value or above the optimal value, fees are no longer charged. However, if the price is in the recommended range, the LPS receive higher fees.

The concentrated liquidity leads to a 100- to 300-fold increase in resource performance. This means that a swimming pool for the same amount of resources needs significantly fewer resources without letting this to be lost for investors.

This function was first introduced at Uniswap V3 for Dexs and has now spread in the web3 world. However, it is still relatively unusual within the Cosmos environment.

According to Alpin Yusseloglu, the procedural developer of Osmosis Labs, the Osmosis model goes one step further than the original model from Uniswap. It enables the LPS a finer setting of the cost factors and reduces possible dissatisfaction with customers.

The Osmosis team also plans to introduce an on-chain purchase publication in the future, but still has no precise schedule for it. Osmosis's goal is to offer asset service providers more options.

other companies, such as the crypto futures substitute Dydx, use the Cosmos environment for its own developments. Osmosis founder Sunny Aggarwal describes the Inter-Blockchain Communication (IBC) process as the safest bridge protocol.

With the introduction of concentrated liquidity, Osmosis extends its range of offers for LPS and offers you more precise control of the costs. It remains to be seen how this function will develop and what effects it will have on the decentralized swap market.