Osmosis: The Best Kept Secret in Yield Farming

About Osmosis' incredible returns and how you can use them to your advantage

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Hey DEFI TIMES community,

The Cosmos ecosystem has many opportunities to earn some yield! There are plenty of zones that you can use today.

The network looks like this:

One of the most interesting opportunities is Osmosis.

It’s a decentralized exchange, that has its own zone.

Right now, Osmosis is the best-kept secret in the yield farming space.

It has incredible returns… and few people know about it!

That’s why we talk about it today.

How can you use Osmosis and how can you use the returns to your advantage?

Let’s get the alpha!


🚀 Listen to our episode with Osmosis founder Sunny Aggarwal!


What is Osmosis?

Osmosis is a decentralized exchange in the Cosmos ecosystem. The user interface is extremely smooth and simple.

Osmosis is built using the Cosmos SDK, which means that it is designed to process thousands of transactions per second. The exchange allows developers to build, design, and deploy their own customized AMMs.

In addition to that, Osmosis is IBC compatible - The zone can communicate with all other zones in the Cosmos network, which enabled IBC as well (such as the Cosmos Hub, Regen, Akash, and many more).

The native asset of Osmosis is OSMO - a governance token that provides a decentralized coordination method for token holders to decide the strategic direction and all future changes to the Osmosis protocol.

OSMO holders can vote on governance proposals and set different parameters for the protocol, such as swap fees.

OSMO is an inflationary token, which is regularly issued as staking rewards, liquidity mining incentives, developer vesting, and to the community pool:

  • Staking Rewards: 25%

  • Developer Vesting: 25%

  • Liquidity Mining Incentives: 45%

  • Community Pool: 5%

As you can see, OSMO is highly inflationary (especially at the beginning of its existence). But that’s exactly why the OSMO rewards are extremely high at the moment.

Before we explore how you can take advantage of that, let’s first explain how Osmosis works.

How high are the rewards on Osmosis?

Okay, as we touched on earlier, Osmosis is a paradise for yield farmers at the moment.

Let’s take a look at some of the pools on the OSMO exchange:

As you can see, the rewards are currently extremely high for most pools. The rewards vary from pool to pool. For example, if you provide liquidity to the CRO/OSMO pool, you receive approximately 230% per year!

As you can guess, the high rewards on Osmosis have caused the TVL to go up significantly over the past few weeks. When Osmosis was released (June 2021), the TVL was sitting at just under $50 million. Right now, it’s very close to $430 million - an 8.6x after the launch!

High rewards make people invest their money and time into Osmosis. But how can you actually profit from it?

How can you provide liquidity to Osmosis to get those high rewards?

Let’s find out!

How can you use Osmosis?

Step 1 - Buy ATOM: You can buy ATOM on all major exchanges (Coinbase, Kraken, Binance, Crypto.com, etc.). Once you have ATOM in your exchange wallet, you are ready to go!

Step 2 - Install the Keplr Wallet: The Keplr Wallet is basically the Metamask of Cosmos. Its user interface is just as simple. Once you have created a wallet and secured your private key, you are ready to send ATOM to your new wallet.

Step 3 - Send ATOM to Keplr: Send ATOM to your wallet - make sure that you select Cosmos Hub as the destination.

Step 4 - Go to Osmosis: Go to the Osmosis interface. Make sure it’s the official web page.

Step 5 - Transfer ATOM on Osmosis: Using the Inter Blockchain Communication (IBC) feature of Keplr, you can now transfer ATOM from the Cosmos Hub to the Osmosis zone. IBC enables different zones to exchange value with each other.

Just go to the “Assets” page on Osmosis and click on “deposit ATOM.”

Step 6 - Deposit Assets to Osmosis Pools: Now it’s time to deposit some funds into the OSMO pool of your choice. That can be any pool you like.

Let’s assume you want to deposit funds into the OSMO/CRO pool.

First, you will need to buy OSMO and CRO. You can do that on the Osmosis exchange interface. Once you are ready, you click on the OSMO/CRO pool and on “add/remove liquidity.”

After you added liquidity, you are ready to earn! =)

Conclusion

Osmosis is the Uniswap of the Cosmos ecosystem. It’s just as simple to use and… a lot cheaper!

It’s not clear for how long the rewards will stay this high because liquidity is growing at an insane speed. The more liquidity is sitting in OSMO pools, the less return you receive on your assets.

However, the combination of the simple user interface and high rewards have made Osmosis extremely popular in the last few weeks!

And it’s a perfect way to get started with the Cosmos ecosystem!


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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.