Summary
This signalling proposal seeks to establish an Astroport Outpost on Osmosis. There, Astroport’s Passive Concentrated Liquidity (PCL) pools would be deployed alongside Osmosis’s existing pools to offer an additional option for prospective liquidity providers.
Abstract
The Astroport and Osmosis protocols appear similar on the surface. Both enable on-chain liquidity provisioning and swapping for Cosmos-based tokens. And both have leaned into offering “concentrated liquidity” pools – that is pools, which concentrate or amplify liquidity around prevailing prices to improve their trade efficiency. Under the surface, though, the protocols take very different approaches that we believe are powerfully synergistic.
Osmosis’s flagship pool is the supercharged liquidity pool. That is a concentrated liquidity pool that gives LPs the ability to set price ranges for the assets they deposit into supercharged pools. By offering this level of granular control, LPs can mitigate potential impermanent loss and improve their returns.
This added control does however require more active management of the LP’s positions to fully maximize returns and ensure their liquidity is being utilized.
Astroport’s passive concentrated liquidity (PCL) pools on the other hand aim to give LPs the benefits of concentrated liquidity pools without requiring active management. PCL pools do this by using an advanced repegging algorithm.
This algorithm looks at ongoing trades and rebalances liquidity and fees around the exponential moving average of those trades. The moving average determines a specific price range around which to amplify trades. If prices move outside the range, the repegging algorithm automatically sets a new price range.
While supercharged liquidity and PCL pools may look like competitors, PCL pools are better viewed as an evolution of passive XYK pools. They should perform 2-3x better than XYK pools, while requiring no active management. Supercharged liquidity pools on the other hand can and often will outperform PCL pools when being used by a highly skilled and active LP.
Professional market makers, for instance, often run their own internal algorithms and programmatically readjust their liquidity to match market conditions in real time. These power users are more apt to use Osmosis-style supercharged liquidity pools.
More casual LPs typically take a “deposit and chill” approach. They prefer to deposit once and let the pool’s algorithm concentrate their liquidity automatically.
Rather than competitors, then, supercharged liquidity and PCL pools complement one another. And by offering them both on Osmosis, they should grow the “liquidity pie” for both protocols in a mutually beneficial way. Specifically, the move should:
- Expand Astroport’s reach to the largest and most important DEX in the Cosmos ecosystem, and grow it’s global trading volume and fee generation in the process
- Attract more passive liquidity on Osmosis and give Osmosis LPs more optionality/pool types to choose from
- Improve capital efficiency for anyone who swaps (or has trades routed through) Osmosis
- “Defragment” liquidity, which may be spread across other AMMs throughout the Cosmos
Standard PCL pool fees apply and will flow back to xASTRO stakers. In addition, all trades that are routed through the Astroport’s PCL pools on Osmosis will generate a 10 basis point (0.1%) fee for Osmosis, which will be split between the Osmosis community pool and the OSMO staking pool.
If this proposal is approved, it would signal the community’s intent to establish an Astroport outpost on Osmosis, which would exclusively offer PCL pools on the Osmosis blockchain (the XYK, Stableswap and Transmuter pools would not be deployed).
Proposal Details
- Deployment of the Astroport contracts
- Osmosis is a permissioned chain. Astroport will be asking to whitelist the Builder Multisig for code uploads on Osmosis
- Once the multisig is whitelisted, the team will deploy the Astroport contracts
- As soon as all contracts are ready, the Outpost will be connected to Assembly for governance
- Deployment of new pools
- The new Osmosis-specific pool creation is permissionless, however, they need to be created via the Astroport Factory. The creation is not currently supported on the Osmosis front-end and needs to be done via the Astroport frontend
- Fees
- Standard PCL fees will be sent back to xASTRO stakers as with all Outposts.
- In addition, all trades that are routed through the Astroport’s PCL pools on Osmosis will generate a 10 basis point (0.1%) fee for Osmosis, which will be split between the Osmosis community pool and the OSMO staking pool.
Conclusion
As Astroport becomes an increasingly important liquidity backbone for the Cosmos, it makes sense to align with the ecosystem’s largest DEX, Osmosis. The synergy extends Astroport’s reach and interoperability within the Cosmos ecosystem while providing value to Osmosis in bridging the gap for pools not well suited for active concentrated liquidity.
This proposal is a signalling proposal because of the permissioned nature of Osmosis. Voting yes on this proposal will indicate the approval for the team to expand Astroport to Osmosis
Copyright
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