Osmosis (OSMO) is a decentralized exchange (DEX) designed for the Cosmos ecosystem, which is a network of interoperable blockchains connected via the Inter-Blockchain Communication Protocol (IBC). Osmosis also supports non-IBC assets from the Ethereum and Polkadot ecosystems. As an appchain DEX, Osmosis has more control over its blockchain stack than DEXs that rely on a parent chain's code. This control has facilitated the development of features like Superfluid Staking, which enhances the security of the Proof-of-Stake model. Osmosis is designed to build a cross-chain native DEX and trading suite that connects all chains over IBC, including Ethereum and Bitcoin.

Osmosis operates on a unique model that allows for customizable liquidity pools. Unlike other protocols where liquidity providers (LPs) can only contribute to a two-token pool with an equal ratio, Osmosis allows LPs to provide liquidity to pools with multiple tokens and unequal ratios. This flexibility enables LPs to adjust parameters such as slippage and transaction fees. Additionally, Osmosis introduces the concept of "AMMs as serviced infrastructure," providing AMM creators with the option to define the bonding curve value function and reuse the rest of the infrastructure using Osmosis' products.

Osmosis provides a suite of trading functionalities, including lending, credit, margin, fiat on-ramps, DeFi strategy vaults, NFTs, stablecoins, and more. These features strive to provide all the functionalities of a centralized exchange, plus the trust-minimization of decentralized finance. Osmosis also intends to reduce harmful MEV (Miner Extractable Value) through the development of a transaction mempool shielded with threshold encryption. The platform's governance token, OSMO, allows holders to participate in the strategic decision-making of the liquidity pool, incentivizing long-term liquidity provision.

Osmosis was launched by members of two core Cosmos teams: Sunny Aggarwal and Dev Ojha from Sikka validator and Tendermint, and Josh Lee and Tony Yun from Keplr, the Interchain Wallet. The project has also received support from Paradigm, a digital asset firm with stakes in numerous other blockchains and protocols. Osmosis operates on a sovereign proof-of-stake blockchain with its own validator set. The OSMO token has a total supply of 1 billion, with a "thirdening" schedule that reduces token distribution by a third each year.

Constructed on the Cosmos SDK, Osmosis enables faster transaction times and lower gas fees compared to some Ethereum-based DEXs. It also introduces a feature known as "pool shares" that allows users to create custom pools with varying weights, which can lead to more efficient price discovery. Unlike some DEXs that have faced criticism for their centralization, Osmosis operates on a decentralized infrastructure. Osmosis provides a straightforward, uncomplicated, and transparent pricing structure. This addresses the complex fee structure criticism faced by some platforms. Osmosis is also recognized for its custom pool creation capability and simple fee structure, making it easier for users to understand compared to other platforms.

Osmosis employs an automated market maker (AMM) model that is highly adaptable, allowing developers to create unique liquidity pools and adjust to changing market conditions swiftly. Unlike traditional AMMs, Osmosis aims to facilitate cross-chain transactions through Inter-Blockchain Communication (IBC). The AMM model used by Osmosis allows for liquidity pools that are not limited to a 50-50 token pair composition. Developers can experiment with different designs, such as a 60-40 split. They can also adjust features like token weights, swap fees, and the AMM curve to determine a suitable configuration. This flexibility allows for a decentralized AMM framework, enabling market participants to determine a balance between fees and liquidity.

The OSMO token is the native utility token of the Osmosis network and has a role in its operation and governance. It has several functions within the ecosystem. The OSMO token serves as a governance token, enabling staked token holders to participate in decision-making processes about the future of the protocol, including every implementation detail. This democratic setup strives to keep the protocol's development decentralized and fair. Additionally, OSMO tokens are utilized for staking, providing a motivation for users to contribute to the network's security. Stakers may receive non-monetary incentives for their contribution to the network's security. Furthermore, OSMO tokens are necessary for liquidity provision. Users are required to use OSMO tokens to add liquidity to the pools, which aids in facilitating trading on the platform.

Osmosis introduced several distinctive features in the DeFi space. One of its key innovations is blockchain interoperability within the same exchange protocol, which allows users to exchange tokens from different blockchains. This is a different approach compared to traditional DEXs, which are limited to tokens native to their underlying blockchain. Osmosis introduced a novel staking process known as superfluid staking. This process allows users to simultaneously provide assets in a liquidity pool and stake assets to secure the network, which may provide non-monetary incentives. These features, combined with the use of third-generation blockchain technology, show Osmosis's active engagement in the DeFi space. Osmosis allows users to create their own liquidity pools with customizable parameters, which may provide a different liquidity environment.

Osmosis supports the creation and trading of custom liquidity pools by allowing users to set their own parameters such as swap fee, weights, and AMM model. This flexibility encourages experimentation and innovation, which may influence market conditions. Osmosis also supports multiple assets in a pool and custom weights, allowing for more than two assets in a pool. A feature called Superfluid Staking is available on Osmosis, which allows users to stake assets to participate in the network's operation while simultaneously providing assets in a liquidity pool.

The Inter-Blockchain Communication (IBC) protocol in Osmosis presents several features. It enables independent blockchains to communicate directly and exchange assets, particularly tokens, indicating their interoperability. This aims to reduce the need for third-party bridges, which can vary in maturity. IBC operates through dedicated channels using smart contracts, facilitating a trustless exchange of information. This protocol also allows for the creation of a broad range of cross-chain applications, including cross-chain smart contracts, messaging, NFT transfers, and oracle data feeds. IBC fosters the concept of "multichain interoperability", which is crucial as more projects and use cases emerge in the blockchain industry. It allows for the creation of an interconnected network of specialized projects that can grow cooperatively by working together. IBC is designed to be compatible with various blockchains, meaning any blockchain can connect and communicate with others using IBC, indicating its versatility and potential applicability.

The Osmosis ecosystem is home to a variety of projects that have been developed using its protocol. One such project is Mars, a platform that provides lending, borrowing, and earning capabilities within a credit protocol in the galaxy. Another project is ION DAO, which strives to build IBCX, an index token for the Cosmos Ecosystem. ICNS, the Interchain Nameservice, is another project that has been implemented within the Osmosis ecosystem. Levana, a platform that has developed a system for fully-collateralized, low-cost perpetual swaps, and Kado, a payments infrastructure and fiat onramp for Web3, are other examples of projects. Sinfonia, a FanToken Platform built to enrich the Artists and Fans Relationship, and Calc Finance, a platform that aims to provide users with calculated, on-chain methods, are also part of the Osmosis ecosystem. These projects demonstrate the diverse range of applications and solutions that can be developed within the Osmosis ecosystem.

Osmosis addresses scalability concerns in the context of growing user adoption by leveraging the principles of osmotic computing. This approach focuses on the dynamic management of IT services, driven by the significant growth in resource magnitude at the network edge. Osmotic computing strives to balance load and optimize resource utilization between servers without hindering service deliveries and performances. It allows for the deployment, migration, and optimization of applications in the form of microservices across cloud/edge infrastructure. This approach is applicable to various sectors, including transportation, smart cities, education, and healthcare, and is intended to facilitate digital transformation. By presenting dynamically tailored microservices in technology-centric environments, Osmosis aims to handle the bulk of security-critical and latency-sensitive data generated by digital devices, with the intention of addressing scalability concerns as user adoption grows.

Osmosis utilizes the Cosmos SDK and Inter-Blockchain Communication (IBC) protocol to facilitate cross-chain token swaps. It strives to provide a platform for swapping, pooling, and trading any tokens compatible with the IBC protocol. Osmosis is a customizable and experimental automated market maker (AMM), beyond being a simple exchange platform. It enables users to establish their own liquidity pools with custom parameters, such as the fee structure, the bonding curve, the swap function, and the incentives. This flexibility contributes to a decentralized AMM framework and allows market participants to find a balance between fees and liquidity. Osmosis employs a superfluid staking process that enables users to provide assets in a liquidity pool and stake assets to contribute to network security simultaneously. This allows users to participate in both transaction processing and network security.