What is Osmosis (OSMO)?

Osmosis is an automated market maker (AMM) protocol that allows developers to create bespoke AMMs with sovereign liquidity pools.

Osmosis, which was built with the Cosmos SDK, makes use of Inter-Blockchain Communication (IBC) to facilitate cross-chain transactions. In other words, Osmosis is a decentralized exchange designed particularly for Cosmos, with intention to spread to other blockchains in the future.

Osmosis is one of the first Cosmos-based AMM DEX. TVL of Osmosis increase 100% since the beginning of 2022 ( $811.63m – $1.79b), Besides Cosmos is top 20 in the cryptocurrency market so the growth potential of Osmosis in the future is feasibility.

Osmosis is inspired by Uniswap, Balancer, and Curve Finance, so it has the advantages of all three mentioned AMMs.

The goal for Osmosis is to provide the best-in-class tools that extend the use of AMMs within the Cosmos ecosystem beyond traditional token swap-type use cases. Osmosis is a sovereign Cosmos zone that draws its sovereignty not only from its application-specific blockchain architecture but also from the collective sovereignty of the LPs who have aligned interests in various tokens for which they provide liquidity.

What is a DEX?

A decentralized exchange (better known as a DEX) is a peer-to-peer marketplace where transactions occur directly between crypto traders. DEXs fulfill one of crypto’s core possibilities: fostering financial transactions that aren’t officiated by banks, brokers, payment processors, or any other kind of intermediary. The most popular DEXs — like Uniswap and Sushiswap — utilize the Ethereum blockchain and are part of the growing suite of decentralized finance (DeFi) tools, which make a huge range of financial services available directly from a compatible crypto wallet. DEXs are booming — in the first quarter of 2021, $217 billion in transactions flowed through decentralized exchanges. As of April 2021, there were more than two million DeFi traders, a ten-fold increase from May 2020.

How do DEXs work?

Unlike centralized exchanges like Coinbase, DEXs don’t allow for exchanges between fiat and crypto — instead, they exclusively trade cryptocurrency tokens for other cryptocurrency tokens. Via a centralized exchange (or CEX), you can trade fiat for crypto (and vice versa) or crypto-crypto pairs — say some of your bitcoin for ETH. You can also often make more advanced moves, like margin trades or setting limit orders. But all of these transactions are handled by the exchange itself via an “order book” that establishes the price for a particular cryptocurrency based on current buy and sell orders — the same method used by stock exchanges like Nasdaq.

What is the question?🚨

What type of wallets provide liquidity on Osmosis?

Is liquidity concentrated and owned by a small number of whales? Or, are there a diverse range of participants in the LP ecosystem?

Do LP composition change based on TVL of the pools themselves?

Methodology

Data preparation

Liquidity provided per LP wallet per pool is measured using transaction data from osmosis.core.fact_liquidity_provider_actions and by calculating the supply and price of LP tokens.

LPs are assigned to segment based on the size of their total assets deposited across pools at any given date. These segments are used to check the drill down on key metrics such as TVL, LP wallets count, etc.

The columns on the left are pretty self explanatory.

as you can see each one represent one of top 20 osmosis pools by number of users.

the first pool contains about 114.93k users and in the second place we have 90.673k users and the decreasing trend goes on from there to the end of the row.

LP Populations (Liquidity Pools)

The total number of wallet, last updated on Oct 26th, is 443 thousands.
As you can see in the images bellow the Population of LP’s is broke down into a wheel in the right image and the column form is shown on the left.
The most amount of LP in the first place belongs to $0 to $10 which is 74.292k and as the amount goes up the number of populations decrees greatly.
The last segment belong to above $1M which has the lowest population and only contains 13.

Liquidity Provided by LP Segments

As you can see in the columns bellow, we can study the liquidity provided by different LP’s.(Liquidity Pools)
The most amount of liquidity provided by the different pools belongs to the Yellow columns which points out the wallets containing $100k to $1M.
After the first place we can see that as the amount inside wallets decrees the liquidity provided also becomes lower and lower. except for the $1M and above segment.
On the other hand we have the TVL share per segment on a wheel which tells us the most amount of TVL provided is by the same segment that has the most Liquidity.($100k to $1M)

LP VS TVL

On the left one of two graphs that are shown bellow this box, we can see the LP transactions against TVL.
Liquidity pools Transactions and the TVL of Atom/Osmo are both increasing from the start of Jun 22nd, Both the amounts rise to their peeks on Mar 1st.
After Mar 1st TVL lowers a bit but manages to stable till Oct 25th, but the LP Transactions keep falling (with some minor spikes along the way) till Oct 25th.
Similar to the left side, we have the weekly LP transactions by wallet amount on the right which is almost the same graph but the parameters have slight change and on the blue line we have the User Count.

LP Count by Number of Pools Joined

On the two images bellow we have the LP Count by number of Pools joined as a percent wheel (on the left), and the Distribution of LP by numbers (on the right).
As we can witness the first place belongs to 106k wallets joined that conclude 73.7% of the max amount of LP.
The second place and the rest have huge drop in LP amount as we go on.

TVL Amount based on Amount

TVL above $10M on different currencies is shown an the columns to the left, and the first place belongs to wallets with $100k to $1M and on the second place we have above $1M wallets. this amount begins to drop as the wallet values decrees.
On the bottom left side we have TVL between $1M to $10M on different currencies, in this situation most of the TVL is held by wallets that contain $10k to $100k and still the $100k to $1M holds a noticeable amount of TVL.
In the last image we have an interesting sight even though above $1M wallets didn’t hold much of TVL but in the TVL between $100k to $1M we can see that these wallets hold considerably more number of TVL.

On the left hand we have three graphs that shows us TVL by segments and Liquidity owner ship by LP segments and finally LP distribution over time.
It is totally visible that the most amount of TVL and Liquidity owner sheep belongs to $1M and above and $100k to $1M.
These two segments not only are the giants of ownership over Liquidity and TVL but they also very very low on distribution of LP over time.
As we can see in the 3rd picture the amount of distribution goes drastically higher when the amount of wallets drop.
So that is we have the most Distribution by $0 to $10 wallets(almost 50% of max) by the end on Oct 26th

Conclusion

In conclusion we can answer the questions we had:

What type of wallets provide liquidity on Osmosis? All the wallets on OSMOSIS provide liquidity of their own fare share, but the amount differs in large scales. For example the $100k to $1M wallets provide the most amount of liquidity and these amounts warry also on the other wallets.
Is liquidity concentrated and owned by a small number of whales? Or, are there a diverse range of participants in the LP ecosystem? Similar to the first question we can say that all the LP segments mentioned in the images above own a number of liquidity but over 80% of liquidity in owned by only 3 LP segments which are above $1M, $100k to $1M and $10k to $100k.
Do LP composition change based on TVL of the pools themselves? Yes the LP composition is affected by the amount of TVL and as you can see the more valuable the wallets are(less number of wallets) the TVL owned by the LP is significantly higher then the other LP’s that have more number of wallets but less value.

About me:

Author: Hojjat
Discord: hojjat7878#8809
Twitter: @hojjat8d
Email: hojjat78delshad@gmail.com

THANK YOU FOR READING!

Appendix

The solution of this question and the queries are completely used from the filipside database

The construction of the dashboard was also used from the site app.flipsidecrypto.com/velocity, which belongs to flipside

Some ==queries== and charts and the ==method== description section are copied from the following dashboards:

               Thank you very much dear ==rmas==

Liquidity Pools - Wallet Composition