Osmosis Delegation Basics

Osmosis is a POS (Proof of Stake) network; Meaning that there are validators with a minimum OSMO staked to secure the chain and produce new blocks. They also have voting power based on their staked amount.

Users also can Bond/Stake their OSMO tokens to a validator which increases their voting power, and accrues staking rewards for the delegator. Once staked, there are two options:

1. Unstake/Undelegate: It takes 21 days to receive your staked OSMO back and it will not accrue rewards in this period.
2. Redelegate: You can instantly change your validator using this option; You do not need to unstake, wait 21 days, and then stake with a new validator

Methodological Notes

There are some important notes that should be considered when trying to make sense of the analysis. We are looking to see what users do with their unstaked OSMO. This can be achieved in many different ways; For example, by investigating 1 month of activity for each unstaker.

The path I took was to see what was the first transaction right after receiving OSMO tokens. I presumed it is the closest thing to the initial intention of unstaking + whatever intention emerges through 21 waiting days.

Since users can unstake many times, it would be very hard to account for every one of these cases so I only take the first case into account, and that is the first transaction after receiving OSMO tokens from the first Undelegation. I also limited the period from the beginning of 2022.

Data & Analysis

Without further due, Let’s get to the findings of our analysis. Starting with some basic statistics on the number of Unstakeeeeers and unstake actions on a daily basis.

• There was an increase from early March which fairly coincide with a price appreciation in OSMO.

• The most remarkable unstake periods are:

  1. Terra Crash
  2. Exploit from some Osmosis validators (occurring after some days of halting network)

Now getting to the most On-point finding of the analysis. There Are many actions defined in transactions but I extracted some more familiar ones to make more sense.

• More than 50 Percent Swapped entire or part of their received OSMO to other tokens
• Almost 25 percent transferred their tokens to other IBC chains like Cosmos, Juno, Secret, etc.
• ~ 15 percent added some or entire of their OSMO to liquidity pools

It seemed to me that there was room to dive deeper into delegation actions, so I made an exception here and set aside the first transaction after the undelegation rule.

The next two charts show the overall behavior of OSMO stakers after their first undelegation.

• 95% experience delegation again (not redelegation)
• Some few users, undelegated more OSMO as they proceed.

There are also users who choose to redelegate, which we’ll see in the next section.

Redelegation Reason

These are the Top 10 Validators that chosen the most as the redelegation destination.

I checked to see what could the possible reason be, But it’s not that easy. We know that most people stake their OSMO hoping to get some decent airdrop from newly launched protocols, and they change their validators if come to the conclusion that some validator has more chance in this case.

Other than that, three of these 10 validators have been among top 10 validators with the most reward given so this might be another reason.

Swap Tokens

I though it also could be interesting that which tokens are the most popular to swap after receiving the first unstaked OSMO.

Atom, USTC, Juno, LUNC, and USDC are the top 5.

Conclusion

• Trading, Bridging and Liquidity providing are the most popular actions after undelegation.
• Atom is the most popular asset to swap into.
• Users will redelegate to validators with more airdrop chance and the most reward given.
• Terra crash and Osmosis exploit were the event that generated the most unstake actions.
• Unstaking is decreasing constantly if we don’t consider the two spikes caused by aforementioned events.