Try Quests to earn crypto[Osmosis] - Hop In the Pool
Bounty Question
Analyze how users join pools on Osmosis. Do they dive in headfirst (add both assets; joinpool) or do they wade in carefully (singleside; join swap extern amount in). Also analyze how deep the pool is (typical swap size in token and USD for both activities).
Liquidity Providing
Providing liquidity (called “LPing”) is the process of depositing assets into an AMM pool. AMMs are decentralized finance protocols that allow for the swapping of assets without a centralized intermediary. Just as trading firms make traditional markets, AMMs establish prices and facilitate trades using permissionless liquidity pools into which users can deposit assets.
For example, if Pool #1 is the OSMO<>ATOM pool, users can deposit OSMO and ATOM tokens into the pool and receive back Pool1 share tokens. These Pool1 share tokens (called LP tokens) represent one’s proportional ownership of the pool.
Liquidity pools have specific ratios at which assets must be deposited. Most AMMs require that assets be added at a 50–50 ratio (the total value of Asset 1 is equal to the total value of Asset 2). Similar to Balancer protocol, Osmosis allows for pools with customized weights (allowing the total value of one asset in the pool to be higher than the other) and even liquidity pools with more than two assets.
Users pay a fee to buy and sell from these liquidity pools. These transaction fees are added to pool assets, essentially resulting in a pro-rata distribution to LP share holders. (Since one’s proportional ownership of the pool remains constant, as the total amount of liquidity in these pools increases due to fees, one’s total contributions also increase.)
Liquidity provision is not without costs. LPs take on a risk known as impermanent loss. It essentially means that users would have earned more simply by holding the assets than depositing them into liquidity pools. When the price of the assets in the pool change at different rates, LPs end up owning larger amounts of the asset that increased less in price (or decreased more in price). For example, if the price of OSMO moons relative to ATOM, LPs in the OSMO-ATOM pool end up with larger portions of the less valuable asset (ATOM).
Impermanent loss is the difference in net worth between HODLing and LPing. Liquidity mining helps to offset impermanent loss for LPs.
Impermanent loss is mitigated in part by the transaction fees earned by LPs. When the profits made from swap fees outweigh an LP’s impermanent loss, the pool is self-sustainable.
To further offset impermanent loss, particularly in the early stages of a protocol when volatility is high, AMMs utilize liquidity mining rewards. Liquidity rewards bootstrap the ecosystem as usage and fee revenues are still ramping up.
Osmosis also has many new features and innovations in development to decrease impermanent loss as well.
Methodology
To answer this question, I first tried to come up with a basic query to answer the different parts of this question. This basic query was executed once for the ==osmosis.core.fact_liquidity_provider_actions== table.
In the base query, first the required columns were selected from the osmosis.core.fact_liquidity_provider_actions table:
BLOCK_TIMESTAMP, TX_ID, LIQUIDITY_PROVIDER_ADDRESS, ACTION POOL_ID, AMOUNT and CURRENCY.
In the AMOUNT column, we see large numbers in the main table due to not applying decimal currencies. In my chosen columns, I applied the decimals of each of the currencies to their AMOUNT to get the real equivalents. Then, in order to have the symbols of the currencies, I used the osmosis.core.dim_labels table, and if the addresses of this table were the same as the currencies of the fact_liquidity_provider_actions table, the PROJECT_NAME of the dim_labels table was used as the symbol of each currency. In the end, I used the osmosis.core.dim_prices table to determine the USD amount of the performed actions. To get the prices of currencies, I determined the average daily price of these currencies (each of which had its own symbol in this table) and used it in my final table. In the final table, when DATE and the PROJECT_NAME of a currency was the same as its symbol in the table of prices, the USD_AMOUNT column was also obtained for each action. Of course, it should be noted that due to the incompleteness of the price table, this column is empty in many rows and no data has been reported for this parameter (USD_AMOUNT). Here is the final table used in further analysis.
Thanks to Ali3N, I found out that INJ and IVO currencies have problems. These problems were also built into the base query. One was corrected by decimal correction and the other was removed from the data due to a huge error in the price.
But in order to determine what kind of behavior of users had in joining pools, two types of behavior can be seen among users:
- ==Wade in Carefully==: users who enter the pool carefully. This means that they add one of the currencies of the pool in their Liquidity Providing.
- ==Dive in Headfirst==: there are users who do not show caution in entering the pool. In their Liquidity Providing, they add all currencies in the pool.
In the continuation of this analysis, we want to check which of these behavioral styles of users has the upper hand.But what should be done to achieve this goal?
We already know that each transaction related to adding currencies to pools contains at least 2 rows. In all transactions of this category, one of the rows is related to token minting due to adding liquidity (ACTION = 'lp_tokens_minted') and the other row(s) is related to adding currency to the pools. (ACTION = 'pool_joined'). What is important for us in identifying user behavior is actually the number of row(s) of their Liquidity Prividing transactions.
- ==Cautious Users==: Transactions made by these users have only one row where ACTION = 'pool_joined'.
- ==Non-Cautious Users==: Transactions made by these users have more than one row where ACTION = 'pool_joined'.
- \
Base Query
WITH PRICE_TABLE AS (
SELECT
DATE(RECORDED_AT) AS DATE,
SYMBOL,
AVG(PRICE) AS DAILY_PRICE
FROM osmosis.core.dim_prices
GROUP BY 1,2
ORDER BY 1)
SELECT
BLOCK_TIMESTAMP,
TX_ID,
LIQUIDITY_PROVIDER_ADDRESS,
ACTION,
POOL_ID,
CASE WHEN PROJECT_NAME = 'INJ' THEN AMOUNT/POW(10,18) ELSE AMOUNT/POW(10,DECIMAL) END AS JUSTIFIED_AMOUNT,
CASE WHEN PROJECT_NAME = 'INJ' THEN AMOUNT*DAILY_PRICE/POW(10,18) ELSE AMOUNT*DAILY_PRICE/POW(10,DECIMAL) END AS USD_AMOUNT,
CURRENCY,
PROJECT_NAME
FROM osmosis.core.fact_liquidity_provider_actions
FULL JOIN osmosis.core.dim_labels ON CURRENCY = ADDRESS
FULL JOIN PRICE_TABLE ON SYMBOL = PROJECT_NAME AND DATE = BLOCK_TIMESTAMP::DATE
WHERE TX_STATUS = 'SUCCEEDED'
AND PROJECT_NAME NOT IN ('IOV')
In all the above 6 parameters, Dive has the upper hand.
Dive's lead over Wade culminates in the volume of USD deposited into pools. The volume of USD deposited into pools in Dive is about 6.63 times the volume of USD deposited into pools in Wade.
The number of deposits into pools in Dive is about 3.08 times the number of deposits into pools in Wade.
The number of Liquidity Providers in Dive is about 1.74 times the number of Liquidity Providers in Wade.
The number of deposit transactions in Dive is about 1.69 times the number of deposit transactions in Wade.
The volume of pools in Dive is about 1.27 times the number of pools in Wade.
In Dives: On average, in each deposit transaction, about $889 was entered into the pools.
In Dives: On average, each Liquidity Provider has contributed about $13.75k to the pools.
In Dives: On average, each Liquidity Provider had about 15.5 deposit transactions.
In Dives: On average, more than $5.05m has been deposited into each pool.
In Dives: On average, each currency has been deposited into the pools in the amount of more than $19.8m.
In Wades: On average, in each deposit transaction, about $226.5 was entered into the pools.
In Wades: On average, each Liquidity Provider has contributed about $3.61k to the pools.
In Wades: On average, each Liquidity Provider had about 15.93 deposit transactions.
In Wades: On average, more than $0.97m has been deposited into each pool.
In Wades: On average, each currency has been deposited into the pools in the amount of more than $2.99m.
The brightest performance can be seen from the beginning of 2022 to March, where the biggest peak in the number of transactions, the number of deposits and the number of Liquidity Providers can be seen. The trends in all three parameters are very, very similar. The first day of March is the top day among all the days of all three parameters.
As of October 3, 2021, more than $109m has been deposited into pools. This is by far the most USD entered into the pools in one day. But if we want to talk about the growth period, the first months of 2022 can be seen here.
From the point of view of the number of pools and the number of currencies used, a very fluctuating but overall upward trend can be observed. Over time, the number of currencies and pools involved in user deposits has been on the rise and reached its peak on November 19, 2022. On this day, 119 pools and 77 currencies were present in the deposits of this day.
On average, in each deposit transaction, about $643 was entered into the pools.
On average, each Liquidity Provider has contributed about $12k to the pools.
On average, each Liquidity Provider had about 19 deposit transactions.
On average, more than $4.9m has been deposited into each pool.
On average, each currency has been deposited into the pools in the amount of more than $22.8m.
It can be well seen that since the end of 2021, the new feature offered (making it possible to deposit one of the currencies of the pool) has experienced explosive growth. Over time, it has become a very close competition between this method and the traditional method of adding liquidity (adding currency pairs to a pool with a half-half dollar value ratio). The situation in recent months has been such that the Wade method has had the upper hand in the number of transactions and the number of Liquidity Providers. But in the number of adding liquidity and volume of USD deposits, Dive method is superior. (The first one is due to the inherent higher number of liquidity additions in each transaction and the second one clearly indicates that users prefer to enter large volumes of USD into the pools using the traditional method)
Regarding the number of pools, Dive method was first superior, but immediately after the explosive growth of Wade method, this superiority was severely challenged and after a while, the new method won over the previous method.
Regarding the number of currencies, in all this time, less than 10 days can be found when the number of currencies used in the Wade method is more than the number of currencies used in the Dive method. Of course, this is a logical result and maybe even the closeness of the two results can be considered as the superiority of Wade's method. Because in the Dive method, at least two currencies are deposited separately, and in the Wade method, only one currency and the closeness of the number of currencies in these two methods, that is, the attractiveness of the Wade method is very high.
Pool No. 1 (ATOM / OSMO) ranks first among all pools in terms of the number of transactions in all three sections (all deposits, Dive and Wade method).
Pool No. 1 (ATOM / OSMO) ranks first among all pools in all three sections (all deposits, Dive and Wade method), in terms of USD volume of currencies added to the pool.
Clearly, a very large portion of the deposits in these top pools are from the Dive method. (both in the number of transactions and especially in the volume of USD)
In Wade's method, pools 678 (USDC / OSMO), 611 (ATOM / STARS), 606 (ATOM / HUAHUA) and 605 (HUAHUA / OSMO) are among the top 10 pools based on USD volume, and their pools are among the top 10 in the other two parameters. They are not the first. While all the top 10 pools of the Dive method are the same as the top 10 pools of all deposits.
Regarding the top pools in terms of the number of transactions in the Wade method, only two pools 712 (WBTC / OSMO) and 678 (USDC / OSMO) are among the top 10 pools, but their pools are not among the top 10 in the other two parameters. While here, all the top 10 pools of the Dive method are the same as the top 10 pools of all deposits.
Among the top Liquidity Providers, there is only one address that is in the top 10 in terms of number of transactions in all three categories:
osmo19l9wsymdh3mp7munzrlk8rs03ttnu2uaujyktu
Among the top Liquidity Providers, there is only one address that is in the top 10 in terms of USD volume in all three categories:
osmo17qushcdp622jq8hj0dkgcz8r9lpp8ux8hzs4kh
All the top Liquidity Providers of the Dive method are the same ones that are the top Liquidity Providers overall in terms of USD volume. But in terms of the number of transactions, this is not the case, and Wade's share of 5 users and Dive's share of 4 users share the top 10 of the total. (one that was common to all three lists)
Top currencies in terms of number of transactions and number of added liquidity:
- OSMO
- ATOM
- STARS
- JUNO
- HUAHA
The top currencies in terms of the number of liquidity providers:
- OSMO
- ATOM
- JUNO
- STARS
- MNTL
Top currencies in terms of USD Volume:
- OSMO
- ATOM
- JUNO
- XPRT
- AKT
Top currencies in terms of number of pools:
- OSMO
- ATOM
- AKT
- CRO
- REGEN