Osmosis: Burn the House Down
Q8. Find the week that the largest volume of OSMO burning happened. What caused this event? Show some of the events that this burning had on the Osmosis ecosystem.
Approach, Assumptions and definitions
Before we start this analysis let's define some terms.
Burn
For this analysis, we consider two types of 'burn' events.
- When token leaves Osmosis to another chain, the amount of tokens that leave will be burnt. i.e. If 10 Juno from Osmosis is deposited to Juno Chain that 10 Juno on Osmosis will be considered as 'burnt'
- When someone withdraw liquidity from a Osmosis pool. The LP token will be considered 'burnt'.
Token price (in Osmo)
Since Osmosis chain has no price data table we're gonna use DEX swaps to find Osmo volumes for event 1. mentioned above. Therefore we made an assumption that swaps happened on Osmosis reflects the price of the burnt token.
Aprroach
- We are gonna look at weekly burnt tokens and calculate their volumes in Osmo (according to the price(in Osmo) derived from swaps)
- How many transaction that took place in weekly basis for each of these tokens.
- Then we'll look at burn event no. 2, LP burns, How many LP tokens from each pool has been burnt in weekly basis overtime.
- Since LP token price are hard to derive from swap tables we are just plot the number in terms of LP tokens but that won't help to compare the amounts across pools therefore we'll look at the number of burn transactions that happened weekly in these pools.
- It's quite clear the week that the world saw Terra's collapse has a significantly high spike.
- The spike comes unsurprisingly from UST(TerraClassicUSD), LUNA(Luna Classic) and also and increase in ATOM as well.
- Even in other weeks we see these above 3 mentioned tokens have the highest number of burn volumes (in OSMO) but the numbers are way way lower compared to the week of "May Mayhem"
- Interestingly we can see a gradual increase in "USD Coin" burn volumes since the Terra's collapse.
- Juno has had the highest number of weekly burn transactions in the last week of February (~50K)
- However, the number of JUNO burn transactions keep decreasing since early April.
- During the week of Terra's collapse we can see a spike in Atom (Cosmos), TerraUSD and LUNA burn transactions
- However compared to the volumes we saw in the first charts this increases are not huge. In other words yes the number of burns have increased but the average volume (in OSMO) burnt in one burn transaction has increased significantly. which means the users have panicked and burn in huge sums to move their tokens.
- There is an increase in the number of burn transactions for EVMOS in the week starting from 30th of May.
It's hard to compare the number of LP tokens burns across different pools therefore we're looking at number of burn transactions happened in different pools on weekly basis.
- We can see that Pool #1(ATOM/OSMO) consistently has a very higher portion of the total number of LP burn transactions.
- Also the Pool #560(USTC/OSMO) had also seen higher number of burn transactions but that sky rocketed during "May Mayhem)
- Similar trend could be seen in Pool #561(LUNC/OSMO) however the most LP burn transactions happened after 23rd of May although the LUNA collapse was on 9th of May.
- In terms collective number of burn transactions across all pools we can see the week starting from 23rd of May is the highest thanks to LUNA and UST LP burns.
Conclusion
It's quite clear that May Mayhem (Terra Collapse" triggered a very high volume of burns on Osmosis particularly for LUNA(classic), UST (Classic) and Atom tokens. While we can see a similar trend in LP token burns as well. During this volatility period and afterwards LUNA and UST LP tokens has been burning...!!