🧪 Osmosis

Osmosis is an advanced automated market maker (AMM) protocol that runs on its own chain

What can people do on Osmosis?

Well… not much. Osmosis acts like a liquidity hub for the Cosmos Ecosystem.

Users can swap, provide liquidity in pools, and stake their Osmosis token to participate in the governance of the protocol as well as receive staking rewards

Scope of Analysis

• How many active users are there on Osmosis?
• What do Osmosis users do on-chain?
• How active are Osmosis users throughout the day?
• What assets are moved in and out of Osmosis via IBC?

Key Findings

• Osmosis users growth and activity has stagnated since July 2022, with around 20k active users daily
• Half over these users swap on Osmosis
• Transaction activity spikes at 1730 UTC everyday on Osmosis as rewards from LP, staking are claimed and distributed
• As a large portion of users are collecting yields from LPs and staking rewards, there’s the risk where DAU drops when yield decreases, be it from organic swap fees / inflationary token emission

How many active users are there on Osmosis?

Total users and number of active users (wallets) performing transactions on-chain

What do Osmosis users do on-chain?

Here, we examine transactions by the type of event that it represents.

Approach: Here, we label transaction events using the Osmosis fact tables on Flipside and their transaction hashes. I.e. if a transaction hash is found in the swaps table, it will be labeled as a ‘swap’ event. Using this approach, swaps, staking, LP actions, IBC transfers, and governance voting actions were identified. We then plot and group the events by transaction count and the number of unique users to see trends in user activity over time

The line chart above shows the total number of unique wallets performing the event labeled. Note that the total number may exceed the daily distinct wallet count due to multiple actions performed by a person. Click on the legend to isolate the event of interest.

The trend observed here bears many similarities with transaction count. We saw an overall decline in users since March 2022. On a regular day, there are ~ 10k unique addresses swapping on Osmosis and around 7-9k claiming staking rewards.

The chart above shows the daily number of new users, active users (distinct wallets), and total new users on Osmosis since July 2021. At the time of analysis (Oct 2022), there were 570k unique wallets.

• Of all these wallets, there were 111.8k monthly active users, defined by users who have performed at least 1 tx every month from the wallet’s creation, 27.1k weekly active users were identified, calculated with the same approach as monthly active users
• Daily active users, by this criteria, constitute a small number (1.3k) of users due to how stringent it is. In terms of active users (distinct wallets), we see that there are around 20-40k wallets transacting daily, which is rather variable.

The chart above shows the volume of transactions on Osmosis by the type of event that it’s labeled with and the transaction distribution normalized (area plot). The transaction volumes have remained steady since July 2022. In general, we tend to see sporadic spikes in governance vote transactions

How active are Osmosis users throughout the day?

Plotting events by the time of the day (UTC hour)

The barplot above shows the transaction count across the time of the day. Here we see this unique spike in activity at UTC 1730 hours.== This corresponds to the time when LP rewards are being distributed to users. Clearly, we see an increase in the proportion of staking rewards, staking activity, and LP action (by multiple times). Likely, these are users compounding their rewards to accrue higher APY given the yield-related nature of these events.

What assets are Osmosis users moving via IBC?

Here we explore IBC in and outbound transactions by the total transaction count. For ease of interpretation, we will only present the total 5 pairs by month

Overall, the number of IBC transactions has increased greatly since July 2021. While the number has fallen ever since, we are still seeing ~ 400k tx in and out of Osmosis.

• One clear constant in assets moved on IBC is Cosmos (ATOM), it has remained as the top asset moving in and out of Osmosis across all the months. Interestingly, we see differences in the trends when we compare top inbound with outbound IBC assets.
• While Evmos has been the top inbound asset over the last 3-4 months (surpassing ATOM), Cosmos still remained as the top asset moving out from Osmosis from IBC, followed by Juno and then Evmos. Looking at March 2022, where transaction activity peaked, we see that there were more inflowing transactions for Chihuahua and Umee while there was more outflowing tx from Juno.
• At present, the charts show that Evomos, Bostrom, Juno and Stargaze are popular assets moved through Osmosis

twitter: pinehearst_ | discord: pinehearst#1947 | date of analysis: 16th Oct 2022 | Osmosis Daily Active User 

What does this mean?

The bulk of Osmosis users come back to collect rewards and compound rewards. Osmosis will very much face the same fate as other protocols and chains should the yield from LPs/staking decrease, whether generated organically or inorganically (token inflation).

Users are inherently yielding maximalists, they will search for better yielding protocols, leaving lesser liquidity and users. The relationship between yield-liquidity-user-volume will spiral down quickly in the absence of value accrual.

This is very much a chicken and egg issue as you need users to generate fees, while users only LP and interact with the platform when there’s something to gain. At present, the levels of user activity on Osmosis have remained at the same level for some time, suggesting that there’s still something in it for the 20k users still active. Osmosis should consider monitoring the organic yields from swaps, incentivized emissions, and the developments in the wider Cosmos ecosystem to explore its impact on returning users.