Introduction to Osmosis

Osmosis is a DEX protocol, which means it uses smart contracts to determine the price of digital assets, to produce liquidity via a peer-to-peer (P2P) methodology, and to exact trades between users. This approach to an exchange platform is known as an AMM — a DEX protocol that prices crypto assets in liquidity pools.

Osmosis is a layer one (i.e., base layer) blockchain with its own validator set that secures the chain through Proof-of-Stake consensus. Proof-of-Stake is environmentally friendly compared to the Proof-of-Work system used by Bitcoin and Ethereum. The Osmosis asset is used for staking to secure the network, on-chain governance, and transaction fees. Osmosis offers interoperability with other blockchains using IBC and Axelar. Osmosis seeks to compete directly with the user experience of centralized exchanges, such as Coinbase (COIN) or Binance (BNB-USD).

What are the questions?

• What type of wallets provide liquidity on Osmosis? 

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

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

Methodology

All the data analysis is done by using Flipside data on Osmosis chain.

The main idea goes around answering the questions regrading wallet compositions - liquidity pools on Osmosis.

So at first, I have made a categorized wallet composition criteria based on wallet balance and then I made the rest of the analysis.

What type of wallets provide liquidity on Osmosis? 

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

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

Answer and Key Notes

We can see the composition of wallets that are providing liquidity.

• Whale: wallets with more than 100000 USD balance
• Shark: wallets with balance between 50000 and 100000 USD
• Dolphine: wallets with balance between 20000 and 50000 USD
• Fish: wallets with balance between 5000 and 20000 USD
• Octopus: wallets with balance between 1000 and 5000 USD
• Crab: wallets with balance between 1 and 1000 USD
• According to the above, Crabs are the most among liquidity providers, in case of number of wallets

Answer and Key Notes

• Considering both total liquidity providers and daily ones, in case of volume, whales play the main part. That is something quite obvious from both normalized and donut plot.

• Scatter view can also show a nice distribution of wallet categories by the volume they are providing to the pools.

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• So the answer would be, as there are a diverse range in LP participants, whales are the main part when it comes to liquidity providing.

Answer and Key Notes

• The above chart, shows total TVL on all active pools, categorized by wallet volume compositions. The liquidity across majority of pools is concentrated on whales as seen on the chart.
• The interesting point is that, Pool 553 and 555 with the largest TVL are not even in the top 30 pools based on number of users.
• If we wanna answer the question, we can say LP composition has changed only on the very small pools where whales don’t belong. But in the majority and most active pools, the LP composition remains the same.