Question in detail:

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).

Overview of analysis:

This dashboard divided into the following parts:

• The comparison of Headfirst and Singleside action
• Detailed analysis of Headfirst
• Detailed analysis of Singleside action

Methodology:

The data provided by Flipside has been used to handle this analysis. To handle this investigation the following steps have been passed as below:

• Step 1: The identification of various LP actions
  • Table→ osmosis.core.fact_liquidity_provider_actions
  • Metrics→ Find out transactions for ACTION='pool_joined'
• Step 2: Compare two type of LP actions
  • Metrics→ Count of action, distinct users, USD volume of actions, Average LP action per user and day, Average volume of action per user and day
• Step 3: Detail analysis of various LP actions
  • Metrics→ Top pools, currencies responsible for actions and previous metrics of Step 2
• Step 4: By aggregating the outcomes of the steps and deep dive into the two type of LP actions, draw a conclusion about how users interacted with liquidity pools.

Osmosis chain:

Osmosis is an advanced Automated Marketer Protocol (AMM) that allows developers to build custom AMMs with robust liquidity pools. Osmosis is built using the Cosmos SDK and uses the Inter-Blockchain Communication (IBC) feature to enable cross-chain transactions. The Cosmos ecosystem follows the "Blockchain as Decentralized Program" architecture; This means that Osmosis is a blockchain connected to cosmos Hub, which is also a decentralized exchange.

Osmosis, with the help of IBC, connects to the entire ecosystem of Cosmos chains and their more than 10 billion dollars of native assets. After supporting active blockchains on the Cosmos hub, the project aims to connect to other chains such as Ethereum and Bitcoin.

Providing liquidity on DEXs of Osmosis

Liquidity pool provides a new standard for efficient trading of assets and at the same time allows investors to earn profit from their assets. DeFi (DeFi) liquidity pools are very popular nowadays and many people are thinking of joining these pools. A liquidity pool is actually an automated market maker (AMM) that automatically connects buy and sell orders based on predetermined parameters using a smart contract. Here it is not necessary to connect traders directly with other traders and liquidity will be available as long as investors have entered their assets into the pool. Market makers in exchanges that rely on the order book need to constantly adjust their buy and sell orders according to price fluctuations. Market makers need to be professional here and have the time and expertise to manage their strategies. But in a liquidity pool, there is no need for these things and it is not necessary to collect information from different exchanges about the price of an asset; Liquidity providers only need to enter their assets into a liquidity pool and leave the rest to the smart contract.

Part 1: Stats related to various LP types

Findings:

• As can be seen, the Headfirst action has higher count of transactions and users compared to the Singleside action.
• Also, the volume of LP as Headfirst is much higher than Singleside action in term of total and average volume.

Part 2: Analysis of add both assets (Headfirst LP action)

Findings:

• The OSMO and ATOM tokens absorb the highest share related to the Headfirst action from various aspects.
• The dominated pool on Headfirst action belong to Pools #1 which represents the ATOM/OSMO pool.
• In the last week of September, 2021 the highest volume of Headfirst action happened specially for OSMO with over 116 million USD volume.

Part 3: Analysis of join swap extern amount in (Singleside LP action)

Findings:

• About 50% of Singleside actions belong to Pool #1 (ATOM/OSMO) liquidity pool.
• Also, over 85% of volume as Singleside action belong to OSMO and ATOM tokens.
• The highest participation as Singleside occurred in the first quarter of 2022 until May, 2022.

Conclusion:

Now based on the consequences of the previous parts, the final conclusion has been drawn as below:

• The popular LP action among users is Headfirst and this kind of action has superior from each investigated metrics.
• As expected, the OSMO token and pool #1 have dominated to process of adding liquidity to Osmosis pools.
• After Terra collapse on May 2022, the tendency to adding liquidity to Osmosis pools has been decreased accordingly.

Useful links:

• Osmosis network
• Pools on Osmosis
• Add Liquidity to Osmosis pools

Author:

Credited by MZG

Discord handle: m.zamani#0361

Twitter handle: @GargariZamani