Osmosis is an advanced automated market maker (AMM) protocol that allows developers to build customized AMMs with sovereign liquidity pools. Built using the Cosmos SDK, Osmosis utilizes Inter-Blockchain Communication (IBC) to enable cross-chain transactions.

In Osmosis, users can stake their OSMO to vote on governance proposals. The users with higher amount of holdings have more power in the voting system.

The validators network on Osmosis is a vital part of the ecosystem and, among other things, guarantees the security of the Proof Of Stake blockchain. You're probably wondering, how so?

Think of a validator like a banker or, even better, like a Bitcoin or Ethereum miner. They are responsible for authoring transactions and make sure to only add valid and non-tampered transactions to a block on the blockchain. Moreso, they are also required to regularly cast votes for the prices of Osmosis tokens. Misbehaviors get punished by slashing a validator. This translates to a loss of funds (including delegators' OSMO) equal to the gravity of the offense.

Validator candidates can bond their own Osmo and have Osmo "delegated", or staked, to them by token holders. The validators are determined by who has the most stake delegated to them — the top XX validator candidates with the most stake will become Osmosis validators (depending on the proposal approved).

In this dashboard we are gonna explore how decentralized is the Osmosis ecosystem. Mainly, we are gonna focus on the Props 114, 196 & 337 which were all passed in an effort to promote decentralization within the ecosystem.

To do so, we are gonna track several governance metrics to see if the proposals had some effect on the decentralization:

• How did the voting power of the top 66% of the active set validators change after these proposals were passed?

• How did the voting power of the top 66% changed after t+30, t+60 and t+90 days after each proposal?

• Power share distribution by validators rank

• How did the Nakamoto Coefficient change after these proposals were passed?

• How did the Nakamoto Coefficient changed after each proposal?

  \n

Osmosis voting power

• Before the 362 proposal, the adoption regarding voting power of 66% validators has been so good, but since mid October, the voting power value seems to be stable and after the 362 proposal it seems to continue there over time at around 120M OSMO.
• The power share distribution change based on the validators rank. As we can see, it seems that the top 10 validators has lost an important percentage of power from the beginning, passing from more than 0.7 power share to less than 0.45. The top 10-50 validators power share has increased from 0.3 to 0.35. These changes are good for the decentralization.
• Since March 2022, the Nakamoto coefficient increased to 6. Few months before the proposal 362, the number reached its ATH at 7, but in September it returned to 6 and even dropped to 5 but rapidly recovered its 6. After the proposal 362, the number seems to continue at 6. This uptrend must continue due to is good for the decentralization as more validators are needed for the fault tolerance.
• There were more old validators voting for the governance than new validators. But if we take a global view over all the proposals carried out so far, we can see that for the past proposals the percentage of new validators was higher. Both, the amount of active validators as voters and the number of votes by validators have been higher for old validators that the new ones.
• The average votes per validator decreased in this proposal compared to the average of the rest proposals, mainly for the old validators that reduced its activity to half. The average activity voer time remained similar between old/new and then, we can assume that when a new validator joined the network rapidly is adapted.
• Regarding the voting results, we can see how for the 362 proposal almost 40% are ‘Yes’, 26% ‘No’, 25% ‘Abstain’ and less than 1% for ‘Veto’. Quite different from the average of the past proposals which ‘Yes’ represents more than 68% of the total votes, ‘No’ less than 1%, Abstain 13% and ‘Veto’ less than 0.14%.
• The percentage of new validators can clearly seen that decreased in this 362 proposal from an average of 35.77% for the past proposals to around 20%. The numbers are different if we consider the voting power, which percentages passed from 5% to 1% respectively, but a drop has been detected as well.

Looking at the voting power of the top 66% of the active set validators change after these proposals were passed, we can see how before the 362 proposal, the adoption has been so good, but since mid October, the voting power value seems to be stable and after the 362 proposal it seems to continue there over time at around 120M OSMO.

In the image on the left, we can see the power share distribution change based on the validators rank. As we can see, it seems that the top 10 validators has lost an important percentage of power from the beginning, passing from more than 0.7 power share to less than 0.45. The top 10-50 validators power share has increased from 0.3 to 0.35. These changes are good for the decentralization.

Osmosis Nakamoto Coefficient

Regarding the Nakamoto coefficient, we can see how during the period previous to the proposal, it was at 4, then it is to say that 4 validators were needed to reach the bizantine tolerance fault to have more than a half of the voting power.

Since March 2022, the Nakamoto coefficient increased to 6. Few months before the proposal 362, the number reached its ATH at 7, but in September it returned to 6 and even dropped to 5 but rapidly recovered its 6. After the proposal 362, the number seems to continue at 6. This uptrend must continue due to is good for the decentralization as more validators are needed for the fault tolerance.

Overview

Methodology

Key insights

Validators activity

In the first chart we can see the validators’ activity compairosn of the recent proposal 362 vs the past ones. We can see how in this case there were more old validators voting for the governance than new validators. But if we take a global view over all the proposals carried out so far, we can see that for the past proposals the percentage of new validators was higher. Both, the amount of active validators as voters and the number of votes by validators have been higher for old validators that the new ones.

However, if we consider the average number of votes per validator, we can see how in this case the activity of new validators is similar to the old validators, so the difference between new and old validators is more evident for the previous proposals. It is to say that the activity decreased in this proposal compared to the average of the rest proposals, mainly for the old validators that reduced its activity to half. The average activity voer time remained similar between old/new and then, we can assume that when a new validator joined the network rapidly is adapted.

Governance proposals results

Finally, regarding the voting results, we can see how for the 362 proposal almost 40% are ‘Yes’, 26% ‘No’, 25% ‘Abstain’ and less than 1% for ‘Veto’. Quite different from the average of the past proposals which ‘Yes’ represents more than 68% of the total votes, ‘No’ less than 1%, Abstain 13% and ‘Veto’ less than 0.14%.

On the other hand, the percentage of new validators can clearly seen that decreased in this 362 proposal from an average of 35.77% for the past proposals to around 20%. The numbers are different if we consider the voting power, which percentages passed from 5% to 1% respectively, but a drop has been detected as well.