# Intro to Osmosis
It’s hard to explore Cosmos ecosystem today without first coming across Osmosis. Launched in June 2021, Osmosis is primarily a DEX but true-to Cosmos ethos of horizontal scaling by creating application specific blockchains, Osmosis is also a blockchain with DEX being the primary purpose. It has Inter-Blockchain Communication (IBC) built in and allows for swaps and liquidity pooling of IBC-enabled, Cosmos SDK assets.
Today, Osmosis is the top DEX in the Cosmos ecosystem by Total Value Locked (TVL), Daily IBC transfers and Daily Active Users. Although the TVL has come down significantly from its peak of ~$1.8B, it’s still the top application to come out of the Cosmos-ecosystem (excluding Terra which uses the Cosmos SDK but started out as a completely separate and unconnected blockchain).
Today, Osmosis is at the heart of the Cosmos ecosystem with a transaction to almost all the other chains in the ecosystem as can be seen from this Mintscan visualization.
https://hub.mintscan.io/ibc-network
Because osmosis is IBC-enabled, it allows for easy bridging to all the other Cosmos blockchains. One can easily deposit/withdraw another Cosmos blockchain’s native token via the DEX.
# OSMO Staking
Osmosis blockchain uses the Proof-of-stake consensus mechanism used by to achieve distributed consensus. In this mechanism, network participants who want to validate the transactions are required to “lock” the network token/currency (OSMO) as collateral. The process of “locking” the tokens is known as staking. In return for validating transactions and blocks, these validators and delegators are rewarded with the native token based on the amount they have staked in the network.
Osmosis recently went through a thirdening as part of its yearly token emission schedule which means that the staking APY has come down significantly. Now its down to ~33%. The top validators atm are paying around 27.82% APR after their 5% commission.
# Analysis
In this analysis, we’re looking at what the users are doing after they undelegate their OSMO i.e. are they selling OSMO, LPing it or delegating it again to another validator.
Definitions
In a Tendermint PoS blockchain there are actions a delegator can take:
1. Delegate — The process of staking OSMO with a validator
2. Undelegate — As the name implies, this is unstaking action and reverse of “Delegate” action. On Osmosis, the unstaking period is 14-days before the unstaked OSMO can be accessed.
3. Redelegate — The process of changing the validator the OSMO is staked with. This doesn’t require the 14-day unstaking period and the OSMO can be immediately redelegated to another validator.
## Staking amounts over time
Let’s start with a simple overview of how much OSMO has been involved over time in the different staking actions.
- As we can see, there’s a healthy amount of OSMO being staked daily over time.
- Starting in January 2022, we see a significant number of OSMO being redelgated — as high as 40–50% daily. By end of April 2022, this number is back to being less than 10%.
- For undelegations, we see two significant periods. Starring in September we see around 20% undelegations daily. Starting in March 2022, this number rises to around 30–40% daily but reduces back to around 20% in May 2022.
- Post May 2022, we see the largest daily peaks for both Delegate and Undelegate amounts — around 7M OSMO. This is to be expected as more OSMO have been released into circulation.
- Looking at the cumulative OSMO amounts per action, we can see that the total amount of OSMO staked is up to 198M with a sharp uptick in the beginning of July.
- The Undelegated and Redelegated amount of OSMO are up to 58M and 46M respectively.
- Undelegated OSMO showed a sharp uptick in the end of April and crossed the number of redelegated OSMO in May.
Top Redelegated Validators
If we look at the top beneficiaries of the “redelegate” action, we find the top 20 validators with the largest being Provalidator with around 4.6M OSMO redelegated.
Sources of redelgations
Now, if we see the top sources of redelegates, we see that the most amount of OSMO (around 4M) has come from the following three validators
- 0base.vc
- Cosmostation
- Sentinel dVPN
We can also arrange the above information in an interactive network graph where the size of the points represents the amount of OSMO delegated to.
## What happens to OSMO after undelegation is completed?
Now, it’s time to answer the question of what happens to OSMO after the 14-day undelegation is completed.
Methodology
To answer this question, I needed to come up with a framework. I considered the following 3 actions of a delegator after their OSMO had completed unstaking:
- LPing into a pool
- Swap for other tokens
- Delegating again to a validator
As I began exploring the actions that can be done, I came across a challenge — many delegators will delegate newly acquired tokens while previous tokens are undelegating. That leaves the question that at which point should you consider post-undelegation actions? To solve this dilemma, I only considered the latest undelegate action and the amount of OSMO undelegated. As soon as the post-action OSMO amount exceeded the undelegated total, I considered the amount of undelegated OSMO “spent” and closed the time-window of “what they did post undelegation?”.
Here’s a real-world example of the actions performed by a delegator after their OSMO tokens are unlocked. This delegator unstaked 500 OSMO and as soon as the amount of OSMO used in actions exceeds 500, I stop counting. In this case, it takes about 17 actions and 14 days (3/7 to 3/21) for this delegator to “spend” the unlocked OSMO.
I ran this query across all the delegators and counted how much OSMO went where.
And now for the reveal! 🥁🥁🥁
Of the ~28M OSMO undelegated (considering only the latest undelegations), the majority — around 20M i.e. around 71%— of the OSMO has been swapped into different tokens.
The other actions — LPing and Delegating — only accounts for about ~4M of OSMO i.e 14%.
What tokens was OSMO swapped to?
Now, we look at where nearly 20M OSMO went.
- The majority of OSMO (~13M/52%) was swapped into ATOM.
- A large number of OSMO (5M/25%) was tragically swapped into Terra UST! These users would have been better served by staying in OSMO.
- In third place we have about 2.5M (12%) of OSMO swapped into USDC. Since USDC is a recent addition to Osmosis, the lower amount is expected.
- All the other tokens represent a small amount of swapped OSMO.
Looking at the amount swapped over time, we can see that the months of April, May and June which represent the biggest amount of OSMO swapped. These were the months when Terra crashed and we had 3AC bankruptcy spread contagion to the market and deepen the crypto winter.
Delegating after undelegating
If we take a look at what validators users are delegating their tokens to after undelegating, we have one clear winner — Cosmostation with 1.8M or nearly 50% of the undelegate → delegated amount.
# Conclusion
In this analysis, I set out to look into the undelegating behaviors of OSMO stakers and what they do after undelegating. During this journey we found the following:
- Large amounts of OSMO was redelegated in Jan-Mar timeframe following by large amounts of undelegations in Mar-May timeframe.
- Majority of the undelegated OSMO (and in Mar-May) timeframe was swapped to other tokens.
- Provalidator was the largest recipient of redelegated OSMO while Cosmostation receiving the lions share of delegated OSMO after it was undelegated.
