With a market capitalization of over $740 million, Osmosis is currently the third-largest decentralized exchange in crypto and a central piece of the Cosmos ecosystem. Its co-founder, Sunny Aggarwal, is also the co-founder of Sikka Tech, which builds infrastructure for decentralized networks and is one of the biggest validator sets on Cosmos Hub.
"Undercover Bitcoin Maxi": A Talk With Osmosis Co-Founder Sunny Aggarwal
Interesting interview, covering many areas of both Cosmos and Osmosis development. Let me focus on just one issue.
CB: Would you mind going into detail about how the Terra crash impacted Osmosis?
SA: I’m actually working on a blog post on this right now, I’m going to publish on the six month anniversary of the crash. Look, half of the liquidity on Osmosis was made up of UST and LUNA at some point. Maybe slightly less than half. And the way that Osmosis is structured is that, as these two tokens crashed, people sold out of those assets into OSMO, then sold OSMO into ATOM, and then sold ATOM onto centralized exchanges. So the crash had a price impact on OSMO as well, and a lot of our TVL was wiped out—half of it just went to zero.
Would not have happened so badly had Osmosis had more "managed pools" Balancer style! No, really! But even after this "supernova", they're not listening.
But generally, in crypto at large, my hottest take is that Terra’s mechanism was interesting. I think they got greedy and the Anchor scam basically killed the goose. I don’t know, I think it’s a setback. One of the reasons I really believe in crypto, that I really like working in crypto, is that I like experimenting with algorithmic monetary policy. And I think that Terra just set that back a lot.
Yep, when I saw what Terra was doing... I bailed out! Stupidly, didn't bail out 100%. Worse, some of the LP gauges would have taken 14 days to unbond. When I looked at my portfolio, direct exposure was under 5% - it was the cascade of crashing pools that crumbled the TVL.
This can all happen again - I need to push more. Rate-limiting helps slow down the crash, but can also freeze out smaller players. We need the actual defi pools to be way smarter.
I see this as a serious "blind spot" - mind you, I haven't met many people who know anything about tokenomics, apart from trotting out the obvious, and the downright wrong.