Cosmos DeFi gets a boost as “rivals” Osmosis and Astroport collaborate on programmable liquidity pools

Cosmos-based decentralized exchange Astroport will deploy its passive concentrated liquidity (PCL) pools on Osmosis, the largest Cosmos-based DEX by volume, following successful governance votes on both platforms. This move marks an alignment between two of the most active DEXes in the Cosmos ecosystem with the aim of improving the overall trading experience and capital efficiency for users.

PCL pools, which aim to provide the benefits of concentrated liquidity without the need for active management, will be offered alongside Osmosis' existing “Supercharged Liquidity” pools. Astroport's pools utilize an advanced repegging algorithm that automatically concentrates liquidity around the exponential moving average of running trades. As Astroport core developer Andre Sardo explained:

“With PCL pools, you go into a pool and LP, and you can leave your tokens there for days, months, or years and have them automatically adjust based on market conditions. Impermanent losses are minimized and fees are maximized.

And because your liquidity is passive, it is truly programmable or composable. It can be accessed by apps, vaults and aggregators anywhere in the cosmos.”

The use of Astroport's PCL pools on Osmosis is expected to benefit both protocols. Standard PCL pool fees flow back to xASTRO stakers, while all trades routed through Astroport's PCL pools on Osmosis are subject to a 0.1% Osmosis fee, which is distributed between the Osmosis community pool and the OSMO stake pool. This move is expected to expand Astroport's reach, increase its global trading volume and fee generation, and attract more passive liquidity to Osmosis.

Sunny Aggarwal, co-founder of Osmosis Labs, predicted that this move could lead to record volumes in just the first month.

“Competition is good, but it's even better to align yourself for the benefit of the larger community – so it's very exciting to see Astroport and Osmosis joining forces here… Only time will tell, but I expect that Astroport deployment on Osmosis will be one of the largest volumes within a month of launch.”

While Supercharged Liquidity and PCL pools may seem like competitors, the teams believe they are better viewed as complementary offerings for different types of LPs. Supercharged liquidity pools are best optimized by professional market makers and active LPs who run their own algorithms and programmatically adjust their liquidity based on market conditions. In contrast, PCL pools are aimed at more casual LPs who prefer a “deposit and chill” approach, the teams say, allowing the pool's algorithm to automatically concentrate their liquidity.

According to Jose Maria Macedo, founder and CEO of Delphi Labs, this alignment between Astroport and Osmosis is a significant development in the Cosmos ecosystem. Macedo explained:

“It’s two massive DEXs that outsiders see as rivals coming together and assimilating. And they do it in a way that benefits both protocols. They leverage their strengths and combine them to improve liquidity for the entire Cosmos ecosystem.”

Additionally, Donovan Solms, Astroport’s core developer, emphasized the portability of Astroport’s codebase, likening it to a “magic suitcase” that can be deployed on any Cosmos chain. Solms explained:

“We can go wherever there is a need for liquidity in the cosmos. And thanks to IBC, every operation is connected. It’s part of a bigger picture, which is this backend layer of truly passive, truly infinite liquidity.”

Preparations for the deployment are underway. PCL pools are expected to be operational with Osmosis in the coming weeks. This historic connection between Astroport and Osmosis is intended to improve the capital efficiency of those exchanging or transacting through Osmosis, while potentially “defragmenting” liquidity distribution across other automated market makers across the Cosmos ecosystem.

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