diff --git a/README.md b/README.md index ff7cbd4fe34..8d3e40db88f 100644 --- a/README.md +++ b/README.md @@ -81,90 +81,3 @@ to use the SDK fork, and how to make / test updates to SDK branches. For more information, please see [the contributing guide](https://docs.osmosis.zone/developing/get_started/contributing.html). - -## Why Osmosis? - -### On customizability of liquidity pools - -Most major AMMs limit the changeable parameters of liquidity pools. For -example, Uniswap only allows the creation of a two-token pool of equal -ratio with the swap fee of 0.3%. The simplicity of Uniswap protocol -allowed quick onboarding of the average user that previously had little -to no experience in market making. - -However, as the DeFi market size grows and market participants such as -arbitrageurs and liquidity providers mature, the need for liquidity -pools to react to market conditions becomes apparent. The optimal swap -fee for a AMM trade may depend on various factors such as block times, -slippage, transaction fee, market volatility and more. There is no -one-size-fits-all solution as the mix of characteristics of blockchain -protocol, tokens in the liquidity pool, market conditions, and others -can change the optimal strategy for the liquidity providers and the -market makers to carry out. - -The tools Osmosis provides allow the market participants to -self-identify opportunities and allow them to react by adjusting the -various parameters. An optimal equilibrium between fee and liquidity can -be reached through autonomous experiments and iterations, rather than a -setting a centrally planned 'most acceptable compromise' value. This -extends the addressable market for AMMs and bonding curves to beyond -simple token swaps, as limitation on the customizability of liquidity -pools may have been the inhibiting factor for more experimental -use-cases of AMMs. - -### Self-governing liquidity pools - -As important as the ability to change the parameters of a liquidity pool -is, the feature would mean very little without a method to coordinate a -decision amongst the stakeholders. The pool governance feature of -Osmosis allows a diverse spectrum of liquidity pools with risk tolerance -and strategies to not only exist, but evolve. - -In Osmosis, the liquidity pool shares are not only used to calculate the -fractional ownership of a liquidity pool, but also the right to -participate in the strategic decision making of the liquidity pool as -well. To incentivize long-term liquidity commitment, shares must be -locked up for an extended period. Longer term commitments are awarded by -additional voting power / additional liquidity mining revenue. The -long-term liquidity commitment by the liquidity providers prevent the -impact of potential vampire attacks, where ownership of the shares are -delegated and potentially used to migrate liquidity to an external AMM. -This provides equity of power amongst liquidity providers, where those -with greater skin-in-the-game are given their rightful power to steer -the strategic direction of its pool in proportion to the risk they are -taking with their assets. - -As AMMs mostly guarantee a level of constant total value output, those -who may disagree with the changes made to the pool are able to withdraw -their funds with little to no loss of their principals. As Osmosis -expects the market to self-discover the optimal value of each adjustable -parameter, if a significant dissenting opinion exists--they are able to -start a competing liquidity pool with their own strategy. - -### AMM as serviced infrastructure - -The number and complexity of decentralized financial products are -consistently increasing. Instruments such as pegged assets, derivatives, -options, and tokenized leveraged positions each have their own -characteristics that produce optimal market efficiency when paired with -the correct bonding curve. That being said, the traditional notion of -AMMs have evolved around putting the AMM first, and the financial -product being traded second. - -As AMMs substantially increase the market accessibility for these -instruments, assets with diverse characteristics either had to: - -1. Compromise efficiency and trade on existing AMMs with non-optimal - bonding curves or -2. Take on the massive task of building one's own AMM that is able to - maximize efficiency - -To solve this issue, Osmosis introduces the idea of an 'AMM as a -serviced infrastructure'. Fairly often, adjustment of the value function -and a few additional parameters are all that's needed to provide a -highly-efficient, highly-accessible AMM for the majority of -decentralized financial instruments. By providing the ability for the -creator of the pool to simply define the bonding curve value function -and reuse the majority of the key AMM infrastructure, the barrier to -creating a tailor-made and efficient automated market maker can be -reduced.