According to Token Unlocks, Osmosis (OSMO), a popular decentralized exchange (DEX) developed on Cosmos, is discussing running the Osmosis 2.0 upgrade to expand OSMO tokenomics.
Room from three proposals focused on upgrading, appraisal, and increasing returns for shareholders.
OSMO Altcoin Inflation Will Be Reduced, Staking Rewards Will Not Decrease
The first proposal aims to expand OSMO’s emissions program, which has 50% daily emissions restrictions. However, if that were the only change made, the maximum supply would not reach 1 billion, instead it would be around 780 million OSMOs.
Therefore, in order to maintain the maximum supply of cryptocurrencies of 1 billion, a final management approach needs to extend the tertiary period. Third place in Osmosis is a relative of OSMO, the native token of Osmosis, where token issuance is reduced by a third each year.
The second proposal aims to adjust the emission to minimize the options of the first proposal. This change will result in increased staking and pool incentives, resulting in a significant array of net returns for stakers and liquidity providers. However, a journey in community pool and developer rewards is a pass.
There is a discussion on upgrading
the OSMO to OSMO 2.0 🧪🧪@osmosiszone
— Token Unlocks (@Token_Unlocks) April 14, 2023
After the three offers have been implemented, daily OSMO emissions will be significantly reduced by 50%, while the same OSMO emissions for stake rewards will be maintained. According to these analysts, it will significantly improve tokenomics by reducing inflation and increasing returns for stakers and liquidity providers.
The third proposal aims to reduce the superfluid risk factor to 25%; this will allow 75% of OSMO locked in superfluid pools to be used for staking. This change will increase the APR of superfluid pools by ~2%, while reducing the staking APR by ~1.4%.
The Superfluid risk in Osmosis is the risk of losing some of the OSMO tokens staked through Superfluid Staking. Superfluid Staking is a feature that allows you to stake OSMO tokens underlying liquidity pool (LP) positions on Osmosis. This way, both trading fees and staking rewards can be earned for providing liquidity and securing the network.
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However, there is a possibility that the staked OSMO tokens will be slashed if the authenticator misbehaves or tries to attack the chain.
Slashing is a mechanism that penalizes validators for breaking the rules and reduces their tied stakes. In the case of Superfluid Staking, slashed funds are sent to the Osmosis Community Pool.
Overall, the transition to Osmosis 2.0 will have a significant impact on OSMO tokenomics. While there may be some reduction in rewards for some stakers, the reduction in inflation and increase in net return will ultimately benefit the Osmosis ecosystem, according to Token Unlocks analysts.
*Not investment advice.