Liquidity | Osmosis Docs

Initial Liquidity Options

When onboarding a new asset, Osmosis Zone recommends having at least $1000 worth of liquidity in a pool before listing on frontier.osmosis.zone; There are several ways to set the minimum liquidity requirement.

Note that the Osmosis Foundation will do this not Consider any OTC token transfers or loans

• Add your own liquidity
  • Simply purchase at least $500 worth of OSMO (recommended), ATOM and/or UST to combine with the new $500 asset to create a 50/50 pool
    • Recommended criteria for a new pool:
      • Contains only 2 tokens
      • 50/50 weighting
      • Contains a common base asset (e.g. OSMO, ATOM or UST)
      • 0.2% for OSMO pools, 0.3% swap fee for ATOM or UST pools
      • 0% exit fee
      • No future governor (set to blank (“”))
      • Sufficient liquidity (worth at least $1000)
  • Alternatively, find some partners who would be willing to provide the underlying asset (e.g. OSMO, ATOM, UST, etc.) of liquidity (this assumes you can provide the pair value share (i.e. the new asset)).
  • Alternatively, it is possible to create an asymmetrically weighted liquidity pool to reduce the base asset requirement (e.g. 80% FOO::20% OSMO). However, the Osmosis Foundation recommends only creating 50/50 pools
  • See: GAMM Module: Create Pool for the CLI command to create a pool
  • If the asset has already been added on the Osmosis Zone Frontier Assets page, a new pool can be created on the Osmosis Zone Frontier Pools page
• Initiate a liquidity bootstrapping pool (LBP)
  • A liquidity bootstrapping pool (LBP) is a liquidity pool that is initiated with a phase of linear weight change.
    • Choose any starting weights (e.g. 90:10), ending weights (e.g. 50:50) and weight change duration (e.g. 3 days)
  • The main purpose of an LBP is to be able to initiate a liquidity pool with relatively small amounts of underlying asset (e.g. 10% OSMO) and large amounts of new pair value (e.g. 90% FOO). Throughout the weight change, as the new pair investments become cheaper, the market is stimulated to fill the pool with more base investments over time.
    • Since you are providing a small amount of the base asset (e.g. OSMO), it is expected that it will be able to provide a large amount of the pair asset (e.g. FOO).
    • The benefit of being able to build a liquidity pool with more underlying assets from the market comes at the expense of the GAMM/LP token, which loses value during the weight change
      • Some (unaudited) examples where the pool is initially created with a fixed price and the prices of the assets do not change throughout the LBP:
        • 80 FOO/20 OSMO -> 50 FOO/50 OSMO, means a doubling of the OSMO side, but a 20% depreciation of the GAMM/LP token
        • 90 FOO/10 OSMO -> 50 FOO/50 OSMO, means a 3x the OSMO side but a 40% depreciation of the GAMM/LP token
        • 95 FOO/ 5 OSMO -> 50 FOO/50 OSMO, means a ~4.36x the OSMO side, but a ~56.4% depreciation of the GAMM/LP token
      • Note that if the pair asset (FOO) price rises or falls during the LBP, it may mitigate or exacerbate the GAMM/LP token’s fall in value
  • The secondary purpose of an LBP is natural pricing for the new asset.
    • While fixing a price for the token can be a strategic way, it is still possible to conduct an LBP with a price already fixed, even if there were arbitrage opportunities. However, the GAMM/LP tokens depreciate over the duration of the weight change and are therefore generally not recommended
  • For more information on LBPs, see: More Information: Liquidity Bootstrapping Pools.
  • For information on creating an LBP see: Creating an LBP
  • When creating an LBP, make sure to request the appropriate changes in the Osmosis Zone Frontier Front End to ensure the LBP page is displayed
  • Note: It is highly recommended to postpone Aridrops until the LBP is fully completed. The potential for users to dump an airdrop token during such a sensitive phase of pricing can have a significant negative impact on the asset’s final price – much more so than an airdrop released afterwards.
  • Note: LBP 2.0 is still under development and it will probably take a few more months to implement the front-end interface for it
• Apply for a loan from the Osmosis Community Pool (OCP)
  • Osmosis has now seen a successful case of a new project backing a loan from OSMO from the OCP that would later be repaid in the form of the new pair token
    • The borrowed OSMO was sent to a multisig wallet, added to an LBP, and then the pair asset (STARS) was returned to the OCP from the same multisig wallet after the LBP was completed
  • Example:
    • Stargaze Network (borrowed 135,000 OSMO, repaid equivalent from STARS)

Additional liquidity

As more liquidity becomes available to users, either through mining, airdrops or giveaways, it could make strategic sense to incentivize more liquidity to add to the Osmosis liquidity pools to ensure there is a healthy, consistent market for the new one asset there. Visit the Liquidity Mining Incentives Docs page to learn more about Osmosis Liquidity Mining Rewards, External Gauge Incentives, and Superfluid Staking.

Creating a liquidity bootstrapping pool

Below is an example of the pool.json file for a liquidity bootstrapping pool.

The weighting of a liquidity bootstrapping pool begins at the weight specified in the weight parameter and moves the weights linearly until the target pool weights are reached over a period of time specified by the duration parameter at pool creation.

Typically, the weights start with an imbalanced ratio, giving more weight to the token to be sold, and shift to a 1:1 weight (or a weight that favors the counterparty token that the pool is accumulating would like). The change in weight affects the exchange price of the tokens, even if the tokens remain the same within the pools. Note that linear weight change does this not mean linear price change (it is highly recommended to play around with the different parameters of this basic LBP simulator to make sure you understand how the pool behaves with different parameters and market demand).

The pool creator can specify when the weight change begins by setting the start time. While the pool is active and available for trading at the initial weights, the pool’s weight shift will not begin until the start time is reached.

Example pool files

The following is an example of a liquidity bootstrapping pool. The weights change linearly between the specified starting weights and the target weights over 72 hours (3 days). If no start time is specified, it defaults to the time the tx successfully executed on the chain.

The pool.json file:

{
“weights”: “10 acts, 1 atom”,
“Initial Deposit”: “1000acts,100atoms”,
“Swap Fee”: “0.001”,
“exit fee”: “0.001”,
“lbp-params”: {
“Duration”: “72 hours”,
“Target Pool Weights”: “1act,1atom”
}
}

Instead with start time included:

{
“weights”: “10 acts, 1 atom”,
“Initial Deposit”: “1000acts,100atoms”,
“Swap Fee”: “0.001”,
“exit fee”: “0.001”,
“lbp-params”: {
“Duration”: “72 hours”,
“Target Pool Weights”: “1act,1atom”,
“start time”: “2006-01-02T15:04:05Z”
}
}

Example CLI TX​

osmosisd tx gamma create-pool –pool-file=”path/to/lbp-pool.json” –from myKey

Note: The command to create a liquidity bootstrapping pool is the same as creating a normal pool. However, if the pool has valid lbp parameters in the pool file (json), it will be created as a liquidity bootstrapping pool.

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