Osmosis Connector for Hummingbot — Project O-Nexum

BY Pecunia.FinanceJuly 12 · 11 min read

The wheels are turning for a new project, called O-Nexum.

Pecunia.Finance is excited to be contributing to the Hummingbot code-base once again, this time to create a connector to the popular Osmosis DEX found in the Cosmos ecosystem. Naturally, this means the Osmosis connector will be the first (public) connector to utilize the Cosmos Ecosystem Interface that was built last year.

Not only will this open up a massive new AMM opportunity for Hummingbot users, but it will also bring synergies to the new Concentrated Liquidity feature launched by Osmosis just recently. Pecunia.Finance is excited not only to build the connector, but also utilize it privately to run AMM strategies and leverage all the potential liquidity flowing from centralized exchanges. 👀💸

About Osmosis.

Osmosis is a decentralized exchange (DEX) built on the Cosmos Network. It is designed to facilitate the trading of digital assets, primarily focusing on the interoperability of tokens from different blockchain networks. Osmosis aims to provide a decentralized and efficient platform for users to swap, stake, and govern a wide range of assets.

The Osmosis DEX leverages the Inter-Blockchain Communication (IBC) protocol, which is a standard for communication and token transfers between independent blockchain networks. This protocol enables Osmosis to connect and interact with various blockchains, allowing users to trade assets across different ecosystems. By utilizing IBC, Osmosis aims to overcome the limitations of traditional DEXs that are typically confined to a single blockchain.

One of the key features of Osmosis is its emphasis on liquidity provision and yield farming. Users can provide liquidity to various token pairs on the platform, earning fees and rewards in return. Additionally, Osmosis introduces a concept called “gammastaking,” which allows liquidity providers to earn rewards in the form of a secondary token. This model encourages users to participate in the platform’s ecosystem and contribute to its liquidity pools.

The “concentrated liquidity” feature is a unique aspect of Osmosis DEX that sets it apart from traditional automated market makers (AMMs). In a traditional AMM, liquidity is evenly spread across the entire price range of a trading pair, resulting in a constant product formula where the product of the token balances remains constant.

In Osmosis, however, the concentrated liquidity feature allows liquidity providers to concentrate their funds within a specific price range, rather than spreading them evenly. This is achieved through a concept called “gammav2 pools,” which are an extension of the constant product formula used in AMMs.

With concentrated liquidity, liquidity providers can define a price range, specifying upper and lower bounds within which they want to concentrate their liquidity. By concentrating liquidity in a narrower range, liquidity providers can potentially benefit from reduced slippage and improved capital efficiency for trades occurring within that range. This makes it particularly useful for assets with high volatility or where liquidity is needed at specific price levels.

Concentrated liquidity on Osmosis also enables users to create and customize their own liquidity pools with specific price ranges, allowing for more flexibility in market-making strategies. This feature empowers liquidity providers to tailor their positions based on their trading preferences and market conditions.

What is Hummingbot?

Hummingbot offers a user-friendly, high-frequency trading bot and online dashboard. The bot is open source software which allows traders to automatically execute AMM and other strategies between centralized and decentralized exchanges, based on pre-defined parameters. Since the release of Hummingbot, it has enabled 3,200+ individual market makers to fill $2.4 billion in trading volume. Daily volume averages $12.3M and was hitting a high watermark in Feb/2022 of $17M. The current release supports 72+ token issuers and exchanges.

Who is Pecunia.Finance?

Pecuina.Finance is a project management DAO that leverages opportunities in the DeFi industry to build solutions and generate capital to push humanity into the future on the basis of sustainable & fair technology. The contributors are achieving this by pursuing a wide range of financial and technological products and services, as well as deploying trading strategies using Hummingbot.

About the Contributors

The contributors have considerable experience in OOP, OOD & OOA with Python & Java, several years developing applications with React frameworks using TypeScript and JavaScript, as well as DevOps experience. The developers are supported by business consultants sharing a combined 30 years in IT, PM, and CRM (both on- and off-chain). Besides participating in countless blockchain projects privately, each member brings with them a network of contacts spanning popular platforms, protocols, and exchanges.

Previous Projects

The flagship project of Pecunia.Finance was Nexum, a connector planned between Sifchain and Hummingbot for which the DAO received two grants. Due to the implosion of Sifchain, the team switched gears and used the grants to deliver a Cosmos Ecosystem Interface for the Hummingbot Gateway, which allows connectors for Cosmos ecosystem DEXs to be built more easily than without.

Pecunia.Finance is also building a proprietary governance and operations platform called Porta, coming soon.

Anticipated Outcome

Automated Trading: Hummingbot allows users to create and execute algorithmic trading strategies. By integrating with Osmosis DEX, users can leverage the features of Osmosis, such as concentrated liquidity and cross-chain trading, in their algorithmic trading strategies. This automation can help users execute trades more efficiently and take advantage of market opportunities.
Liquidity Provision: Osmosis DEX relies on liquidity providers to ensure sufficient liquidity in its pools. By connecting Hummingbot to Osmosis, users can become liquidity providers and automate the process of providing liquidity. Hummingbot can continuously monitor the liquidity pools, adjust the positions, and re-balance the assets as needed, helping users optimize their liquidity provision strategies.
Market Making: Osmosis DEX supports market-making activities, and Hummingbot is well-suited for market-making strategies. By connecting Hummingbot to Osmosis, users can deploy market-making bots that provide liquidity to specific trading pairs on Osmosis. This can help improve liquidity depth, reduce spreads, and enhance the overall trading experience on the platform.
Arbitrage Opportunities: Osmosis DEX’s cross-chain capabilities and connection to various blockchain networks can create potential arbitrage opportunities. Hummingbot can be utilized to monitor price differences and execute trades across different chains, taking advantage of price discrepancies between Osmosis and other exchanges. This can enable users to capitalize on arbitrage opportunities and potentially generate profits.
Customization and Strategy Optimization: Hummingbot provides a range of customization options, allowing users to fine-tune their trading strategies according to their specific requirements. By integrating with Osmosis, users can leverage the concentrated liquidity feature and customize their trading strategies to take advantage of specific price ranges or market conditions on Osmosis DEX.

Scope of Funding

With funding secured thanks to the Osmosis Grant Foundation, Pecunia.Finance has access to the resources needed to develop the connector between Osmosis DEX and the Hummingbot Client.

Milestones

Core Connector & Endpoints
Merging with Hummingbot code-base
(Release documentation & instructions)
Long Term Support (LTS)

To find out more…

Pecunia.Finance can be reached via Discord with the link below to answer any questions you may have. The team will also be monitoring posts in the Hummingbot Discord and Osmosis Discord for questions posted there. If you are reading this early enough, a representative will also be joining a Twitter Space on July 10th, hosted by Osmosis Grants Foundation, to answer questions live with the Osmosis community.