Providing Liquidity on Osmosis

After learning how to liquid stake your tokens, learn how to provide liquidity in DeFi on DEXs such as Osmosis. We use Osmosis Pool #803 ATOM/stATOM for this example.

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Adding Liquidity to a Pool on Osmosis Frontier

Now that you have staked your tokens, you can use your stTokens in decentralized finance. One way to do this is by providing liquidity to decentralized exchange (DEX) pools. For this tutorial, we will explain how to provide liquidity on Osmosis.

To see Osmosis’ comprehensive guide to Providing Liquidity, click here.

For more background context and a Stride-specific tutorial, keep reading!

A Brief Overview of Liquidity Pools:
Liquidity is a measure of how easily an tokens can be exchanged to another tokens. A liquidity pool is a pool of digital tokens that allows trading on a decentralized exchange (DEX).

The primary goal of liquidity pools is to facilitate peer-to-peer (P2P) trading on DEXs. By providing a steady supply of buyers and sellers, liquidity pools ensure that trades can be executed quickly and efficiently.

Osmosis is the largest DEX in Cosmos and Stride's main liquidity hub.

Basically, Osmosis has two separate frontends.

App Page:
→ used for all on-boarded chains
→ contains a list of tokens that are registered onto the Osmosis Assetlist Registry

Frontier:
→ space for newly listed and unverified tokens
→ multichain DEX currently used for Cosmos-based tokens
→ users can access liquidity pools, swap tokens, generate and earn incentives.

They look very similar - be sure that you are using the correct frontend depending on the type of token and pool you are interested in.

App Page:

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Frontier:

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Osmosis uses the Inter-Blockchain Communication (IBC). IBC makes trustless interchain transactions possible in the Cosmos ecosystem.

You can make a deposit into the platform directly from your wallet (we will use Keplr here) once it is connected. Once the funds are successfully deposited, you will be able to approve transactions and add liquidity to incentivized pools.

Get Started: Making a Deposit on Osmosis Frontier

Use your stToken balance (stATOM for this example) to enter the pool:

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  1. Go to https://frontier.osmosis.zone/ and click ‘Connect Wallet’ on the left-hand side bar.
  2. You will see options for types of wallets to connect. Select the relevant one and enter your password. For this example we are connecting a Keplr wallet.
  3. Once the wallet is connected, Click ‘Assets’ on the left-hand side bar.
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  1. In the ‘Search’ bar under ‘Assets’ type stATOM and click ‘Deposit’.
  2. Enter the amount that you want to deposit. You can also click ‘balance’.
  3. Select "Deposit" then approve the transaction (wait for the ‘transaction confirmation’).
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Adding your stToken to a Liquidity Pool

After completing the deposit, you can now add your available funds to the pool. Check which pools are incentivized at https://frontier.osmosis.zone/pools to determine how you will earn rewards.
Note: Each pool has a pool ID number.
→ For instance, stATOM uses Pool ID #803

  1. On the Osmosis dashboard, click on ‘Pools’ on the left side-bar. Make sure your pool is incentivized by ticking "Incentivized" pools. (note: some pools are externally incentivized - this means they can be seen when "All Pools" is ticked as shown here, and will be shown in the externally incentivized list further down the page).
  2. Search for a token, for example, stATOM or 803 in the search bar. Select the one you will liquidity to. You will see the pool’s total liquidity, volume, fees, and the APR.*
    After selecting the pool, click ‘ADD/REMOVE LIQUIDITY’ on the top of the page.
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  1. Enter the amount that you want to add and click ‘ADD LIQUIDITY’
    (Note: if you don’t have a balance of ATOM (only stATOM, such as this example), you can tick the ‘Auto-Swap Single Asset’ box and enter your stToken balance)
  2. Approve this transaction and wait for the confirmation message on screen.
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Note: There is no ATOM balance in this example - so here is where we can switch to exclusively use the token that is available (stATOM).

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Bonding

  1. Bond your liquidity by clicking the green ‘Bond Shares’ button.
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  1. Select the 14 days unbonding option.
  2. To enter the maximum amount, click on the available balance. To input a different balance, type in the text box. Click Bond to approve the transaction.
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  • Pool incentive rewards are paid once per day on Epoch time at 17:15 UTC*

Sources:

Updated 2 months ago