Osmosis founder envisions Cosmos as Bitcoin’s application layer in DeFi

Author: Nate Whitehill, CryptoSlate; Translator: Baishui, Golden Finance

In a recent SlateCast show, Akiba and Nate welcomed Osmosis founder Sunny Aggarwal for an insightful discussion about the Cosmos ecosystem, the rise of hyperbitcoinization, and the future of DeFi.

Hyperbitcoinization and the Role of Cosmos

Sunny expressed his long-term vision of building an application layer for Bitcoin, a goal that inspired his involvement in Cosmos from the beginning. He explained:

"Seven years ago, in 2017, I thought we were building for Bitcoin. How does this help Bitcoin? So I started looking into Cosmos because this is how we build an application layer for Bitcoin."

The introduction of Ordinals and other developments in the Bitcoin ecosystem have reignited "Bitcoin Season 2" or the "Bitcoin Renaissance," providing Cosmos with an opportunity to play an important role in the hyperbitcoinization movement.

Alloy Assets: Solving the Liquidity Fragmentation Problem

One of the key topics discussed was the concept of “Alloy Assets,” a solution that seeks to address liquidity fragmentation between different blockchain ecosystems. Sunny explained the rationale behind this innovative approach:

“What happened was about a year or two ago, Osmosis used governance and the DAO basically voted to make Axelar ETH the canonical ETH on Osmosis. The problem is that over the past two years, one or more bridges have emerged, like Wormhole, and more activity in the Ethereum ecosystem has moved to L2.”

Alloy Assets allow users to deposit and withdraw tokens from various source chains (such as Ethereum L2) while maintaining fungibility and improving user experience.

Community Engagement and DeFi Innovation

Sunny emphasized the importance of community engagement to Osmosis’ success, and said that the team conducts customer surveys every quarter to collect feedback and formulate the project’s development roadmap. He stressed the need for continued innovation in the DeFi space and cited the potential of combining social elements with DeFi:

“Especially with the rise of social, when you combine social and DeFi, some really interesting things emerge. One of the things I've been paying attention to is DeFi, and today's cryptocurrency is largely designed based on this model of the world, where we live in a trustless system, but I don't actually think that's actually the real state of the world.”

The Trade-off Between Centralization and Decentralization

Speaking about the debate surrounding centralization and decentralization, Sunny expressed concern about the shift toward centralized execution in the Ethereum L2 ecosystem, noting:

“The question is what decentralization brings you more than just a safe, you know, in a blockchain, you're looking for a bunch of different properties, right? You're looking for security, which means the correct execution of the protocol, will the system always be online? You’re looking for censorship resistance.”

He advocates for network security that leverages economic incentives across networks to enhance security and effectiveness without compromising decentralization.