Decentralized exchange (DEX) Osmosis will conduct its v14.0.0 upgrade, termed “Neon,” in line with a broader plan to expand product integrations and make cross-chain trading more lucrative for traders, developers said Wednesday.
The upgrade, which is scheduled to take place at block height 7937500 on Jan. 23, 16:00 UTC, will include a number of important enabling upgrades for Osmosis.
One of the key features of the upgrade is the implementation of geometric TWAP (Time Weighted Average Pricing) in Osmosis liquidity pools. In finance, a TWAP is the average price of an asset over a specified time. A TWAP strategy is often used to minimize a large order’s impact on the market by dispersing the large order into smaller quantities and executing them at regular intervals over time, as per Binance.
The above will allow protocols building on Osmosis to choose between two pricing mechanisms that will be relevant for the protocol to provide “concentrated liquidity” to users – a design that increases the capital efficiency of using a DEX along with improved rewards for liquidity pools (LP).
Liquidity pools refer to tokens supplied by a user to a DEX, which in turn incentivizes users to become liquidity providers in exchange for a share of transaction fees and free tokens.
The upgrade would also make pricing ticks more efficient and will stave off liquidity attacks utilizing upward price manipulation. Such manipulation has previously resulted in bad actors making off with as much as $100 million by manipulating DEXs.
Furthermore, Neon will introduce a downtime detection module, which will detect if the Osmosis network is out of action or unavailable for use and prevent improper liquidations on other lending protocols that rely on Osmosis’ pricing data.
Osmosis developers said that it was important to get this upgrade deployed quickly in order to pave the way for the upcoming integration of the Mars Protocol, a credit lending and borrowing marketplace.
Users will be unable to use the Osmosis DEX and staking and governance features will also be unavailable until the upgrade is complete.
Osmosis’ native OSMO token was down 3% in the past 24 hours, in line with a broader market decline. The protocol currently holders $160 million in locked tokens, down 90% from 2022’s peak of $1.6 billion.