By Michael Scott
Decentralized exchange (DEX) Osmosis is set to upgrade the v14.0.0 in a project identified as Neon. The Cosmos-based DEX considers the upgrade essential to realize efficient pricing ticks and avert liquidity attacks using upward price manipulation.
The developers’ update on January 18 indicated that embracing the Neon upgrade aligns with the Osmosis broader plan to scale the product integrations. Its accomplishment will facilitate the transformation of cross-chain trading into lucrative activities for traders.
Integrating TWAP in Liquidity Pools
Osmosis developers scheduled the Neon upgrade at block height 7937500. The statement illustrated that the upgrade aimed at enabling system features would occur on January 23 at 1600 UTC. The primary target of the upgrade is integrating the geometric time-weighted average pricing (TWAP) within the liquidity pools. TWAP is considered the average asset’s pricing over a defined time. The TWAP strategy targets minimizing the large order’s effect on the market by splitting it into smaller quantities.
Wading to the upgrade, Binance considers the TWAP upgrade to be set to harmonize the execution intervals over time. The developers explained that the upgrade would enable protocols established upon the Osmosis to embrace a pricing mechanism that offers appropriate concentrated liquidity to the users. The resulting concentrated liquidity is set to optimize capital efficiency by utilizing a DEX yielding improved rewards to the liquidity pools.
The statement conveyed by the developers revealed that the liquidity pools involve tokens remitted to the DEX by the user. Often, the users are incentivized to become liquidity providers to earn free tokens or a portion of the transaction fees.
The upgrade will ease the pricing ticks to avert liquidity attacks where exploiters trigger upward price manipulation. Its accomplishment will shield DEXes from bad actors that have in the past stolen $100 million through upward price manipulation.
Importance of Neon Upgrade
The scheduled Neon upgrade is set to integrate a downtime detection feature. Its introduction will help indicate when the Osmosis network is unavailable for engagement or out of action. Its accomplishment will help shield other lending platforms from exposure to improper liquidations, particularly those reliant on the Osmosis pricing data.
The Monday upgrade is critical to ensure the system’s preparedness for the scheduled interlink with Mars Protocol, which facilitates borrowing and credit lending.
The developers warned that Osmosis DEX would be unavailable along with governance and staking till the completion of the Neon upgrade.
Meanwhile, OSMO tokens suffered a 4% decline in a day to exchange at $0.7965 yielding a total market capitalization of $392 million, almost 90% down from the $3.15 billion at its peak in March 2022.