ProtoRev and Osmosis

The "Protocol Revenue" module on Skip Protocol and why it's great for Osmosis

What does it do?

It's a "privileged" automated trading system that makes revenue for Osmosis.
It automatically conducts arbitrage and extracts the discrepancies in value between liquidity pools. Returning that value to OSMO token holders.

Why is it innovative?

Game changing industry idea: to collect the value that is normally extracted by external bots and third party agents and keep that revenue within the Osmosis protocol itself.

What's stopping other DEXs doing the same thing?

Osmosis is an app chain within the Cosmos and, as such, it knows much more about the transactions within it's own blockchain. In contrast, Ethereum or Solana know very little about the types of transactions within the applications they host. There is also no incentive for those blockchains to prioritise one DEXs transactions over another.
Osmosis is both a DEX and a blockchain so has complete control over the order of transactions with each block (it's the ordering of transactions that makes this possible).

How will it work?

ProtoRev looks for small differences in the value of the same token between liquidy pools and conducts it's own trading strategy to profit from those discrepancies.
Important : As a code module, Osmosis then promotes those transactions to the front of each block.
The promotion of ProtoRev transactions is effectively the same as "MEV" (Miner Extractable Value)
MEV (front running other users transactions for profit) is normally viewed as a bad thing when conducted by external third parties, but when conducted by the internal protocols "for social good" it's incredibly innovative.

Timeline:

By Jan 2023 (Skip has nearly completed the ProtoRev module) and Osmosis labs published the following:
- X Post from Osmosis Zone
In March 2023 Skip ProtoRev went live:
- X Post from Skip Protocol
By September 2023 the effects were starting to show: Skips proto brings 350% higher revenue than transaction fees
- X Post from Skip Protocol
it would seem that between September '23 and May '24 ProtoRev was accumulating OSMO.
On 15th May 2024 the V25 upgrade enabled Osmosis to conduct burn mechanisms on its own OSMO token.
according to X, 1.2 million OSMO was burned immediately.
- X Post from Osmosis Zone
However, according to on chain analytics 1.8 million was burned by 21st June 2024 (as the initial burn), and a post from Osmos confirmed this
- X Post from Osmosis Zone

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