Hey folks, there have been a lot of misleading statements about the discussion between Cosmos Labs and the Osmosis team regarding a potential merger between the Cosmos Hub and the Osmosis chain, which I want to clarify. We take misleading information seriously, especially when being used as a weapon by the Osmosis team to achieve their desired outcome as they move on to new projects and hand Osmosis off to a maintenance team.
Context
The contention being made is that Cosmos Labs somehow misled the Osmosis team into believing that we would support their merger proposal in public, and then surprised them with a non-supportive response when the proposal went live. This is false.
Sunny and the team approached us in December with a proposal for an Osmosis-Hub merger, and we requested initial due diligence information, which they provided. This was a proposal between Osmosis and Labs, and involved different maintenance responsibilities and involvement from the team to the one that is on the forums today. We did not agree on any final terms and made clear that we could not support a proposal without presenting the idea to the ICF council. After presenting the high-level idea to the ICF, we definitively told the Osmosis team in February that we would not proceed or support it, as the cost and operational lift were deemed incompatible with our current priorities/vision. At this time, the proposal was not fully fleshed out, and we did not definitively agree on final pricing terms and other key details, as we disengaged prior to beginning work on a final decision document.
They decided to bring the proposal to the Hub without Labs as a party anyway, as is their right. Moreover, they did not ask for our feedback when they shared it with us less than 24 hours before posting it. So it should not be a surprise to them that we are still not supportive when the proposal went live on the forums.
What is happening in public
Ultimately, I see the attempt to paint our response as a “negotiating tactic” or “surprising” as a disappointing attempt to distract from the proposal itself and its weaknesses. We said no a year ago, a month ago, and we are still saying no. I know it is easier to take the path of drama and debate over past negotiations than actually absorb the feedback, iterate on the proposal, and move on. But my job is the boring one, doing the analysis, checking if it stands the test of time, and sharing hard feedback instead of just acting bullish and throwing money at things, no questions asked.
We have to ask: Is this structured in a way that can be executed successfully while maintaining accountability for all parties involved, with a strong supporting technical rationale? The Osmosis proposal must be held to the same level of scrutiny as the Stargaze proposal. Clear pricing rationale, clear accountability, and milestones for execution.
To be clear: we are not blocking this or even capable of blocking it because Cosmos Labs is not a party to this negotiation in the current proposal. We gave our feedback on the public proposal in the same way we did with Stargaze. It is entirely in Osmosis’s hands to take that feedback on board, iterate, or take it to chain as is. That is their call.
Reality Check
Back to the proposal itself, the factual basis for the Hub acquiring Osmosis at a cost of $22 million with no downside protection around migration is extremely weak. The proposal paints the merger as a savior of the Hub. I wish it could be, but I don’t see that. We have to grapple with the fact that the Osmosis DEX is not saving the OSMO token, and we don’t believe that it will save ATOM either.
The unfortunate fact is that Osmosis is on life support. Osmosis revenue is in decline, and there is no clear path for a migration to change that. In fact, the proposal transitions the DEX to a maintenance crew, allows all of the founders and team members to exit the project with liquid ATOM immediately, and completely offloads not only long-term risk but also short-term risks associated with the liquidity and technical migration onto ATOM tokenholders.
Ultimately, whether to take these risks is up to Cosmos Hub governance. We do not believe that it is in the Hub’s best interest to do so at $22 million, but in the event that the proposal does pass, we plan to support the migration as best we can.