UMA: Everything You Need To Know
The cryptocurrency industry is currently experiencing a rise in DeFi projects. People are so interested in decentralized financial services that the total amount of blocked funds beats the $9 bln level. Some projects don’t bring any changes, but some challenge the traditional financial system and offer new technologies considered fiction 5 years ago. One of these projects is the UMA Coin. It offers solutions for creating synthetic tokens on an advanced blockchain with economic guarantees. Let’s take a closer look at the digital coin.
What is Universal Market Access
The Ethereum White Paper talks about “giving users more advanced methods of managing and signing smart contracts using personal funds.”
The challenge for Universal Market Access (UMA) is to expand these terms with new specs for decentralized contracts. Earlier, individuals and legal entities could buy or sell only assets supported by local authorities. Institutional investors could get around these problems by using over-the-counter derivatives. However, ordinary traders didn’t have access to them. And UMA smart contracts allow every trader to profit from buying or selling assets.
Technical features of UMA
UMA is a decentralized finance protocol that allows you to create, buy and manage financial contracts based on the Ethereum Virtual Machine (EVM). It supports offline margin accounts, which empowers every investor.
With the UMA ecosystem’s help, anyone can create synthetic tokens and link them to any asset. In other words, UMA allows you to trade any goods using ERC-20 coins. Further, the creator doesn’t actually affect the asset itself. An internal UMA token is used to manage the protocol and ensure the operation of the price oracle.
UMA places exchange contracts on a distributed ledger. The user deposits the required security into his account in the blockchain, after which he creates a synthetic token based on it. This creates conditions for the issued coin and ensures their performance through financial incentives. And instead of looking for the underutilization of the issuer, UMA holders can freely recognize and reject such creators. Hence, the oracle is used only as an arbitration.
Derivative exchange contracts based on Ethereum are called synthetic tokens in the UMA blockchain. They have three key components:
- price identifier;
- the duration of the contract;
- security amount.
The UMA network consists of three elements:
- infrastructure for the creation of synthetic tokens (Token Facility);
- checking mechanism (oracle);
- control protocol.
With the help of the Token Facility, users can create synthetic contracts. Anyone can create a secured smart contract by defining the above points. Other users can join this contract by posting security to issue more tokens. Such partners are called symbolic sponsors.
UMA differs from other decentralized protocols in that it doesn’t require the constant filing of prices. Once a fraudulent borrower has been identified, any user can file a security liquidation complaint. In this case, the smart contract owner has the right to contact the verification mechanism (oracle) and contest the complaint. If the oracle found that the liquidator lied, he will be punished by a fine, and the creator of the synthetic contract will receive a reward from it. If the disputant was mistaken, then the entire withheld security is given to the liquidator.
Holders of UMA tokens undertake to vote on the asset’s price when submitting a request to the oracle, as well as for changes to the current protocol. Any user can offer ideas for improving the blockchain. The standard consensus rules apply here: 1 token = 1 vote. 51% of the coins take part in the voting. The so-called “risk laboratories” may also reject the proposed idea, even if most token holders accepted it.
Besides, voting members receive a reward for their participation. It motivates inactive coin holders to participate in the governance of the UMA protocol.
Team and developers
The history of the UMA project begins on the New York Stock Exchange. Former Goldman Sachs trader and programmer Hart Lambour sold his past business finance management platform Openfolio. After that, he founded Risk Labs, attracted $4 mln in start-up investments, and began work on a new digital currency. For this, Lambour gathers a team of 7 professionals. It’s worth highlighting former Goldman Sachs VP Allison Lu and financial analyst Regina Tsai, who was educated at Princeton.
In December 2018, the White Paper of a new project was published, and in the spring of 2019, UMA appeared on stock exchanges. The first 2 million coins were sold at $0.26 apiece. The remaining 98 million UMA was distributed according to the following scheme:
- 48.5 million to the creators of the project;
- 35 million to developers;
- 14.5 million for future sales.
Crypto investment funds Brain Capital, Box Group, and Coinbase Ventures quickly drew attention to the new project. They were interested in a new protocol that allows you to tokenize anything. Besides, there’s a large trading platform, one of the first to add support for the UMA token.
Previously, people didn’t pay enough attention to the UMA project until a tradable token appeared in March 2019, representing the largest American companies’ shares. After that, as we said before, at the end of 2019, a protocol for creating synthetic tokens appeared. And in May 2020, the first real asset appeared – ETHBTC. It was designed to track the performance of Ethereum versus Bitcoin.
In July 2020, UMA introduced synthetic stablecoins – yUSD. It can be used as a loan with a fixed interest rate and a fixed maturity. In this regard, UMA compares favorably with the Compound platform, which issues loans in Tether (USDT) currency because they differ in a variable interest rate and an indefinite maturity.
The project hasn’t yet presented a more detailed roadmap. Still, now we can say that soon, the UMA token will appear on even more exchanges. It’s not surprising because one of these sites is an important investor in the DeFi project.
It’s unclear whether the UMA system should be viewed as a DAO (Decentralized Autonomous Organization). But holders of internal tokens are likely to be critical in the growth of the protocol. Further, the platform users will become much larger because 14.5 million tokens are reserved for future sales.
What exchanges is UMA traded on
The UMA token is now listed on many major marketplaces. Users note the speed and convenience of transactions on exchanges with high liquidity. It means that there’s a lot of interest in the project. Therefore, we should expect the appearance of the token at Binaryx.
Available UMA Wallets
Decentralized finance tokens are created according to the ERC-20 standard. Hence, you can store UMA coins on any wallet that supports Ethereum. Among others, Trezor and Ledger devices are worth noting, and Exodus and Atomic Wallet online safes.
The most popular UMA storage, however, is the Metamask web wallet. It’s designed to work with DeFi protocols. You can also store any ERC-20 tokens here. The wallet has the following benefits:
- the ability to use assets in any dApps that interact with Metamask;
- a convenient browser extension;
- protection of coins due to the storage of keys on one device.
Another argument for token safety is open source. Only at the beginning of working with the wallet, you need to add a UMA coin. Still, other supported assets can be added or hidden at any time.
Pros and cons of UMA
|High demand for synthetic tokens among investors||Complexity of the project concept|
|Community management||Most of the assets are holded by the creators of the network|
|High level of security||High competition in the crypto field|
|Support for large crypto projects|
UMA is a truly unique DeFi project with incredible potential. In this respect, it can be compared to the Ampleforth protocol. Besides, who else could be involved in the work on the token, if not the former employees of Goldman Sachs.
Those who were the first to invest in a promising project received a 100-fold return on investment. And it seems that despite such successes, the UMA project remains a no-name (based on the level of approval of the protocol by the crypto community, as well as interaction in social networks).
Some traders are also attracted by the fact that analysts compare UMA with another synthetic token generation protocol – Synthetix. However, two factors put Universal Market Access one step further. The first is having a more skilled team. And the second is the ability to use almost any digital currency as a security, not just an internal token. Besides, Synthetix relies much more on oracles than UMAs.
However, not everything is so good with the UMA. The fact that only 2% of the original total supply of 100 million tokens went up for sale on the exchange is like a slap in the face to the entire digital currency community.
Thug investors seem to be able to get out of Wall Street, but it’s impossible to wrest the Wall Street knife out of their hands. Encouragingly, a whopping 48 and a half million UMA tokens allocated to the project’s creators are currently closed until 2021. Also, the founders promised not to use these tokens when voting for important ideas.
The fact that they made a promise is good. After all, it’s preferable to have something locked in a smart contract. This even seems logical, given the team’s frequent references to their interest in complying with the cryptocurrency space agreements. On the other hand, UMA’s team has some contacts that are generally not available for most other cryptocurrency projects. Hence, this fact is somewhat alarming for potential investors.
So, the UMA project has three factors that affect its prospects:
- the project seeks to enter the derivatives market, which can be valued at between $500 trillion and over $1 quadrillion;
- UMA has a team with connections to bring the very parties that interact with this market to DeFi;
- reliable operating protocol.
All of this shows that Universal Market Access has a pretty good future ahead of it. Further, UMA could be the protocol that finally brings DeFi to institutional investors. And this is crucial to make DeFi the future of the financial world.