What Is UMA
UMA is short for Universal Market Access and is a decentralized financial contracts protocol for the creation of synthetic assets. It is based on the Etereum blockchain and was originally launched in 2018. Synthetic assets are a class of assets that represent different, underlying assets that have the same value. UMA enables its users to design and create self-executing, self-enforcing, financial contracts that are secured by economic incentives.
Since UMA runs on the permissionless Ethereum blockchain, anyone in the world can create financial contracts and develop synthetic assets with the UMA protocol. UMA allows counterparties to digitize and automate real-world financial derivatives, including futures, contracts for differences, or total return swaps. It also enables the creation of self-fulfilling derivative contracts. This impacts the UMA price.
Who Are the Founders of UMA
Hart Lambur and Allison Lu are the cofounders of UMA.
Lambur graduated from Columbia University with a degree in computer science. He is also the the CEO and co-founder of Risk Labs, the company responsible for the development of the Universal Market Access protocol.
Allison Lu has a degree in Economics and Management from MIT. Lu was the vice president of Goldman Sachs and worked as advisor at One Daijo, a lending protocol based on the Ethereum blockchain.
What Is UMA Used For
The UMA token is primarily used for governance and voting on the UMA improvement protocols.
It allows token holders to vote on UMA Improvement Proposals (UMIPs). Those who vote with the majority consensus are granted 0.05% inflationary rewards for participating in governance and helping keep UMA secure.
The token is also used for voting on price requests made to the DVM (data verification mechanism) through the voter "dApp" or decentralised application. To ensure the safety and security of the oracle-minimized financial contracts, the profit from attacking the contract has to be less than the cost of the attack. UMA tokens are used for voting on price disputes, and the cost of corruption is calculated as the value of 51% of all UMA tokens.
UMA enables investors of all sizes to trade any asset using ERC-20 tokens but without actual exposure to the asset itself. Smart contracts allow users to gain exposure to the price movement of any financial asset – provided a market maker on the platform is willing to provide exposure. Users can gain exposure that would otherwise be out of reach on centralized exchanges or over-the-counter (OTC) markets.
As a result, the UMA cryptocurrency token opens a world of possibilities for decentralized finance (DeFi).
UMA puts derivatives on the blockchain and creates a synthetic token for the asset when sufficient collateral is deposited. Instead of using a price oracle, UMA protocol offers financial incentives to its users for identification and liquidation of token issuers they believe to be undercollateralized.
The fact that everyone can have their own financial contracts and universal market access through contracts on the UMA protocol by using its governance token, affects the UMA price. This makes the optimistic oracle service and inflationary reward possible while using the open-source protocol.
As UMA describes, “Synthetic tokens are collateral-backed [ERC-20] tokens whose value fluctuates depending on the tokens’ reference index.” They have a price identified, an expiration date, and they have a collateralization requirement. Synthetic tokens are basically derivative contracts on the Ethereum (or another smart contract) blockchain.
UMA involves three elements: the framework for creating synthetic token contracts on the blockchain, the data verification mechanism (DVM), and the governance protocol.
Token facility refers to the smart contract on UMA that allows for the creation of synthetic tokens representing an asset. Anyone can create a smart contract within the facility by meeting the three characteristics: the price identifier, the expiration date, and minimum collateralization requirement. The entity that creates the smart contract is the Token Facility Owner.
Any other user can participate in the smart contract to issue more tokens by depositing collateral. These participants are known as Token sponsors.
UMA does not require a constant price feed for the protocol to operate. Instead, UMA incentivizes token holders to check that the issuer of that token is properly collateralized through checking the amount of collateral locked in the smart contract and then doing simple math to check if the collateralization requirements are met. If not, they can call for a liquidation of some of the issuer's collateral.
This is what makes UMA unique.
Where Can You Buy UMA
UMA has an available supply of 62,761,320 UMA and a total supply of 104,693,972.140622 UMA coins. If you want to buy, sell or trade UMA, you can do so on Binance, Coinbase Pro, OKEx, Bilaxy, Latoken, Bithumb, and Bkex.
Our step-by-step guide on how to buy UMA will help you get started!
