The cryptocurrency industry is going through what many refer to as the DeFi era. In the past three years, the number of DeFi projects launched has been extraordinary, with many of these projects solving real-life solutions. This is what we need to help the cryptocurrency industry go mainstream.
However, there is always a project that always stands out from the rest whenever we experience a transformation of this magnitude. In this case, that project is UMA.
Creating one of the most innovative DeFi projects was conceived when Hart Lambur and Allison Lu met on the trading grounds of Goldman Sachs, where Lu worked as vice president.
The goal of this platform is to make everyone have access to financial risk. This can be seen in their mission statement, “make it possible for everyone in the world to access financial risk.”
In 2018 the UMA protocol was launched, and as they say, the rest is history.
Universal Market Access or UMA is a protocol built on the ethereum blockchain that allows users to develop collateralized synthetic tokens that can track any asset’s price. With UMA, you can virtually trade anything (stocks, bonds, securities, or other cryptocurrencies) without owning any of these assets. All you need to trade these assets are ERC-20 tokens.
The UMA protocol has its native governance token (UMA token).
UMA tokens are used to govern and fulfill price requests for the UMA platform using the Data Verification Mechanism (DVM).
In this article, we will be reviewing the UMA governance token and not the UMA protocol as a whole.
What is UMA(UMA) Token?
UMA token Logo
UMA is an ERC-20 token used to govern the UMA protocol. It is used to vote on upgrades to the platform and the price of an asset.
Only holders of UMA tokens have the right to vote on upgrades and the price of assets on the protocol.
UMA token holders have two practical responsibilities: to vote on changes or upgrades to the platform and to vote on the price of an asset when requests are given to the DVM.
There are different types of changes UMA holders vote on. Introduction of new assets to the platform via the token facility smart contract, removal of unused smart contracts and sometimes even vote on the shut down of a smart contract if the need arises.
Upgrade proposals can be presented by any user. This is done by applying public voting; all these are done on the UMA protocol.
For a submitted proposal to be approved, it needs to get at least 51% of the votes and remember, one token equals one vote. When the public votes in favor of any proposal, the development team must implement the changes immediately.
However, there is a caveat; the development team can also reject the proposed changes even if it has the majority vote.
This is why most people don’t consider the UMA protocol completely decentralized. For a platform to be truly decentralized, the development team wouldn’t have any say in the decisions that affect the operations of the platform, it is left to the public to decide.
However, there’s an upside to participating in the voting process. Active voters are rewarded.
The voters are rewarded 0.05% of the supplied 100 million UMA tokens. This is distributed proportionately to the percentage of the total supply the user staked when voting. UMA token holders who didn’t vote are not rewarded with this inflation. This is why every token holder is enthusiastic about voting for proposals on the UMA platform.
How UMA DVM Works
UMA’S DVM (Data Verification Mechanism) was created on the presumption that all oracles price feeds are corruptible. According to the UMA team, any smart contract that relies on off-chain data can be manipulated at the right price. Smart-contracts haven’t been safe, and there’s no law against bribes on the blockchain.
UMA’s DVM aims to keep off-chain price feeds incorruptible by making sure the cost of corruption (COC) is greater than the profit from corruption (PFC) at all times.
The cost of corruption is the smallest possible successful bribe to corrupt an oracle.
The profit from corruption is the maximum amount a user can gun from corrupting the oracle.
By creating an environment where the cost of bribing an oracle is greater than the maximum profit to be made, the DVM ensures off-chain price feeds on the UMA smart contracts are incorruptible.
Metrics of UMA Token
UMA token currently stands at $8.43/0.00045160 BTC on CoinMarketcap. The total supply of UMA tokens is 101,121,244 UMA, with 55,496,613 UMA currently in circulation.
UMA is the 46th most valuable coin, according to Coingecko, with a Market Cap of $433,177,085/23,979 BTC. The 24-hour trading supply of UMA tokens is $15,916,064/881 BTC.
- Total UMA supply: 100 688 646 UMA
- Amount set aside for Uniswap – 2 Million UMA
- Amount set aside for developers and users – 35 Million UMA (Distribution specs not finalized and will be subject to vote)
- Future token sales – 14.5 Million UMA
- Founders, Early contributors, and Investors – 48.5M UMA
What Is The Use Of UMA
When contracts are disputed, token holders will vote on price requests via DVM. Users that vote correctly earn a reward of 0.05% of the total supply of UMA tokens.
This is the main use for UMA tokens. Holders of the token have a say in the type of contracts that can access the UMA protocol, and upgrades to the platform. These issues are resolved through the UMA Improvement Proposal Process also known as UMIP.
Who Created UMA?
UMA was created by two former Wall Street heavyweights. Hart Lambur the founder of UMA was a former trader at Goldman Sachs before he ventured out on his own to create his first company which he sold to go into cryptocurrency.
In 2017 Lambur created a cryptocurrency-focused company called Risk Labs, got some VC funding, recruited Allison Lu a former Vice President at Goldman Sachs, Regina Cai a former financial analyst and financial engineer, and created the UMA project.
What Is The Future of UMA?
The future of UMA may be more exciting than anyone thought. People ignored the project when it launched, but some eyebrows were raised when it created a tradeable token against the top 500 US stocks.
They got everyone’s attention in 2020 when they created the first synthetic token called ETHBTC that tracked the performance of Ethereum Vs. Bitcoin.
Now, the project is going mainstream with listing in the top cryptocurrency exchanges. Now we see a project with all the features of being the real heavyweight in the future, and with 14.5 million tokens set aside for future sales, the founders know the future is bright.
UMA is a unique project with amazing potentials. With a qualified team with the experience to pull off wonders in the financial world, after all, they were former Wall Street heavyweights. The connection to make this go mainstream is available.
Since the launch, investors have made 100 times their initial investment and the project is still relatively unknown in the industry. However, with amazing features and a strong team like that of UMA, we expect an even bigger return on investment when this project will inevitably go mainstream.
The future is bright for UMA as it could be the shining star to lead the DeFi industry to the promised land.