What Is UMA (UMA)?
UMA (UMA) is an open-source protocol based on the Ethereum network, that allows anyone to build their own financial contracts and create synthetic assets. The main goal of the UMA project is to facilitate a decentralized architecture that can grant universal market access to DeFi markets.
The key to mass adoption of cryptocurrencies is in part their utility and the relevancy of their use cases. As the DeFi sector becomes more popular, UMA aims to make the DeFi market more accessible to a wide range of demographics.
UMA protocol allows users to create different financial contracts for different use cases and purposes, and digitize any real-life value like futures, CFDs, crypto assets, and other financial derivatives. These financial contracts can be self-fulfilling, self-executing, and self-enforcing, while users can run them on the Ethereum network. Users can also create their own synthetic assets.
Synthetic assets are an asset class that mimics the value of another asset. They are created through the process of tokenization of real-life values. That is how, for instance, you can invest in crypto assets with synthetic asset investments, and still have ownership over that asset even though you didn’t buy it. Since UMA runs on the permissionless Ethereum blockchain, anyone in the world can create financial contracts and develop synthetic assets with the UMA protocol.
How Does UMA Work?
To enable easy and user-friendly creation of synthetic assets and smooth design of smart contracts, UMA relies on a complex architecture model with two core components, Priceless Financial Contract Designs and a Decentralized Oracle Service. Priceless Financial Contract Designs contain templates for financial smart contracts that exist on UMA, allowing users to design and develop synthetic assets.
The oracle system also has two core components: the Optimistic Oracle Service and the Data Verification Mechanism. The DVM is used for disputes and liquidations, while it also deals with synthetic tokens after contract expiration when settlement is required. UMA relies on Sponsors, Liquidators, and Disputers as integral actors on the network. Sponsors create synthetic tokens, Liquidators can liquidate positions, and Disputers can disagree with the decision of Liquidators.
Liquidators can choose to liquidate a position for contracts that are not appropriately collateralized based on the price index of the given synthetic asset. Liquidators then place a liquidation bond on the contract in question and Disputers can question Liquidators’ decisions and initiate voting. UMA holders can vote, with their voting power being proportional to their UMA balances, and decide on the price at a given timestamp.
Who Are the Founders of UMA? (History of UMA)
Universal Market Access officially launched in 2018 and was co-founded by Hart Lambur and Allison Lu. Lambur is a computer scientist who is also the CEO and the founder of Risk Labs, which is in charge of UMA project development.
Lu held a position as a vice president of Goldman Sachs and has a degree in Economy and Management from MIT. Before co-founding UMA, Allison Lu worked as an advisor at One Daijo, a lending protocol based on the Ethereum blockchain.
The project’s main goal is to grant access to decentralized markets on a global scale and enable anyone to create synthetic assets.
What Makes UMA Unique?
As its very name reveals, UMA aims to create universal market access and grant anyone the necessary tools and resources to create their own financial contracts and design synthetic assets. The main goal is to democratize financial markets and lower the entry barrier through the medium of the UMA protocol, which allows users to tokenize derivatives from traditional financial markets.
With the UMA protocol, anyone can create synthetic assets and tokenize cryptocurrencies, CFDs, and other financial derivatives. That way, UMA users can own Bitcoin for example, without holding the actual cryptocurrency. By lowering the entry barrier, UMA is clearing the path for institutions and individuals from developing economies, allowing them to have an equal chance of owning a financial derivative through tokenization.
What Gives UMA Value?
UMA derives its value from its technical capacity, technology, use case, and mainstream adoption. The intrinsic value of UMA is defined through its innovative technology and the relevancy of its utility, which is how UMA market value can also be influenced. The intrinsic value of UMA often doesn’t coincide with the price of UMA in the market, mostly due to the high volatility in the cryptocurrency market.
UMA price depends on a great number of factors, including the activity of the dev team, upgrades and updates, roadmap developments, partnerships, institutional investors, mergers, new features, and other important news and events.
How Many UMA (UMA) Coins Are in Circulation?
There are currently 89,290,533 UMA in circulation out of a total of No data UMA. The project was launched with an initial supply of 100 million UMA, but there is no hard cap on the max supply of tokens as inflation is used to reward network participants who vote correctly in the DVM. This inflation is currently set at 0.05%. However, the protocol may also charge fees on financial contracts, which it uses to buy and burn UMA. Thus, the supply of UMA can be inflationary or deflationary, depending on the amount of value locked in the protocol and the number of UMA holders voting.
The number of tokens in circulation multiplied by the current market price equals the market cap. The market cap ranks the crypto in comparison with other cryptocurrencies, and also determines its market share and dominance.
Other Technical Data
The main use case of the UMA token is participation in network governance, as UMA holders can propose and vote on changes to the protocol, which includes changes to network parameters. Holders can also vote on timestamped prices when Disputers call for voting on liquidation bonds. Voters and UMA holders can earn rewards based on their staked UMA tokens.
UMA can also be traded in the cryptocurrency market, while traders can make returns based on the difference between the buying and selling prices.
How Is the UMA Network Secured?
UMA is a protocol based on the Ethereum network, so UMA is secured by the same consensus mechanism that Ethereum uses. Proof of Work supports mining operations on the Ethereum blockchain, while the Ethereum dev team is working on a major transition to Proof of Stake with the next upgrade, Ethereum 2.0. Once Ethereum transitions to the PoS consensus mechanism, UMA will be secured through the PoS protocol.
UMA also performs regular audits to ensure that smart contracts are functioning properly.
How To Use UMA?
Anyone can use UMA to create synthetic assets and democratize the way traditional financial markets work. UMA protocol creates a user-friendly environment where users can easily create financial contracts and tokenize any real-life value for the purpose of creating universal market access.
Network participants, including voters, can also earn rewards based on their activity and the number of UMA tokens staked for the sake of voting and supporting network governance.
How To Choose an UMA Wallet
UMA is an Ethereum-based token, so you can safely store it in wallets that support ERC-20 tokens and ETH. The type of wallet you choose will likely depend on how much UMA you have to store and what you plan to do with it.
Hardware wallets or cold wallets like Ledger or Trezor provide the most secure option for storing cryptocurrencies with offline storage and backup. However, they can require more technical knowledge and are a more expensive option. As such, they may be better suited to storing larger amounts of UMA for more experienced users.
Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of UMA or more novice users.
Online wallets or web wallets are also free and easy to use, and accessible from multiple devices using a web browser. They are, however, considered hot wallets and can be less secure than hardware or software alternatives. As you are likely trusting the platform to manage your UMA, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts of cryptocurrencies or for those making more frequent trades.
Kriptomat offers a secure storage solution, allowing you to both store and trade your UMA tokens without hassle. Storing your UMA with Kriptomat provides you with enterprise-grade security and user-friendly functionality.
Buying and selling UMA, or trading it for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.
UMA: Mining or Proof of Stake?
UMA can’t be mined in the traditional sense of the word, like Ethereum or Bitcoin. UMA announced a program called Developer Mining where developers can deploy useful financial contracts and get rewarded based on the rate of use. UMA can also be staked for the purpose of network governance and voting on prices of synthetic assets in liquidation disputes in order to earn rewards.
UMA runs on the Ethereum blockchain, which is based on the Proof of Work consensus mechanism and depends on the power of miners to validate transactions and secure the network, but UMA is not mined in that system.
Conclusion
UMA is one of the top projects hosted on the Ethereum blockchain with a relevant use case and strong utility. As synthetic assets are gaining popularity, UMA might become a more popular asset, which may affect UMA’s price in the market as well. With the goal of creating a decentralized financial market with free access for all thanks to low entry barriers, UMA is working on globalizing tokenization and accessibility to decentralized finance.
As DeFi becomes more popular, UMA could become a valuable asset in the long run, thanks to its technology and utility.
Join the crypto revolution and start your UMA (UMA) journey today!
