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– TIMESTAMPS –
2:04 What is UMA?
4:27 How UMA Works
7:25 UMA Tech Framework
10:32 Priceless Oracles
12:28 UMA Token
14:36 Price Economics
16:26 UMA Speculation
⛓️ 🔗 Useful Links 🔗 ⛓️
► UMA Website: https://umaproject.org/
► UMA Docs: https://docs.umaproject.org/
► UMA Whitepaper: https://github.com/UMAprotocol/whitepaper/blob/master/UMA-whitepaper.pdf
► OTC Derivs Market: https://www.fimarkets.com/pagesen/OTC_derivatives_CCP.php
► UMA Token Sale info: https://thedefiant.substack.com/p/uma-token-sale-also-launches-new-689
📝 What is Universal Market Access 📝
It is a decentralised protocol for creating financial markets that are globally accessible. It provides a framework for users to create synthetic derivatives on the Ethereum protocol.
It allows any two users to enter a financial contract. One that does not rely on some centralised entity to enforce. One that is secure with economic incentives alone.
🖥 How UMA Works 🖥
UMA defines an open-source protocol that allows any two counterparties to design and create their own financial contracts. This is all through the use of decentralised Ethereum Smart contracts.
Each UMA contract comprises these five separate components.
– Public addresses of all the counterparties
– Margin accounts for each of these counterparties
– Economic terms to calculate the value
– Smart contract functions to maintain the margin balances
– An oracle that will provide secure and verified offchain data
These components help to ensure that the contract is able to enforce the rules agreed.
🤔 Priceless Contracts 🤔
These priceless financial contracts are designed with mechanisms in order to ensure the counterparties will always collateralise their positions without relying on any of these price feeds.
The point here is that Oracles are not needed unless there is ever a dispute about a liquidation. However, the economic incentives built into the protocol are designed in order to make the need for this dispute process infrequent.
This is all through the use of the Dispute Verification Mechanism or UMA’s “DVM”. This is used in order to settle disputes that there may be between two contracting parties aruond the real price of the asset on conclusion of the contract.
The genius of this DVM oracle design is that they have developed a game theoretic equilibrium where the cost of manipulating the oracle is always greater than the profit that could be earned by corrupting the oracle.
💲 UMA Token 💲
The UMA token is an ERC20 token on the protocol and its main purpose is as a utility token. There was an initial supply of 100 million UMA.
It had an initial uniswap listing back in April where they sold off 2 million tokens for a price of 26 cents per token. You will also see that there is over 48% that is reserved for private backers and investors
When it comes to the use cases for UMA, there are three main functions:
– Governance: Where users can earn inflationary rewards for participation
– Disputes: Where tokens are used to incentivise price requests during these disputes.
– Fees: I mentioned this before but these are fees that are burned to increase the price.
📈️ Tokenomics 📈
Firstly you have the protocol inflation which is currently 0.05%. This is actually really mild when compared to most other tokens and is even less than inflation on the likes of Bitcoin.
You also have those burns that are taking place in order to decrease the outstanding supply and hence increase the price. The exact amount that is charged in fees will increase proportional to how much is being locked up in the contracts
Taking a look on the demand side, as more people are entering these contracts, they will need to buy UMA in order to pay the fees for potential disputes.
You then also have that governance demand which is a bit harder to determine. You will have to take judgement call around how much you really value this and the benefits that come from being able to vote on those UMIPs.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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