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What is Universal Market Access (UMA)?
Universal Market Access (UMA), is a decentralised financial contracts platform that was created to enable Universal Market Access (thus the name) through the creation of synthetic assets on the Ethereum blockchain.
The convenience of cryptocurrencies, as well as the relevance of their use cases, are important factors in their widespread adoption. UMA seeks to make the DeFi market more accessible to a wide range of demographics as the DeFi sector grows in popularity.
Synthetic Assets are traditional financial derivatives that derive their value from other underlying assets like merchandise, currencies, valuable metals, equities, and bonds. They try to attain similar goals as holding an asset, but without the need to hold the asset itself.
UMA, as a cryptocurrency, works on the Ethereum blockchain and develops a framework for securing “priceless contracts.” The protocol is governed by a decentralised worldwide network whose members come from various backgrounds.
Again, the priceless contracts are used by developers to build synthetic assets or contracts that monitor the value of an underlying asset, like a stock index, commodity price, or the worth of another cryptocurrency.
Who are the founders of Universal Market Access (UMA)?
H.Lambur and Allison co-founded Universal Market Access, which was launched in 2018. Lambur is a computer scientist and the CEO and founder of Risk Labs, that is in charge of the development of the UMA project.
Allison worked at Goldman Sachs as a vice president and graduated from MIT with a degree in economics and management. Allison served as an advisor at One Daijo, a lending protocol based on the Ethereum blockchain, before co-founding UMA.
The fundamental purpose of the project is to provide global access to decentralised marketplaces and to allow anyone to develop synthetic assets.
What makes Universal Market Access (UMA) unique?
Anyone can build synthetic assets and tokenize cryptocurrencies, CFDs, and other financial derivatives using the UMA protocol. The UMA Protocol encourages fair and transparent markets by eliminating any entry barriers across all financial markets, permitting any individual, organisation, or DAO to reach any sort of financial risk without relying on centralised systems or single points of failure. It gives customers unfettered access to short-selling, leverage, and “individually tailored and personalised risk” — such that, risk levels are suited to their specific needs.
Users of UMA can own Bitcoin, for example, without actually possessing the cryptocurrency. UMA is lowering the entry barrier to allow institutions and individuals across developing economies to have a fair chance of holding a financial derivative via tokenization by reducing the entry barrier.
The protocol employs unique technologies and economic incentives to retain collateral and precisely settle transactions fairly and securely while allowing users ultimate control over the conditions of their economic exposure.
Holders of UMA Tokens have some authority over the UMA platform. The holder’s vote to decide an asset’s valuation whenever the platform wants Data Verification Mechanism services. UMA asks for their vote through a chain request.
How Many UMA Coins?
Out of a total of 105,190,632.052221 UMA, 63,724,410 UMA are now in circulation. The project began with a 100 million UMA initial supply, but there is no hard limit on the total number of tokens because inflation is utilised to reward network individuals that successfully vote in the DVM. The current rate of inflation is 0.05 percent.
The protocol, which is used to buy and burn UMA, may, nevertheless, levy fees on financial contracts. As a result, relative to the amount of value locked in the protocol and the total number of UMA holders voting, the supply of UMA can be either inflationary or deflationary.
How does Universal Market Access (UMA) Work?
UMA depends on a complex system framework with two major components, Priceless Financial Contract Designs and a Decentralized Oracle Service, to enable easy and user-friendly production of synthetic assets and smooth design of smart contracts.
In the case of a dispute, UMA enables priceless financial contracts, which are smart contracts that simply require an on-chain price feed.
Economic guarantees and network incentives ensure that those using the system – referred to as “network actors” – engage fairly the majority of the time, but in the event of a malicious actor or an “ad hoc market event,” a dispute can be raised through UMA’s dispute resolution system, known as the data verification mechanism (DVM).
The Optimistic Oracle Service and the Data Verification Mechanism are two essential components of the Oracle system. The DVM is used to handle disputes and liquidations, as well as synthetic tokens if contracts expire and settlement is needed.
Liquidators, Disputers and Sponsors are all important players in the network of UMA. Sponsors can issue synthetic tokens, Liquidators can liquidate positions, and Disputers can challenge Liquidators’ rulings.
Liquidators may also choose to liquidate a position if the contracts are not properly collateralized depending on the synthetic asset’s price index.
Disputers can contest Liquidators’ judgments and commence voting once Liquidators place a liquidation bond on the contract in question. UMA holders can vote on the price at a specific timestamp, with their voting power proportionate to their UMA balances.
How to use Universal Market Access (UMA)?
UMA allows anyone to generate synthetic assets and democratise traditional financial markets. The UMA protocol establishes a user-friendly ecosystem in which users may simply build financial contracts and tokenize any real-world value to achieve universal market access.
Voters and other network players can earn incentives based on their engagement and the amount of UMA tokens invested for voting and reinforcing network governance.
How is the network of Universal Market Access (UMA) secured?
The network of UMA had 5 prominent network actors: token sponsors, liquidators, disputes, the data verification mechanism (DVM) and the
UMA token holders.
Token sponsors are those who lock assets/ collateral in a smart contract to generate synthetic tokens. They are in charge of ensuring that their positions are always overcollateralized, or else they will be liquidated.
The valuation of the collateral in the smart contract is constantly monitored “off-chain” by a solid infrastructure of “liquidators” who use “off-chain price feeds” to supervise if a position is appropriately collateralized.
Disputers are rewarded for keeping track of contracts leveraging UMA’s priceless financial contracts, whereas the DVM settles disputes by asking UMA stakeholders to decide on what the asset’s price was at a particular timestamp.
When a disputer is found to be valid, the DVM will compensate both the disputer and the concerned position’s token sponsor. The DVM will incentivize the liquidator, penalise the disputer, and the token sponsor will forfeit the funds in their position if the “liquidator” is determined to be correct.
The same consensus process that Ethereum employs secures UMA as well. The team Ethereum dev is focused on a major shift to Proof of stake which is Ethereum 2.0., while the mining operations on the blockchain of Ethereum are supported by Proof of work
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.
Conclusion
UMA is one of the most popular Ethereum blockchain projects, having a compelling use case and high usefulness. As synthetic assets grow increasingly popular, UMA may become a more popular asset as well, affecting UMA’s market price.
UMA is focused on globalising tokenization and accessibility to decentralised finance with the goal of developing a decentralised financial market with free access for everybody thanks to minimal entry barriers.
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