What is UMA?
UMA is a protocol for creating synthetic assets. With derivates it allows any user, entity, institution or DAO to access any type of financial risk.
UMA token is used for
- Vote on data points
- Earn fees from providing data points
- Protect the Oracle from Sybil attacks
- Governance of the ecosystem
How UMA works
UMA smart contracts consists of
- Public addresses of both parties
- A margin account for both partys.
- Calculation of economic terms for the agreement
- Choice of oracle
- Add, withdraw, margin balance, remargin, terminate, settle
The smart contract becomes the counterparty of the derivates agreement. Without custoding or owning the underlying asset.
- A smart contract would allow anyone to easily short for example a basket of altcoins.
- The taker enters into a derivative contract with any maker willing to take the other side.
The oracle uses a Schelling Game with a token. Tokenholders vote and get rewarded for voting with the majority and penalized for not doing so. Similar to Kleros.
- Someone request an off-chain data point.
- The request is batched with other requests into a voting period.
- Token holders commit a hash to the data they believe is valid during the period.
- At the end of the period votes are revealed.
- Token balances are snapshotted.
- If > 50% vote for the same data point. That data point is returned to the requester. The voters for that data point get rewarded and the others get penalized.
- If < 50 vote for the same data point. A median of the votes are returned. voters between 25th and 75th percentile are rewarded.
To protect the Oracle from Sybil attacks UMA uses an AMM that will buy back the token and burn it to not go below a certain price. Making it economically non-viable to attack it.
More on this in the white paper.
UMA whitepaper summary
- Different use cases for synthetic assets and tokenization of risk.
- How the protocol and smart contracts work.
- Potential problems like oracles and margin security.
- Another whitepaper will be published on an oracle solution
- Future work: A blockchain agnostic approach.
Total: 100 688 646
- Uniswap – 2M
- Developers and users – 35M (Distribution specs not finalized and will be subject to governance)
- Future token sales – 14,5M
- Founders, Early contribs, Investors – 48,5M
Founders, early contributors, and investor tokens are transfer-restricted until 2021, and all individual token grants are subject to a 4-year vesting schedule.
What’s the story?
- DeFi Hype
- Oracle and synthetic assets in one