November 23, 2022

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UMA Crypto – Universal Market Access, New Revolution In Derivatives Trading

UMA Crypto protocol allows investors to engage in the global derivatives market regardless of their financial status, background, or country by employing blockchain technology and smart contracts.
UMA Crypto

Many items in the global derivatives market can only be traded in certain countries. By making derivatives available to ordinary traders all across the world, UMA Crypto (Universal Market Access) aims to overcome this problem.

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What Is UMA Crypto – Universal Market Access?

Universal Market Access, often known as UMA, is widely regarded as the world’s largest asset manager for digital currencies. It was established in 2018 following the meteoric rise of Ethereum. At its inception, it was intended to be used for the development of synthetic assets on the Ethereum blockchain, and it also served to bridge the gap between traditional finance and the blockchain sector through the use of a financial contract. Universal Market Access has also enabled users to emulate any other assets now accessible on the market, further establishing itself as a decentralized financial contracts platform.

UMA Crypto’s infrastructure makes it easy for developers to make and manage their own derivatives and other DeFi products on the Ethereum network. The protocol has customizable contract templates that developers can use to make derivatives for almost any kind of asset, even ones that most people can’t get their hands on.

Importance Of UMA Crypto In Derivatives Market

All technological and financial impediments to derivatives trading are removed by UMA Crypto. Accredited investors used to be the only ones who could make these high-return investments. An accredited investor must have at least one million dollars in assets. As a result, the ordinary investor would be unable to participate in this activity. Universal Market Access, on the other hand, enables anybody to develop and build universally accessible financial products. As a result, the entry barrier into the world of financial derivatives is lowered, allowing new investors to get exposure to assets that would otherwise be out of reach.

How Does UMA Work?

There are a number of unique protocols that work together to help UMA Crypto achieve its aim of delivering financial services to the rest of the globe. The key components the network is built around are

  • Synthetics: Synthetic assets are intended to track the values of any underlying asset, such as a company’s stock, commodity, or cryptocurrency. Developers can create a synthetic asset utilizing the UMA Crypto protocol as long as the underlying asset’s price information is accurate and publicly available. What’s more, synthetic tokens may be constructed to monitor virtually any type of data. For example, you might build a synthetic token that monitors the price of Ethereum Gas fees or the market capitalization of DOGE. As with cryptos, these tokens have a store of value and are permissionless, accessible, and decentralized.
  • Governance Rewards: Liquidators can get the collateral of an investor by liquidating their position and settling the loan on their own behalf. A dispute can be raised, however, if a party believes that the position should not have been liquidated, and this must be done within a specific amount of time. The authenticity of the liquidation is then checked by network members (disputers) against their own price feeds. If a disagreement arises, holders of the UMA token are asked to vote on what they feel the asset’s price was at the time of the dispute. The disagreements are resolved inside the network based on the input of the parties involved. In exchange for their engagement, token holders are rewarded. This procedure also prevents a variety of other issues that are commonly seen in networks.
  • Price Oracle: Oracles are used extensively in UMA Crypto for a number of purposes. Oracles are off-chain sensors that can send and receive data between blockchains. For real-time valuation, settlement, and dispute resolution, the network presents a trustworthy oracle. There are other price feed oracles that rely on economic incentives to verify authenticity via the Data verification Mechanism (DVM). Part of this method entails ensuring that the cost of corruption is greater than the profit that may be made through illegal activity.

What Is UMA Token?

UMA is the Universal Market Access system’s native governance and utility coin. This ERC-20 coin is compatible with all Ethereum-based DEXs and may be held in ERC-20 wallets. UMA is also utilized in the network’s community governance system to pay fees, generate synthetics, and collateralize oracles.

UMA Crypto

TOKENOMICS

The UMA token is a critical component of the UMA ecosystem since it ensures the economic security of the UMA smart contracts and oracle system. The UMA token’s purpose is to ensure the security of the optimistic oracle using a completely decentralized and permissionless mechanism. UMA’s DVM is aimed to provide an economic assurance about the expense of corrupting the oracle and the profit gained by the corruptor.

The Data Verification Mechanism (DVM) assures that the cost of obtaining 51% of UMA tokens is greater than the profit made by corrupting the DVM, as determined by the collateral held in UMA’s financial contracts. This is accomplished by the imposition of an inflationary incentive (currently 0.05 percent of the total network token supply), which is awarded pro-rata by stake to voters who participate and vote accurately.

Voters will vote accurately as long as there is an honest majority. As the aggregate value of collateral held in UMA increases, the UMA token’s value must increase to ensure the DVM’s security. To maintain this imbalance, the DVM may levy fees on financial contracts that are used to purchase UMA tokens.

There are now 63 million UMA tokens in circulation, with a supply ceiling of about 100 million.

PERFORMANCE HISTORY

When UMA went public in May 2020, it had a price of $1.16. Although it spent the whole month of June that year above its initial value, the UMA coin price eventually settled at $1.30 and $1.60. Things began to go forward in earnest in July. UMA began the month at $1.82 and ended it at $4.33, an almost 140 percent rise.

Late August 2020 saw a true bull run for the cryptocurrency, and by the conclusion of trading on 1 September, it had risen moreover 2,000 percent from its May low. However, on 23 September, it had returned to below $10. It began the year 2021 at $7.64, and an intraday high of $10.35 on 4 January was the first time since the end of September that it had broken past the $10 barrier.

It reached an intraday high of $43.37 in February, a phenomenal rise of about 300 percent. Although it could not hold that level, closing at $33.78 on 4 February and then falling to an intraday low of $27.29 on 7 February. the fact that it remained between $20 and $30 till the end of May 202.

Following a series of ups and downs during the remainder of the year, the price remained between $10 and $15 for the remainder of the year. The crypto meltdown in the first quarter of 2022 drove the price down to $4.83, following which it fluctuated between $7.5 and $10 at the start of the second quarter.

DEVELOPERS

Allison Lu and Hart Lambur, two ex-Goldman Sachs traders, created UMA in 2018 with the purpose of allowing users to transfer risk over the internet without the need for a central authority. The team used traditional finance derivatives as inspiration to create an open-source protocol that allows anybody, anywhere to design and implement trustless financial contracts.

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