Crypto technology is still very early and is susceptible to daily losses due to bugs, hacks, rug pulls and any other issues that may cause losing funds.
With these common problems arising in crypto space, UMA protocol created a product that gives benefits to its users as well as offers solutions with those underlying problems mentioned.
UMA has different products that can be very beneficial and offers solutions, one of them is the Protected Tokens.
Key pointers Benefits & Solutions UMA Protected Tokens can offer
Benefits;
To help users protect their assets,
Protect tokens from smart contract risk (hacks, bugs & rugs pulls) and user errors as it is backed by UMA's Optimistic Oracle.
The protected tokens can shield UMA's assets from theft or losses if the value of it has issues.
Solutions;
Can interact using protected tokens deposited in smart contracts without risking the collateral asset.
Recovery tokens can be held in any secure wallet to be used later to recover the protected tokens in case something bad happens (hacks, bugs, rugpulls or user errors.)
Users can create proposals to Optimistic Oracle if hacks, bugs or rug pulls happen to recover the funds.
The proposal will be disputed by the UMA Multi-sig committee team. Funds can be recovered once they agreed to the proposal
Withdrawable funds (after proposal disputed or if nothing happens) with or without waiting for contract expiry.
What is a Protected Token?
Protected token uses a long-short pair (LSP) of UMA contract that can wrap any ERC20 asset and create protected recovery tokens.
Protected tokens can be stored in different wallet addresses or smart contract systems that can act as an extra layer of protection which allows token recovery in case of funds lost, hack or bugs.
This ensures that the protected tokens can be used with confidence as it does not expose assets to any additional smart contract risk, which can be very useful for new protocols or new added features to the existing protocols.
Hats Finance Uses Protected Tokens
Hats Finance is a dynamic protocol intended for white hat hackers and auditors, wherein projects, community members, and stakeholders incentivize security of protocol and responsible disclosure.
Hats Finance created scalable vaults using the project's own token. Bounty values will depend on the success of both the project and its token.
Hats Finance top priorities is security as they wanted to make sure that their investors, hackers and all participants in the protocol have confidence that tokens are held in the highest security levels.
With that, Risk Labs launched the UMA Hats Vault Protected Token Pair using 30,000 UMA tokens as collateral that is worth $240,000 and deposited the protected tokens in Hats Finance vault. Whitehat hackers who can identify bugs in UMA and Across protocols will be rewarded with the protected tokens.
When funds are lost due to hacks or bugs, or user errors in the Hats vault, UMA committee multi-sig will review the reports. The recovery tokens that were held in a secure wallet can be used to recover the collateralized UMA.
The recipient of rewards with this program will receive 1:1 matching recovery tokens from Risk Labs in order to redeem the protected and recovery tokens paired for the UMA collateral without waiting for the contract to expire.
UMA holders can mint their own protected tokens pairs too and add the protected tokens in Hats UMA vault. They are currently working on making a helper contract inorder to match protected and recovery tokens 1:1 in a decentralized way easier. If it's already done, users can send the recovery tokens they minted to the contract.
For the meantime, users should deposit their protected tokens in the vault while keeping the recovery tokens in a secure wallet.
Want to mint your own protected tokens?
Protected tokens can be very useful in experimental protocol launches, staking systems, on-chain enforcement or off chain governance, token rewards programs, asset recovery for lost keys, and more.
So, if you are interested in launching protected token pairs in your DAO or protocol try to reach out with Risk Labs team or the SuperUMAn DAO for them to guide you.
They'll advise you with contract parameters and to make sure that Optimistic Oracle covers all the issues that you would like to protect yourself from hacks, bugs or if applicable users errors which is publicly verifiable if there are any disputes.
Surely, they'll love to hear your ideas and help you bring them to life.
Sources: Hatfinance.medium - umaproject.org
All Images from sources
This was the content, I submitted for my Copywriters application in Social Media Team in SuperUMAn DAO. I was also permitted to post it on my blogging platforms.
UMA Protected Tokens is one of UMA products, I hope you learn something from it.
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Date Published: May 18,2022
Such a cool concept