SuperUMAns #55 - Universal Market Access, KPI Options, Range Tokens and the Optimistic Oracle

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#Club1BCH

1 year ago

In community: Club1BCH(4ac4)

Topics: Life, Cryptocurrency, Blog, Writing, Story, ...

UMA Protocol has always been a pioneer in DeFi and Web3 development, constantly promoting the crypto decentralization and implementing blockchain technology in the Cryptoverse. All types of DeFi protocols and DAOs can use the UMA tools to implement financial solutions and improve the way was assets can enhance the products.

I discovered UMA when it was added on Coinbase, and the idea of Universal Market Access built on open-source infrastructure for synthetic tokens was something I never heard before. The ecosystem was fully managed by decentralized oracle services, creating a bridge between web2 and Web3.

UMA improved the crypto market and the economics in the blockchain sector through innovating tools such as KPI options, Range Tokens, Success Tokens and on-demand synthetic currencies.

Let's dive into the Umavesre and explore the ERC-20 token that powers the ecosystem! The an open-source protocol based on the Ethereum network that allows anyone to build their own financial contracts and create synthetic assets is powered by $UMA, and has multiple use cases.

The UMA token is a crypto-gem, not the type of memecoin with no utility. UMA holders can use their assets to participate in decentralized governance and be part of a movement that keeps innovating the blockchain sector.

Behind the scenes is the most powerful tool, the Optimistic Oracle! The oracle can bring real-life data into the blockchain. The Optimistic Oracle differs from Chainlink and other traditional oracles because it has the ability to find the truth for ANY outcome, easily solving "gray area" disputes when there is no categorical right or wrong case.

The Optimistic Oracle helped prediction markets because it can determine any truth. The OO will verify any smart contract data, offering versatility to power markets predicting absolutely everything ... from the next US President, the SuperBowl winner, Oscar awards to and any other outcome.

UMA and the Optimistic Oracle will have a key role in the future of DAO governance, DeFi, decentralized prediction markets, and many more blockchain solutions.

The decentralized prediction markets sector is niche but with a huge potential of growth. We may soon see more events, more options and markets for any type of event. UMA's Optimistic oracle can and will support the prediction market space to bloom!

The UMA economy constantly pushes the technological boundaries of the system an creates tools that facilitate and solves the current issues of cryptocurrencies, including DOA governance and rewards for communities.

KPI Options

UMA is different from other projects and this difference is clearer when you look at UMA incentivization mechanism, the Key Performance Indicators (KPI). The value of the incentives will depend on the TVL of the UMA protocol, therefore rewarding hard work and progress. The economic enhancement and utility creates a better synergy between protocols and communities.

The KPI is the opposite of useless airdrops, as KPI options are synthetic tokens that will pay out the holder more as the core requirement is being achieved. The beautiful mechanism of KPI option will unwrap at a higher value if the indicator is reached.

The first step is to define the metric and the deadline when the KPI option will be redeemable. The maximal reward will become unlocked if the community will reach the desired indicator. The indicator can be number of users, TVL, trading volume, number of token holders, participation in governance, etc.

The next stage is to set the collateral type, the asset that will be distributed to KPI holders after the deadline. If the asset is not whitelisted for UMA contract usage, than a UMIP (UMA Improvement Proposal) must be proposed for approval.

Once the collateral type is set, the price identifier for the KPI Option will be added through UMIP. The approval of the price identifier UMIP will lead to the next step, the creation of the KPI Option contract and the blockchain minting.

After creation, the front end will be designed and the final step will be the minting and the distribution of tokens. The minting process will lock the collateral into the smart contract and will create the KPI tokens.

After the minting, and until the deadline, the success of the KPI option depends on the success metrics of the community. They can work together to maximize the value of KPI options or accept a lower reward. Clearly communicating the success metric and providing some suggestions for your community on how to achieve it to maximize the value of the options they were airdropped will allow your community to pull together for the identified common goal.

KPI options are flexible and used the tool to power-up my Humble Tractors NFT collection. The first ever implementation for non-fungible tokens, aligning the individual NFT holder interests with the collective interests of the collection.

The KPI was created to reward holders if the sales volume of Humble Tractors reached certain values, and at expiry date was valued at 0.50 USDC per KPI option.

Range Tokens

The Range token - a new treasury primitive that will enable DAOs an innovative method to access funds and diversify the treasury without selling the native tokens. The treasury monetization will create unique benefits for the DAO. The Range tokens can enhance the business model of many DeFi protocols and create a better experience for both merchant and customer.

The innovative solution involves the usage of the native tokens as collateral to borrow funds. The tapped funds have no risk of liquidation and everything stays safe on-chain!

The flexibility the advance security of UMA was used to build the perfect tool for DAOs treasury and community management.

All DAOs will use the native tokens to create and provide liquidity which will result in benefits for community members. As the DAOs are ever growing, UMA created the tool that will support this growth.

The Range Token will support the upwards trend, providing support for DAO expansion and a method of borrowing the funds required for diversity and operations.

The majority of top protocols are holding the treasury in the native token and some are valued at billions of dollars. The risk comes from the market fluctuation and 2022 was a prime example, as Ethereum and Bitcoin lost over 80% of their highs, heavily affecting DAO treasuries.

This series of events created to demand for a tool that will safeguard and prepare DAOs from future cataclysmic bear market by diversifying the treasury. To match the demand, the Range Token will act similar to a convertible debt in traditional finance.

Traditional finance has many options to access funding, such as equity sales, bonds and loans while decentralizated finance protocols must sell native token to access funds. This process may be difficult, depending on restrictions or vesting schedules and finally a solution was created. Range Token was created to overcome the challenges and assist treasury diversification, while minimizing the immediate price impact that usually happens when native tokens are sold.

The Range Token was compared to a convertible debt, similar to when companies are receiving funds without issuing equity upfront. The DAO will use the native token as collateral to borrow the funds and at maturity it is paid back or if not, the range token holder is compensated with the equivalent amount of the collateral.

The formula used is Range Token = Yield Dollar - Put Option + Call Option, which will use the settlement price of the native token to determine the number of tokens. If the native token is trading at $20 on settlement day, a 1000 USDC debt will be settled with 5 tokens (20 x 5 = $100).

The numbers of DAO native tokens given to the Range Token holder is capped because the collateral cannot be liquidated. To compensate the exposure and the risk given by price volatility, the Range Token holder will receive a minimum number of DAO native tokens regardless of how much the price will raise.

Why minting and buying Range Tokens? The Range Tokens are creating an unique risk profile for long term investors and powers up the opportunities for those that use decentralization in the blockchain . Buying the native token makes the investor vulnerable to direct exposure, while the range token is only affected by significant price moves. As Range Tokens will allow DAOs to borrow funds without the risk of liquidation, the demand will keep growing. Because the risk of liquidation is eliminated, the stability and value of the native token is not affected by the Range Token.

While the DeFi protocol will grow, the DAO will have the opportunity to sell the tokens at a higher value, as a result of the delay given by the Range Token unique attributes. New projects will receive time to expand and consolidate the concept before they will have to pay out.

Range tokens comes as an addition to UMA's KPI options and call options offer, providing DAOs with the tools required for diversity and evolution. The new asset class has unique risk exposure and created a token that rewards both parts involved in the contract.

Success Tokens (ST)

The Success Tokens (ST) are two tokens merged into one, a call option attached to the project token. The synthetic token will reduce the business risk and create a more optimistic DeFi experience.

The set-up allows the DAO to offer a call option with the token purchase, instead of the classic discount. The investor pays the market price for the package, keeping in mind that the call option is valuable if the project performs well.

The investor will get the bonus if the project will bloom and will keep him/her interested in the development and expansion of the idea. The call option generates a double exposure if the token value grows, creating a win-win scenario for the whole community.

UMA Voting and Prediction Markets

The blockchain evolution never stops at Risk Labs, where Across Protocol and the Optimistic Oracle are powering a modern Cryptoverse.

The prediction markets are another strong sector that is powered by UMA's optimistic oracle, and it is clear that the tool revolutionized the landscape. Polymarket used UMA's support to decentralize prediction markets and solve problems associated with traditional venues.

Prediction markets have long held a place at the heart of the Cryptoverse and the Polymarket success story was built on UMA's Optimistic Oracle. The Web3 platform helps users bet on current events in sports, politics and more. The OO uses game theoretical principles to find a Schelling Point for any outcome, which makes it a powerful tool for resolving Polymarket disputes.

Online bookies are bullies, charging high fees and even blocking successful players from betting. Online betting companies will enforce low maximum limits to customers and play any card in their sleeves to make profit. The synergy created by the Optimistic Oracle and Polymarket created an open and trustless alternative.

Any user with a web3 wallet can bet on events and receive fair rewards if the bet is correct. This brings easy solutions for both mainnet and layer2s.

Major sporting and political events will always trend on Polymarket, because macroeconomic and political topics tend to attract higher liquidity. “Who will win the U.S. 2024 Republican presidential nomination?” has the most liquidity, with $1,500,000 committed up to date. The prediction will expire on the 10th of September 2024 and it already had $2,700,000 in volume

The Polymarket design and UI is simple and efficient, with the option of buying and selling shares then redeem their winning ones for $1.

If I predict that Donald Trump will win and use $100 for this market, I will get approximately 189 shares and a potential return of $189 in 2024. However, going against Trump brings a higher profit! Using $100 for "NO" will give me 208 shares and a potential return of $208 when the prediction will settle.

How it works? The funds are locked in smart contracts, so traders who predict correctly receive instant payouts. The blockchain offers full transparency and easy access for everyone.

Decentralized prediction markets don’t ask for KYC details, as the users will only need a Web3 wallet to participate. Everything is transparent as all data gets recorded on-chain and the participants can see where the funds are going.

The Optimistic Oracle helped prediction markets because it can determine any truth. The OO will verify any smart contract data, offering financial versatility to power markets predicting absolutely everything ... from the next US President, the SuperBowl winner, Oscar awards to and any other outcome.

The Optimistic Oracle differs from Chainlink and other traditional cryptocurrency oracles because it has the ability to find the truth for ANY outcome, easily solving "gray area" disputes when there is no categorical right or wrong case.

A prime example was solved in December 2022, when TIME selected “Volodymyr Zelensky & the Spirit of Ukraine” as the Person of the Year. The dispute was whether Volodymyr Zelensky had won TIME’s Person of the Year award, and the UMA token holders resolved the market to "YES"

UMA Staking and oSnap

The blockchain evolution continued with more implementations for the Optimistic Oracle and oSnap - the gasless snapshot voting with on-chain execution by UMA. The oSnap name is short for Optimistic Snapshot Execution. The tool will use the optimistic oracle to verify any arbitrary data from governance snapshots.

The UMA 2.0 mechanics will overhaul the token rewards system as the users will earn regardless of the number of votes, with the possibility to stake and help settle on-chain disputes.

The staking rewards will be streamed continuously as one of the best financial opportunities on mainnet.

Stakers will get higher rewards (est. 27% APR) or lower as the voters will experience reward reallocation depending on whether they vote consistently and accurately as part of UMA's optimistic oracle DVM.

If you are into DAOs or Web3, you probably used Snapshot. The governance tool is used by the majority of protocols and DAOs to vote on proposals by achieving token-based consensus.

oSnap was created by the collaboration between UMA and Snapshot, and aims to add execution functionality by pushing results on-chain. Safe (formerly Gnosis) will be a prime beneficial, as now DAOs tokenholders are able to propose and execute on proposals from start-to-finish, without any specific person’s signature required.

The Optimistic Governance is the governance that uses UMA's Optimistic Oracle to verify outcomes optimistically, and the proposals proceed unless someone raises a dispute. The OO (Optimistic Oracle) can be used to verify any kind of data, including whether a proposal passed a Snapshot voting round.

Many DAOs are constantly using Snapshot voting to coordinate and reach governance decisions, but the tool doesn’t offer proposal execution. Once the consensus is reached, the DAOs rely on team multi-sig wallets to implement the results. DAOs depend on the signatories on a multi-sig to execute the vote’s outcome, and the process can be hard to coordinated due to time zones, internet issues or other problems.

oSnap brings evolution and the DAOs need to scale ... the ability to coordinate trustlessly without facing security or waiting time obstacles.

UMA is working hard to create the tools that DAOs can use to move quickly without sacrificing decentralization or voter UX. oSnap brings this world one step closer

How oSnap delivers trustless execution? oSnap combines Snapshot’s popular off-chain voting mechanism with Safe’s industry-leading multi-sig wallet infrastructure. Users are incentivized to submit the correct transactions for execution, and they also have an incentive to dispute if there is an error.

In the case of a dispute, no transaction is executed and it will need to be re-submitted. UMA token holders will review who was correct in the dispute, and reward that person from the other party’s bond.

Which of the above tools you used and what you expect from UMA to develop in 2023? I want to see the Optimistic Oracle solving more day-to-day issues and ways to implement it in eco-friendly campaigns!