UMA Explained

Derivatives

Derivatives are contracts that derive their value from the performance of an underlying entity. In simple terms, this is an asset that tracks the price of another asset, for example, gold. Derivatives also allow users to track an assets price without having actual exposure to the asset itself. The derivative market is massive, but it is not accessible for lower profile investors most of the time. UMA provides the opportunity to bring various derivatives to the Ethereum blockchain and let it be accessible to anyone.

The platform

Token sponsors can buy or sell derivatives on UMA by putting down an asset as collateral. In exchange, investors receive synthetic tokens that are digital derivatives. These users are responsible for tracking their position and make sure there is enough collateral. If there is no enough collateral to support a position, the liquidators come in and liquidate the position. If the token sponsor feels like the liquidation was unfair, they can open a dispute.

In case of a dispute, the DVM (Data Verification Mechanism) will step in and resolve the dispute. Token holders will check the asset’s price at a given timeframe and provide their report back to the DVM. If the dispute is built on Ethereum and correct then the person who raised the dispute would be rewarded; otherwise, the DVM will reward the Liquidator if the dispute was wrong. This system is generally one of the main differences between UMA and for example, Synthetix, since Synthetix relies mainly on oracles.

UMA token

The UMA token is responsible for the platform’s function and the platform’s governance. UMA holders get to decide what kind of contracts and assets can be supported by the platform and determine future updates. Additionally, the UMA token holders can validate price requests through the Data Verification Mechanism. UMA holders can earn rewards by voting on these price requests disputes.

UMA is quite a new and exciting project that users believe to be the future of decentralised exchange. Currently, the total value locked in contracts on UMA is around 101 million dollars. If you are interested in buying UMA on SpectroCoin, visit SpectroCoin Exchange!

If you have any questions regarding cryptocurrencies supported at SpectroCoin, don’t hesitate to contact our customer support through the LiveChat bubble available on our website or drop an email at [email protected].