Crypto Corner: A profile on UMA

With so many tokens added to the Wirex app this year, getting to know them all can be a bit overwhelming. That’s why we’re reacquainting you with them in our weekly Crypto Corner series.

This week, we’re shining the spotlight on UMA. This token joined the Wirex family in June and came all the way from Wall Street…

What’s it all about?

UMA is the governance token of the Universal Market Access protocol. It gives holders voting rights to make changes to the protocol, with one token being equivalent to one vote.

The UMA network is built on the Ethereum blockchain and allows users to create synthetic tokens and derivatives that can track the price of any asset, including real-world assets such as gold or global stocks.

In case you aren’t aware of what derivatives and synthetic tokens are, here’s the lowdown:

A derivative is a financial contract between two or more parties that gains its value from an underlying asset, group of assets or benchmark. Derivatives are popular among investors as they give them exposure to an asset that may be otherwise unavailable. Common types of derivatives are options, futures, collateralised loans and prediction markets.

As for synthetic tokens, UMA describes them as: “Collateral-backed ERC-20 tokens whose value fluctuates depending on the tokens’ reference index.”

To function efficiently, the UMA protocol relies on two mechanisms – Priceless Financial Contract and the UMA oracle. The Priceless Financial Contract mechanism creates self-executing smart contracts that only require a price on-chain in the event of a dispute. Meanwhile, the Data Verification Mechanism (DVM) acts as a resolution system for raised disputes. It also uses financial incentives and voting to value and secure contracts.

Who came up with the idea?

UMA was founded in 2018 by Hart Lumbar, who had previously worked as a professional trader at Goldman Sachs. A year before UMA was launched, Lambur founded Risk Labs and managed to raise $4 million. Following this success, he gathered his team and released the UMA whitepaper in December 2018.

What’s the difference between UMA and SNX?

UMA is often compared to the Synthetix platform, primarily because both allow users to create synthetic tokens. However, the key difference between the two is that Synthetix uses its SNX token as collateral to create synthetic assets, whereas UMA lets you use virtually any asset.

What can you do with UMA?

UMA is available to buy at exclusive OTC rates in the Wirex app. Plus, you can also spend it in real life with your multicurrency Wirex card. Why not give it go a today?