Very soon we may see a lot of the billions of dollars traded around the world every day of traditional finance flowing into decentralized protocols and platforms, and that’s not only good for blockchain and DeFi space, it also means that many millions of people around the world can get goods that would otherwise be out of reach.
Today’s legal frameworks mean that traditional derivatives are reserved only for accredited and institutional investors, which means that entry barriers are too high for the day-to-day investor.
UMA (which stands for Universal Market Access) is trying to accelerate the DeFi adoption trend by making synthetic asset trading available to anyone, anywhere. Any two counterparties can design and create their own personalized collateralized synthetic ERC-20 financial contracts and tokens on Ethereum’s blockchain with UMA’s open source protocol, confident in the knowledge that everything is guaranteed through economic incentives (which are collateral) and enforced through the power of Ethereum’s smart contracts.
Legal recourse within the cryptocurrency world has been notoriously difficult in recent years, the pseudo-anonymity of users and many project teams combined with the decentralized and unauthorized nature of the blockchain has meant that taking action against bad players or problems can be capital, time and resource intensive.
Recently, UMA announced the launch of STONKS in partnership with Yam Finance through their collaborative project, Degenerative Finance, which will be a synthetic asset that replicates a ten most bullish index according to WallStreetBets. The asset will monitor the sentiment of the reddit and WSB community, and both teams seek to “give DeFi users more opportunities to voice their opinions outside the confines of the traditional financial ecosystem. ”
Also UMA eliminates the need for recourse to the court of law and instead offers a trustless, non-authorized mechanism that secures contracts with economic incentives.
UMA Protocol uses financial contracts that receive financial incentives to identify and liquidate suspected under-collateralized token issuers. Therefore, the oracle of UMA is only used to resolve disputes over liquidations.