Universal Market Access (UMA) was one of the first decentralized finance (DeFi) protocols to emerge on the Ethereum (ETH) blockchain. The protocol powered by the UMA token aims to bring universal access to DeFi markets.
Today, we will be analyzing UMA in detail to determine whether it is a legitimate cryptocurrency project.
So, without further ado, let’s get started.
What is Universal Market Access (UMA)?
Universal Market Access (UMA) is an open-source DeFi protocol deployed on the Ethereum blockchain that allows users to build financial contracts around synthetic assets.
Synthetic assets are securities that mimic the price action of an underlying asset but don’t require the owner to actually own that particular asset to trade it. That means, UMA users can invest in cryptocurrencies with synthetic assets and still maintain ownership over that asset even if they didn’t purchase it directly.
The primary goal of the UMA network is to facilitate a decentralized architecture granting universal access to all DeFi markets.
The protocol allows users to create different financial contracts for different use cases and purposes, and also digitize any real-life value like futures, CFDs, crypto assets, and other financial derivatives. The financial contracts powered by UMA are self-executing, self-fulfilling, and self-enforcing, and can be run on Ethereum.
How Does the Universal Market Access (UMA) Network Function?
UMA relies on a complex architectural model consisting of two core components to enable easy and user-friendly creation of synthetic assets and seamless designing of smart contracts.
The Priceless Financial Contract contains templates for financial smart contracts that exist on the Universal Market Access protocol that allow users to design and develop synthetic assets.
Whereas the Decentralized Oracle System consists of two core components: the Optimistic Oracle Service and the Data Verification Mechanism. The DVM is mainly used for disputes and liquidations. It also handles synthetic tokens after the expiration of their contracts whenever a settlement is required.
UMA relies on sponsors, liquidators, and disputers as integral actors on the network. Sponsors are responsible for creating synthetic tokens, liquidators can liquidate risky positions, and disputers can disagree with the decisions taken by liquidators.
What is the UMA Token?
UMA is the utility and governance token of the Universal Market Access ecosystem. The cryptocurrency is an ERC-20 standard asset deployed on the Ethereum blockchain.
The token is mainly used by the UMA ecosystem for governance and disputing resolution functions. Governance participants are rewarded in UMA for helping make decisions about the network.
UMA token derives its value from its technical capacity, technology, use case, and mainstream adoption. The intrinsic value of UMA is defined through its innovative technology and the relevancy of its utility.
The token’s price also depends on other factors, such as the activity of the development team, network upgrades and updates, roadmap developments, partnerships, institutional investors, mergers, new features, and other important events.
There are currently 76.39 million UMA in circulation out of a total supply of 117.8 billion UMA.
Initially, 100 million UMA was released, but there is no hard cap on the maximum supply of tokens as inflation is used to reward network participants who vote correctly on the Data Verification Mechanism.
The token’s inflation rate is currently set at 0.05%. However, the protocol may charge fees on financial contracts that it uses to buy and burn UMA. Therefore, the supply of UMA can be inflationary or deflationary, depending on the amount of value locked in the protocol and the number of UMA holders voting on governance decisions.
At the time of writing, UMA is trading at $5.72 – down over 12% in the last 24 hours. The native token of the UMA ecosystem achieved a 24-hour trading volume of $272.84 million. The total market capitalization of UMA is $437.339 million.
UMA recorded its all-time high in February 2021, when it was priced at $41.56. Meanwhile, the token’s all-time low valuation was recorded in April 2020, when UMA was trading at $0.3036.
Is UMA a Good Investment?
UMA is a promising cryptocurrency project because it seeks to democratize the derivative asset markets by allowing users to create their financial contracts on the Ethereum blockchain.
It seeks to solve the fundamental problem with traditional financial institutions that impose barriers of entry to new users in terms of rules and regulations. The project is also one of the oldest DeFi protocols on the market.
All things considered, I can surely say that UMA is a legitimate cryptocurrency project. However, before making any investment decision, I would advise that you do your research and only invest money that you can afford to lose.