Understanding No-feed Price Synthetic Asset Agreement "UMA" in one article
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley)
Crypto Valley Live (ID: cryptovalley)
, author: DeFi Pulse, translation: lily, reprinted by Odaily with authorization.
Today, we spoke to UMA co-founder Allison Lu about her and her team’s mission to bring market access to all through synthetic asset tokens, decentralized oracles, and priceless financial contracts.
How did you get started in the crypto space? What motivates you to build your projects, products and services?
Starting at the end of 2017, my co-founder Hart and I have been exploring various ideas based on blockchain to solve problems in the financial services industry. Our approach was to look at the history of financial innovation, and we quickly thought of financial derivatives. We realize that blockchain-based financial contracts have the ability to help people around the world achieve universal market access across their country's existing fiat financial infrastructure.
We have always known that when building the infrastructure to create financial contracts, our protocol requires an oracle. When we started working on oracles, we realized that if we wanted to build a protocol that could scale to support trillions of dollars in economic value, we needed an oracle that was economically secure. Therefore, we have also developed a data verification mechanism.
What are you building and what makes it unique?
UMA builds financial infrastructure on Ethereum. Specifically, two things:
Data Verification Mechanism (DVM) is a decentralized oracle service.
Invaluable financial contract designs that can be used to create synthetic tokens.
The DVM is optimized to maintain the economic security of the contracts that use it. The DVM design itself is based on the bold statement that any on-chain oracle can be compromised. This means that any smart contract that relies on off-chain data can be manipulated to achieve a certain price. Our solution is to introduce a simple economic security framework for evaluating oracles. We look at the potential profit from breaking (PfC) and cost of breaking (CoC) of contracts in the system, and devise a mechanism to ensure that the cost of breaking an oracle will exceed the potential profit. In doing so, we remove the economic incentive to destroy our oracles in the first place. The second part we build is the priceless financial contract. Priceless financial contracts do not require on-chain price feeds to function and reduce the frequency and scope of oracle attacks by minimizing the use of on-chain oracles. Previously in DeFi, when the oracle machine failed, it was mostly instant and short-lived. In contrast, when a priceless contract requires an oracle to provide a price, it looks backward in time, which makes the price more secure.
We are a financial infrastructure company, so our users are developers, and developers generally have their own customers in turn."robot"。
Project developers use our financial contract factory to define synthetic tokens that can track local currencies, real-world assets or cross-chain assets, etc. Their users can then go on to interact with these synthetic tokens through any interface that supports the ERC20 standard, or mint new tokens from a custom UI. These projects cover a range of use cases, including native payments, investing, and speculation.
In addition to project developers, UMA relies on a network of liquidators and disputers to ensure that synthetic tokens remain pegged to target prices and that each token contract remains solvent. Economic incentives embedded in priceless contracts encourage members of the DeFi community to run these liquidations and disputes
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What future event or feature are you most looking forward to on your roadmap?
Recently, I'm most excited to showcase the synthetic tokens that our user base has been developing. We (or our partners) have run a number of PoCs over the past year to validate user interest in synthetic tokens, and many are now preparing for a wider launch. In 2020, you'll hear more and more from our partners.
I've been happy to make myself obsolete for a long time! I mean, UMA token holders, have control over the UMA ecosystem in the form of token holder driven governance. Over time, we hope to reduce the role of the core developers and help the community self-organize to maintain and build what it needs.
Where do you think your projects, products and services are in the future of DeFi?
Digital assets on Ethereum (including ETH itself) already have enormous economic value. DeFi already gives users the ability to do things with these assets while still retaining control of their private keys: store it, trade it, lend it, etc. UMA adds another composable capability: the ability to convert the economic value of a user's assets into the risk of something else. Imagine being able to use ETH to hedge your BTC holdings, or use Dai to access a global stock index, or lock in interest rates on different DeFi protocols."In the long run, we believe that DVM can guarantee the security of various financial contracts, and it can also ensure that everyone who can access DeFi has the ability to have universal market access."In DeFi, what do you think should attract more people's attention?
