Universal Market Access
UMA’s mission is to make financial markets universally accessible—unrestrained by censorship, pre-existing financial and social capital, or beliefs and values. The economic freedom created by universal market access creates equal opportunity to pursue prosperity and build financial independence .
Synthetic assets are collateral-backed tokens whose value fluctuates depending on the tokens’ reference index.
UMA provides priceless financial contract templates for developers to create any kind of financial contract. Priceless contracts minimize on-chain oracle usage to reduce the frequence and surface area for oracle attacks.
The first set of priceless contracts enable developers to create synthetic assets. Up until now, synthetic token designs have required smart contracts to know the value of its collateral at all times, as reported by an on-chain price feed. “Priceless” synthetic tokens differ because they do not require an on-chain price feed to indicate whether the contract is properly collateralized. Instead, they have a liquidation mechanism that allows anyone to liquidate an undercollateralized position.
In this design, liquidators can choose to liquidate positions based on their own off-chain view of the reference index for the token, which informs their view on whether the position is properly collateralized. Positions that have not been liquidated are assumed to be properly collateralized.
Liquidators are kept honest by disputers who are rewarded for catching invalid liquidations. Only when a liquidation is disputed is an oracle needed. UMA’s priceless financial contract templates leverage a decentralized oracle service known as the Data Verification Mechanism (DVM). This system of incentives functions to minimize oracle usage while keeping the entire system correctly collateralized.
UMA’s priceless contracts leverage an optimistic oracle known as the Data Verification Mechanism (DVM). The DVM provides the price of an asset at a requested timestamp only when network participants dispute the value of collateral backing a synthetic token. This differs from non-optimistic oracle solutions which constantly write prices on-chain to ensure contracts are properly collateralized. Minimizing oracle usage increases the security and scalability of decentralized financial contracts.
When a dispute occurs, the DVM aggregates price data submitted by UMA token holders. UMA token holders respond to price requests by referencing the asset's price off-chain and reporting the price to the DVM. This price is used as an input by the DVM to determine the final price of the asset.
If the price returned by the DVM determines the disputer was correct, the disputer is rewarded with a penalty charged to the liquidator; conversely if the disputer was incorrect, the disputer forfeits a bond to the liquidator.
UMA's DVM is backed by economic guarantees to ensure it price feeds cannot be corrupted. Learn more here!