What is UMA? And how does UMA work? (2022 edition)


What Is UMA (UMA)?


UMA (UMA) is an open-source protocol based on the Ethereum network, that allows anyone to build their own financial contracts and create synthetic assets. The main goal of the UMA project is to facilitate a decentralized architecture that can grant universal market access to DeFi markets.

The key to mass adoption of cryptocurrencies is in part their utility and the relevancy of their use cases. As the DeFi sector becomes more popular, UMA aims to make the DeFi market more accessible to a wide range of demographics.

UMA protocol allows users to create different financial contracts for different use cases and purposes, and digitize any real-life value like futures, CFDs, crypto assets, and other financial derivatives. These financial contracts can be self-fulfilling, self-executing, and self-enforcing, while users can run them on the Ethereum network. Users can also create their own synthetic assets.

Synthetic assets are an asset class that mimics the value of another asset. They are created through the process of tokenization of real-life values. That is how, for instance, you can invest in crypto assets with synthetic asset investments, and still have ownership over that asset even though you didn’t buy it. Since UMA runs on the permissionless Ethereum blockchain, anyone in the world can create financial contracts and develop synthetic assets with the UMA protocol.


How Does UMA Work?

To enable easy and user-friendly creation of synthetic assets and smooth design of smart contracts, UMA relies on a complex architecture model with two core components, Priceless Financial Contract Designs and a Decentralized Oracle Service. Priceless Financial Contract Designs contain templates for financial smart contracts that exist on UMA, allowing users to design and develop synthetic assets.


Source : What is UMA? And how does UMA work? (2022 edition)

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