Democratizing Decentralized Data: What Is the UMA Cryptocurrency? 

Since its 2019 launch, Chainlink (LINK) has stood out as cryptocurrency's dominant data transfer hub. Despite being the go-to protocol for sharing info between onchain and offchain sources (aka oracles), it's not the only cryptocurrency closing the gap between the real world and blockchain-based projects. 

For example, the Ethereum-based Universal Market Access (UMA) protocol offers a distinctive Optimistic Oracle solution to send data feeds without intermediaries. Using UMA's distinctive technologies as a foundation, web3 developers have even more options to link their tokens and decentralized applications (dApps) to the wider world.

The history of Universal Market Access (UMA)

In 2018, former Goldman Sachs employees Hart Lambur and Allison Lu wrote a whitepaper explaining their vision for UMA's goals and technical specifications, focusing heavily on creating synthetic blockchain-based tokens representing financial contracts. In this preliminary outline, UMA focused more on helping developers create intermediary-free virtual assets—particularly financial derivatives—using the decentralization of Ethereum (ETH) and automated programs called "smart contracts." 

Although UMA introduced derivative products, including a tokenized representation of the S&P 500, Lambur and Lu shifted their priorities to refining UMA's Optimistic Oracle (OO) service in succeeding years. Similar to other crypto oracles like Chainlink, the OO's primary function is to connect offchain and onchain data feeds without introducing points of centralization. The UMA protocol led the initial DEX offering (IDO) for its UMA tokens in 2020, and the company Risk Labs leads development and funding on this network. 

How does UMA work?

The UMA protocol integrates with other Ethereum-based dApps interested in using its oracle price feeds or tokenization features. To ensure the accuracy of the data sent through the OO, UMA uses a multi-stage verification procedure that assumes information is valid from the onset (hence the phrase "optimistic"). When a client requests data from the OO, an "asserter" on the network submits the information plus a locked amount of cryptocurrency (aka a "bond"). In the second stage, other computers (aka nodes) on the OO have the right to challenge the asserter's claims if they believe they're invalid by locking (aka staking) UMA tokens onchain.  

Everyone on the OO votes using UMA's Data Verification Mechanism (DVM) whether to approve or deny the asserter's data before it passes to the client. At the end of this process, the bonded cryptocurrency either goes back to the asserter or the primary dissenter, depending on the outcome of the votes and whether there were any valid accusations. If a dissenter's claims aren't proven true, they lose their staked cryptocurrency, which disincentivizes frequent disputes unless nodes know they'll win the bonded cryptocurrency. 

UMA FAQs

What is the UMA token? 

The UMA token is the native cryptocurrency on the UMA protocol and follows Ethereum's ERC-20 coding standard, and is pivotal in incentivizing node participation and securing the OO's operation. UMA token-holders also enjoy governance rights to vote on proposals for UMA's operations. Traders interested in UMA's price often use exchange or crypto price aggregators to see the real-time UMA price chart.

Where do traders store UMA tokens? 

Since UMA is an ERC-20 token, it's compatible with Ethereum-based crypto wallets like MetaMask. Crypto traders interested in buying, storing, or using UMA must check their crypto wallet's list of supported tokens before downloading them.

What makes the UMA cryptocurrency unique? 

UMA's distinguishing feature is its reliance on optimistic cryptography for its oracle solution, which aims to provide dApps and external patterns with a high-speed solution for data transfer. In addition to its OO, UMA also offers synthetic tokenization using its price feed portal, providing traders, institutions, and crypto projects with more options to design digital derivatives.  

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