DeFi Deep Dive — UMA, Cutting Middlemen Out of Derivatives Markets

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Introducing the cost of lawyers and financial advisors has always represented a high barrier to entry to financial markets. With the help of smart contracts and oracles, the UMA project aims to bring that barrier down.

Unlike meme coins that are created for the sole purpose of riding the whimsical waves of social media, DeFi protocols are seeking to leave behind the enduring value. As permissionless, decentralized finance continues to evolve, it can tap into existing financial markets.

UMA represents the latest evolution of the DeFi space, creating tools to participate in the derivatives market worth over $540 trillion.

UMA explained
Standing for Universal Market Access, UMA’s mission is to cut the middleman out of the financial derivatives markets.

Based on open-source coding, the UMA protocol runs on the Ethereum blockchain to create synthetic assets. As a derivatives protocol, it tokenizes those assets in the traditional financial arena outside the blockchain space.

The UMA protocol makes this possible by providing a framework to create ERC-20 tokens. In turn, these collateralized crypto tokens track any existing derivatives asset. This way, investors can use UMA to trade in the derivatives without accessing them directly.

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