Listing Proposal: Add UMA as collateral on Aave

Governance
1

Sentence Rational

I would like to propose AAVEngers to support the listing of UMA Token as an asset to be used as collateral on AAVE v2/v3.

References

Link to:

Paragraph Summary

UMA is a popular and essential asset for securing contracts that use UMA Protocol. It is not currently possible to be utilized as collateral on Aave to obtain other assets.

UMA Protocol is a community-led optimistic oracle that enables anyone to obtain a price on anything. UMA’s Optimistic Oracle enables a suite of products such as KPI Options, cross-chain bridges such as Across, Range tokens, Success Tokens and Call/Put Options.

View here for a complete list of contracts launched on UMA.

UMA protocol has a current TVL of $100.3 million. AAVE will obtain a first mover advantage for enabling users to borrow against their UMA tokens. This proposal is to add UMA token as an asset on AAVE v2/v3 for users to use as collateral. Note - this proposal does not include adding UMA token as an asset for users to borrow.

Motivation

This enables UMA tokenholders to collateralize their UMA tokens to gain exposure to other assets (e.g. ETH or USDC) and use funds obtained from loans on Aave to operate UMA protocol and increase their ability to provide price data to UMA’s optimistic oracle.

Being able to use UMA as collateral to obtain more capital helps secure the value locked on UMA. Disputers on UMA could have a credit line against UMA tokens in the event they needs to perform very large liquidations but do not have the non-UMA capital on hand to do so. Borrowing is a clean operational approach to obtaining capital and securing the value locked on UMA.

Specifications

  1. What is the link between the author of the AIP and the Asset?

    I work for Risk Labs, an entity underneath the UMA Foundation.

  2. Provide a brief high-level overview of the project and the token

    UMA token is used to operate UMA’s optimistic oracle. Owning UMA gives you the ability to contribute price information to UMA’s Optimistic Oracle and govern UMA protocol (and receive rewards for doing so).

About UMA Protocol

UMA is an open-source protocol that provides the infrastructure for developers to create and manage decentralized financial products that anyone can use, no matter where they live.

UMA enables developers to create decentralized financial contracts via two core components:

Together, these two components enable the creation of fast, efficient, and secure decentralized financial products

UMA’s goal is in its name; Universal Market Access. UMA contracts are self-governing and secured by UMA’s optimistic oracle.

  1. Explain positioning of token in the AAVE ecosystem. Why would it be a good borrow or collateral asset?

    UMA’s presence on AAVE would provide additional TVL to AAVE and an opportunity to earn additional fees as UMA holders would be able to come to AAVE to collateralize their assets.

UMA is a community-led protocol that enables anyone to easily create secure derivative products on Ethereum. UMA protocol has a current TVL of around $100.3 million.

  1. Provide a brief history of the project and how it overcame stressed conditions

    UMA currently secures around $85 million of money in contracts built ontop of UMA. UMA has never been compromised and is designed in a way that is very secure by minimizing oracle usage and ensuring the cost to corrupt UMA is always greater than the amount of money that can be stolen from it. View below for more information on the economic guarantees UMA provides for contracts built on top of it.

docs.umaproject.org

How UMA solves the Oracle Problem | UMA Docs

The DVM embraces the fact that any on-chain oracle can be corrupted — for a price.

  1. How is the asset currently used?

    UMA token is used to operate UMA’s optimistic oracle, known as the Data Verification Mechanism (DVM). Owning UMA gives you the ability to contribute price information to the DVM and govern UMA protocol.

The benefits of owning UMA include:

  • Earning rewards for voting on price requests from financial contracts using the DVM
  • Earning rewards for governing the UMA ecosystem by voting on parameter changes and approving system upgrades. System upgrades can include supporting new price identifiers or collateral types

Voters who participate and vote correctly earn an inflationary reward (currently 0.05% of total network token supply), distributed pro-rata by stake.

  1. Emission schedule - UMA Token Release & Treasury Update | by Hart Lambur | UMA Project | Jan, 2021 | Medium

  2. Token permissions and upgradability - UMA is governed by UMA tokenholders. All upgrades / changes are voted on by UMA tokenholders. Votes are aggregated by UMA’s Data Verification Mechanism (DVM) whereby it will then implement the proposed changes (if applicable).

  3. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)

    UMA has a market cap of $1,024,092,720 and is listed on major decentralized and centralized exchanges (Coinbase, Binance, Gemini, OKEx, Huobi, etc.,). The 24-hour volume on coinbase is over $63 million. View more here: UMA price today, chart, market cap & news | CoinGecko

    UMA is also included as an asset in Grayscale’s Defi Index and Bitwise’s Index fund

  4. Social channels data (Size of communities, activity on Github)

  1. Contracts date of deployments, number of transactions, number of holders for tokens

Risk Assessment

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UMA is an optimistic oracle that uses economic guarantees to secure markets. Unlike mechanically restrictive price feed oracles, an optimistic oracle is able to serve any arbitrary data on-chain. UMA’s flexible oracle serves data for uses including a cross-chain bridge, insurance, custom derivatives and prediction markets among other things.

The UMA Protocol also provides various smart contract templates that are automatically secured by its optimistic oracle. Among these are contract templates and integrations for creating synthetic tokens, predictions markets, “KPI options” and structured financial products.

The UMA governance token is used to operate UMA’s dispute resolution system, known as the Data Verification Mechanism (DVM). Owning UMA gives you the ability to contribute price information to the DVM and contribute to UMA protocol governance decisions.

The benefits of owning UMA include:

  1. Earning rewards for voting on price requests from financial contracts using the DVM
  2. Earning rewards for governing the UMA ecosystem by voting on parameter changes and approving system upgrades
  • System upgrades can include supporting new price identifiers or collateral types

Voters who participate and vote correctly earn an inflationary reward (currently 0.05% of total network token supply), distributed pro-rata by stake.

UMA Voting Contract v1 Risk: B

UMA was launched just under two years ago. Since launch the platform has expanded to 100’s of price feeds supporting yield dollars, KPI options and a variety of success tokens. The UMA community has also expanded and is supported by the new SuperUman DAO whose mission is to to communicate the true power of universal access to markets and its benefits to the world. Over that period, the platform has approved over 226 price identifiers and 101 collateral currencies all supported by the UMA optimistic oracle and powered by the UMA governance token.

UMA Counterparty Risk: B

UMA is a permissionless protocol where token holders vote on price requests, governance and system upgrades. Anyone can propose new UMIPs to expand and improve the financial products supported by UMA.

UMA Market Risk: B

UMA has a good market capitalization with a high volume. The price volatility is relatively low given the utility of the voting token.

Risk Parameters

LTV 55%

Liquidation Threshold 65%

Liquidation Bonus 15%

Reserve Factor 35%

Technical Specifications

Add UMA token as a collateral currency on AAVE.

Security Considerations

A security concern to consider is that someone could use Aave to attempt to obtain 51% or more of the UMA tokens to corrupt a vote and extract value from UMA. As a result of this we propose to only add UMA as a collateral asset whereby borrowers cannot borrow UMA tokens with UMA as collateral.

If you support UMA on AAVE I’d love for supporters to delegate some proposal power with their Aave or even better stkAAVE to this address:

0x7FF96F5f4B8E15B898a50933A7518ad6e1032600

  • Approve
  • Reject

0 voters

13 Likes
2

I think it’s beyond time to list UMA. It has been long due. Aave adds value to the Defi ecosytem by preserving the value of the individual project tokens while accelerating growth and driving the community together towards pre defined goals.

9 Likes
3

UMA has a ton of major exchange listings including on Coinbase and Binance, as well as vast DEX liquidity. It’s a very strong token with a robust ecosystem. Furthermore, the UMA and Aave teams communicate frequently.

This is a good opportunity for Aave as well, because it would be the only decentralized lending market and because this very thing has been often requested by tokenholders. Onward!

9 Likes
4

Not truly universal when Universal Market Access is not an option as collateral. :slight_smile:
As an enthusiast for both projects, I’ld like the possibility to borrow/lend against my UMA.

7 Likes
5

From a personal perspective, it would be awesome to lend/borrow with UMA as collateral on AAVE v2, v3. I would be keen to leverage some of my own UMA holdings.

Beyond that scope, there are numerous integration possibilities that could benefit both the AAVE & UMA protocols (as well as communities). Whitelisting UMA as collateral could help encourage such future collaborative efforts.

7 Likes
6

UMA has applied to be listed as collateral on Aave before. The last time around, there was too little community engagement. Between then and now UMA has grown in community, products, and technology and now offers a number of novel financial primitives pushing DeFI forward.

Having UMA listed on Aave is mutually beneficial and will drive the adoption of both platforms.

11 Likes
7

UMA is gradually gaining grounds and should be added as collateral. It’s a very strong token with great potential.
It will be beneficial for both Aave and UMA because this has been often requested by tokenholders.

5 Likes
8

Not sure what the logic is against adding UMA as collateral. They’re a DeFi OG and in need of a way to collateralize it.

5 Likes
9

Definitely think UMA deserves to be listed on AAVE.
Great team, strong projects, huge community, high innovation, well integrated in the crypto-universe, wonderful spirit, long term vision…
Could not see any good reason to wait more before listing it!

7 Likes
10

UMA is a great project with high standards, It’ll only be beneficial for Aave and UMA as they aim for a similar goal. UMA is definitely great as collateral to lend/borrow on AAVE.

4 Likes
11

UMA is continuing to make big waves in the crypto space quarter by quarter. They launched a new protocol, insurance protocols are using their Optimisitic Oracle because its reliable, safe, and secure, created financial tools to diversify ones treasury as well as incentivize a community, have a strong, active, and thriving community as you can see in these comments, are constantly pushing the limits of what is capable in DeFi, just wait until you see whats coming next. Sorry for the run on sentence but theres so much depth to UMA that people dont understand its more than just a derivatives and oracle smart contracts platform.

4 Likes
12

UMA is an obvious choice for AAVE, and I will gladily use my votes to approve this proposal. I like them as a project and I see potential in a future partnership between Aave and UMA. Check my twitter thread for more info. https://twitter.com/GeorgeMihalac12/status/1460732480084918280

3 Likes
13

UMA as collateral to lend / borrow on Aave makes sense as UMA is one of the leading protocol in the crypto with the best of benefits having Optimistic oracle with DVM usage .Partnership will be icing on the cake.

3 Likes
14

As an Aave and UMA hodler I do not see any risk factors that would be of concern. UMA has never been hacked. Many protocols and DAOs have used their KPI options for airdrops, Call options and now Range and Success tokens that will change the way protocols negotiate with VC’s. It would be great to use my UMA tokens to borrow Aave for the Balancer pool then deposit LP tokens in the SM. UMA is scaling to every EVM compatible chain and developed the fastest, cheapest bridge from L2 to L1. They recently rolled out the bridge on Arbitrum and the spike in the protocol’s token reflects the rising interest in UMA . I hope to be voting for this soon.

4 Likes
15

As an open-source protocol, that is permissionless, and enables smart contract tooling for a variety of financial and community use cases, UMA would be a strong token choice for inclusion across the Aave markets.

As a token holder I am eager to see UMA as a collateral for lending & borrowing, to further the utility of the token and grow participation in the DVM.

5 Likes
16

This would be amazing if UMA were on Aave user. I am not currently using Aave but have used it in the past, if UMA were on Aave I would be using it often. Let’s make this happen.

3 Likes
17

UMA is a great project and deserves to be on Aave. Way to go for UMA… :rocket::rocket:

4 Likes
18

Registered to vote yes on this!

2 Likes
19

Hi @tommy1 - would you mind specificing which entity?

It seems most of the commentators are new users and new posters. This engagement is unprecedented - what channel or forum have they been directed from?

I would like to point out out that 16/18 comments are from accounts created in the last day.

1 Like
20

Specified above! I believe we are seeing the increase from SuperUMAns

https://twitter.com/SuperUmans

2 Likes