Token Analytics: Umee

EXECUTIVE SUMMARY

Umee is a steady growing project with an experienced team and unique features:

  • access to both Ethereum and Cosmos network assets;
  • ability to collateralize staked assets.

Few main potential risks:

  • Token Distribution schedule (10–12 months) is too long.
  • Token Metrix are the biggest problem for participants of public token sale. Funds bought tokens 14.5 times cheaper and will have the same token release schedule.
  • Token utility is not clear for me. I suppose that users will not use a token for fees and governance.

More detailed information you will find in my report below.

INTRODUCTION

The initial implementation of this Cross Chain DeFi protocol will allow the ability to lend and borrow across blockchains. A Universal Capital Facility will contain access to both Ethereum and Cosmos network assets, effectively creating one single capital facility that users can interact with. A key distinguishing feature of Umee will be the ability to collateralize staked assets for borrowing across blockchains as users will have a choice to continue earning stake when engaging in DeFi. Umee will start with a base case scenario where users are able to lend and borrow assets across blockchains, similar to if they were participating in borrowing and lending activities on Compound or Aave. Concurrently, Umee will allow core functionality where holders of assets on a proof of stake blockchain such as Cosmos are able to collateralize their staked position in order to borrow assets on another blockchain such as Ethereum.

The Umee Blockchain facilitates instant interoperability using the Tendermint Proof of Stake consensus protocol with the Cosmos ecosystem, Ethereum network, side chain architectures, layer two scaling solutions, and alternative base layer protocols.

Website:

https://umee.cc/

Whitepaper:

https://drive.google.com/file/d/1RB_GrtxsucgOM12vVBtpdj43rINZfSsx/view

MARKET OVERVIEW

DeFi’s growth in 2021 has been exponential, turning it into a sector now worth over $100 billion. Cosmos Network is making great strides while adding new layers to its already robust DeFi infrastructure that includes many exciting projects such as Terra, THORchain, Band Protocol, and Crypto.org.

One key area of growth is the addition of some of the most advanced cross-chain decentralized exchanges (DEXs) that leverage the Inter-Blockchain Communication protocol (IBC) to enable permissionless and harmonious trading across various Cosmos blockchains and beyond.

The DEX ecosystem within Cosmos is growing quickly. There’s now access to new and promising tokens, higher liquidity for smooth trading and price stability, permissionless token listings, opportunities for generating higher ROI by participating in liquidity pools, and a lot more. So, let’s take a look at four of the hottest protocols right now and examine why they’re gaining traction:

https://blog.cosmos.network/defi-in-cosmos-meet-these-4-cross-chains-dexs-1df23dd413b0

PROBLEMS

Many DeFi offerings and products closely resemble products and functions in the traditional financial marketplace. There are decentralized applications, or dApps, running on blockchains, that enable people to obtain an asset or loan upon posting of collateral, much like traditional collateralized loans. Others offer the ability to deposit a digital asset and receive a return. Both types of products offer returns, some directly, and some indirectly by enabling the use of borrowed assets for other DeFi investing opportunities. In addition, there are web-based tools that help users identify, or invest in, the highest-yielding DeFi instruments and venues. Other applications let users earn fees in exchange for supplying liquidity or market making. There are also tokens coded to track the prices of securities trading on registered U.S. national securities exchanges, and then can be traded and used in a variety of other DeFi applications. So while the underlying technology is sometimes unfamiliar, these digital products and activities have close analogs within the SEC’s jurisdiction.

  • Investment opportunities are offered completely outside of regulatory oversight

In spite of the number of authorities having some jurisdictional interest, DeFi investors generally will not get the same level of compliance and robust disclosure that are the norm in other regulated markets in the U.S. For example, a variety of DeFi participants, activities, and assets fall within the SEC’s jurisdiction as they involve securities and securities-related conduct. But no DeFi participants within the SEC’s jurisdiction have registered with SEC, though SEC continue to encourage participants in DeFi to engage. Investors and other market participants must understand that these markets are riskier than traditional markets where participants generally play by the same set of rules.

  • High fees for the transactions on the Ethereum blockchain

Much of DeFi activity takes place on the Ethereum blockchain, but any blockchain that supports certain types of scripting or coding can be used to develop DeFi applications and platforms. Users can only pay in ETH, which they may not have at that moment. Or the user may not want to spend their ETH investment.Necessity to pay a gas fee every time the user uses your application.

  • Volatile and pending transactions

Volatile further dampen the user experience on your Dapp. Pending and stuck transactions can force your users to wait for minutes and even hours before they can carry on interacting with your application. And sometimes the transaction fails altogether.

However, it also poses important risks and challenges for regulators, investors, and the financial markets. While the potential for profits attracts attention, sometimes overwhelming attention, there is also confusion, often significant, regarding important aspects of this emerging market.

https://www.sec.gov/news/statement/crenshaw-defi-20211109

SOLUTIONS

  • Access to both Ethereum and Cosmos network assets

The initial implementation of this Cross Chain DeFi protocol will allow the ability to lend and borrow across blockchains. A Universal Capital Facility will contain access to both Ethereum and Cosmos network assets, effectively creating one single capital facility that users can interact with.

  • Ability to collateralize staked assets

A key distinguishing feature of Umee will be the ability to collateralize staked assets for borrowing across blockchains as users will have a choice to continue earning stake when engaging in DeFi. Umee will start with a base case scenario where users are able to lend and borrow assets across blockchains, similar to if they were participating in borrowing and lending activities on Compound or Aave.

Unlike normal borrowing and lending protocols, Umee will allow a key feature that involves staking assets and using those staked assets as collateral for borrowing assets on another blockchain.

Umee will also implement a mechanism where staking rewards from staked Proof of Stake assets can be immediately liquidated and used to pay the interest from borrowed positions.

  • Universal Debt Facility

Umee’s innovation is encapsulated through its design of a Universal Debt facility, an advanced base layer protocol built using the Cosmos SDK that allows developers to design, build, and deploy their own customized debt instruments. The Umee architecture incorporates a modular and extensible design that allows future iterations of sovereign loan pools and new DeFi Debt Markets. These tools are experimented and iterated towards allowing more optimal DeFi interfaces across protocols.

TOKEN UTILITY

UMEE is the native Proof of Stake token of the Umee Blockchain.The UMEE token will exist as both a Cosmos SDK based token as well as a native ERC-20 token.

There are currently three core uses for UMEE token:

The Umee Blockchain is built on a network of validators that contribute Tendermint BFT consensus to the protocol. Tokens are bonded to validators that stake to provide Proof of Stake to the network. Validators come from an open ecosystem of contributors and infrastructure providers. Tokens can also be delegated to validators by users to participate in the underlying consensus mechanism.

Network fees will be earned in the form of UMEE tokens by validator infrastructure providers. Similar to how ETH is used as a gas fee to pay for transactions on the Ethereum blockchain, UMEE is used as a gas fee to pay for transactions on the Umee Blockchain. Validators earn block rewards in the form of UMEE similar to how transaction fees are processed in native blockchain protocols.

The native UMEE token is also a protocol governance token used to facilitate on-chain governance for the Umee Blockchain. The governance token can be used to vote on configurations of the protocol as well as network upgrades for improving functionality of the blockchain infrastructure. The UMEE governance token will additionally govern DeFi parameters of applications that sit on top of the Umee base layer DeFi protocol.

TOKEN SUPPLY

Overall supply: 10 billions Umee

INVESTORS

Umee Protocol raised $6.3MM seed round for creating a Cross Chain DeFi HubUmee in 2021.

The round was led by Polychain with participation from investors including Ideo Colab, Coinbase, Tendermint, Brian Kelly Capital Management, Alameda Research, CMS Holdings, Argonautic Ventures and Joe Lubin via Ethereal Ventures.

ECOSYSTEM

Umee holds a multi-chain ethos, and as a network, natively integrates with the Cosmos ecosystem through IBC (Inter-Blockchain Communications) connections. IBC connections to other networks include the Cosmos Hub, Terra, Osmosis, Crypto.com, Injective, Thorchain, Secret Network, Akash, Starname, SifChain, Persistence, etc. In addition, Umee actively integrates with other ecosystems and enables cross chain connections with networks like Solana, Polygon, Optimism, Fantom, Arbitrum, Binance Chain, Avalanche along with many other blockchains on its roadmap.

TEAM

Team looks mature and experience. CEO Brent was involved in development of Ethereum and Cosmos.

SALES OPTIONS

TOKEN EVALUATION

Solution

8

There are many successful projects in the field of DEFI. Ability to collateralize staked assets is quite unique. Umee is a steady growing project and has few advantages.

Token Utility

4

Token utility is not so clear as expected. I am not sure that users will use a token for fees, governance or a store of value.

Token Distribution

4

Option 1: 2-month cliff followed by a 10-month linear release starting on February 15, 2022.

Option 2: 2-month cliff followed by a 8-month linear release starting on February 15, 2022.

It is very bad, because seed investors have the sale lock-up period, but with 18 month vesting.

Token Metrix

2

Token Metrix are the biggest problem for Coinlist participants, because funds bought tokens 14.5 times cheaper than participants.

Overall token supply: 10 billions UMEE

Raised in seed: 6.3 mil. $ — (13%)

6 300 000 : 10 000 000 000 = 0.00048

0,07 : 0.00048 = 14.5Х

Investors and Ecosystem

9

Coinbase is the biggest exchanges in the USA according to trading volume. Polychain leaded a seed round with participation from investors including Ideo Colab, Coinbase, Tendermint, Brian Kelly Capital Management, Alameda Research, CMS Holdings, Argonautic Ventures.

Team

7

Team has skills and support from Ethereum and Cosmos teams. Also they are working with in this area since 2016. But they raised money in the beginning of 2021 and do not have a MVP in December 2021. Now team is hiring. Hope they will have a TGE as was planned in February 2022.

Overall Score

4.3

INVESTMENT STRATEGY

Expected price of UMI token depends on initial circulation supply, market conditions, competition and listings on exchanges. Data is unknown.

Overall token supply: 10 billions UMEE

Overall capitalization: 0,7$*10 000 000 000 UMEE = 700 000 000 $

Initial circulation supply: ~ 5% (according to a table above)

Initial supply capitalization: 700 000 000 $ * 0,05 = 35 000 000$

Option 1: 2-month cliff followed by a 10-month linear release starting on February 15, 2022.

Expected price: ~ 0,15–0,25 $ — depends on market conditions

Option 2: 2-month cliff followed by a 8-month linear release starting on February 15, 2022.

Expected price: ~ 0,15–0,25 $ — depends on market conditions

Note: Expected price is not possible to identify accurately.

Speculative Strategy:

Option 1: 0,06 $ — 2-month cliff followed by a 10-month linear release starting on February 15, 2022.

We will receive allocation in 10 parts 10% each.

Every 10% we will sell in 4 parts (when received) with 15% price difference:

25% — 0,15$

25% — 0.17$

25% — 0.19$

25% — 0.21$

Next 9 parts we will sell in 4 parts (when received):

25% — 0,15$

25% — 0.17$

25% — 0.19$

25% — 0.21$

Expected profit from 1000$ investment~ 3000$–1000$=2000$ (200%)

Option 2: 0,07$ — 2-month cliff followed by a 8-month linear release starting on February 15, 2022.

We will receive allocation in 8 parts 12.5% each.

First 12.5% we will sell in 4 parts (when received):

25% — 0,15$

25% — 0.17$

25% — 0.19$

25% — 0.21$

Next 7 parts we will sell in 4 parts (when received):

25% — 0,15$

25% — 0.17$

25% — 0.19$

25% — 0.21$

Expected profit from 1000$ investment~ 2570$–1000$=1570$ (157%)

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Ivan Maltsev

Ivan Maltsev

Partner at 3xcapital.fund. Managing portfolios in crypto since 2017.