The Universal Synthetic project is a service for the issuance of synthetic digital assets, built on the UMA Protocol, and making it possible to allocate synthetic assets tied to the value of stock market instruments through the smart contracts mechanism. Synthetic assets can be linked to the classical stock market assets, such as — stocks, bonds, thematic ETFs, indices, and derivatives.
The Universal Synthetics project introduces a new uSPAC10 token that is the first in the line of synthetic tokens representing the indexes of SPAC shares. uSPAC10 synthetic tokens enable the user to earn on the exponentially growing SPAC market without the need to interact with centralized mediators and purchase real shares. Furthermore, the DeFi protocols that underline the uSPAC10 token ensure its safety and provide additional profitability. Thus, the user receives a reward for issuing synthetic tokens that can become a market maker on decentralized exchanges (DEX) or take advantage to receive additional profitability for providing liquidity.
Anew uSPAC10 synthetic token is a derivative instrument with the price tied to the index of the 10 most dynamic SPAC shares and traded on the NASDAQ and the NYSE stock exchanges. Thanks to uSPAC10, one can profit from participating in the price movements in the real market.
Special-Purpose Acquisition Companies (or so-called SPACs) are companies whose shares are traded on the stock exchange. SPAC is created as an alternative to the traditional IPO and brings businesses to the stock market through acquiring the target company. For the last years, the SPAC’s market has grown exponentially and has proved to be a pretty attractive object for investment.
By their very nature, SPAC shares are prone to impulse growth at the moment of information (or even just rumours) that a target company has been found for a takeover.
Therefore, a good way to make money on such a hasty growth without analysing hundreds of SPACs is to operate the index value change, which includes the shares of the most active SPACs.
Our synthetic uSPAC10 token provides DeFi users with the opportunity to participate in the price movements of SPACs shares.
uSPAC10 is created on the UMA (Universal Market Access) platform and is secured.
USDC stablecoins are used as collateral: the collateral ratio for the minting of a synthetic token is 1.5. Moreover, a decrease in collateral to the level of 1.25 leads to the liquidation of the position.
Because the synthetic token combines the volatility of the real market with the collateral of stablecoins, we get a derivative instrument with a reasonable balance of risk and potentially high profitability. Thus, to issue a more volatile synthetic token with limited threats, the user can use their risk-free assets in the form of low-yield stablecoins.
To calculate the index, we use quotes of the 10 most dynamic SPAC shares, identified by the data of SPAC Analytics. The list of stocks included in the index is reviewed quarterly. Information about the cost of a synthetic token comes through a price oracle that receives data on the price of stocks included in the index from external sources. The index value is calculated daily as the arithmetic average of the daily closing prices of the stocks included in the index.
How does it work?
The user issues (mints) a certain amount of uSPAC10, then from the wallet collateral is debited in the proportion of 1.5 to the cost of synthetic tokens issued.
For example, if a user decides to mint uSPAC10 in the amount of 10 and the index value at the time of issuing equals 32.256 USD, then the collateral cost will be 10 * 32.256 * 1.5 = 483.84 USD. It means that for the release of 10 uSPAC10 tokens, the user must provide collateral in the amount of 483.84 USDC.
Thus, the user becomes the owner of synthetic tokens for which he has provided collateral or, in UMA terminology, “becomes a sponsor” of the issued derivative instrument. For sponsorship, the user periodically receives a reward in UNISX service tokens, which depends on the value of locked collateral and the time during which this collateral is blocked.
The sponsor can “burn” synthetic tokens at any moment and receive USDC, which were used as collateral, at the current index price. However, he must have a sufficient amount of uSPAC10 in his wallet to do so.
The sponsor can operate the issued synthetic tokens as follows:
1. At first, such tokens can be kept in the wallet. In this case, the sponsor receives only rewards for the minting and is obliged to maintain the collateral at the required level by adding extra collateral or “burning” synthetic tokens. At the same time, he does not bear the risks associated with changes in the underlying asset price since he independently manages the issued synthetic tokens.
2. Another option is to sell synthetics. In this case, the sponsor opens a short position for the token and receives funds from the sale that can be invested in order to obtain higher returns (including issuing additional synthetic tokens (linked, for example, to another underlying asset)).
- To regain the collateral (or “burn” synthetic tokens), the sponsor needs to repurchase them, but if the price of the underlying asset decreases, the tokens will cost much less for a sponsor and eventually will lead to a profit. However, if the underlying asset becomes more expensive, the sponsor may incur losses both when buying synthetic tokens and because of the need to increase collateral.
- The sponsor does not receive additional UNISX tokens when selling synthetic tokens.
3. The sponsor also can place synthetic tokens in the DEX liquidity pool (currently supported by SUSHISWAP) that can be done through the service interface. At the same time, the amount of uSPAC10 transferred to the pool and the amount of USDC corresponding to it at the exchange rate will be debited from the user’s wallet. The corresponding amount of liquidity tokens will be credited to the user, giving the right to receive commission income from DEX for each exchange operation. As has been already mentioned above, to “burn” synthetic tokens, the sponsor must first withdraw them from the liquidity pool.
Reward and Utility Tokens
The user receives a reward for minting uSPAC10 in UNISX reward tokens. There is a UNISX/USDC liquidity pool on DEX, so the user has the opportunity to transfer his UNISX tokens to the liquidity pool and receive a commission from exchange operations or sell UNISX through DEX by exchanging them for USDC.
Furthermore, the user can lock UNISX on the service contract (stake) through the service interface. In this case, synthetic tokens are “withdrawn from circulation” in order to reduce inflation. The users can also interact with staking liquidity tokens.
- The user receives a reward for staking in UNISX tokens.
- Stacking is available not only to sponsors but also to any owners of UNISX.
The user with UNISX tokens put in a staking contract receives new xUNISX utility tokens that can be used as followings:
- to return UNISX tokens from the stake and receive rewards for staking. Moreover, when returning UNISX from a steak, the corresponding xUNISX tokens are destroyed;
- to participate in voting on the development of the service. Note that the voting is available only to those UNISX owners who are long-term participants in the project and who have placed their tokens in liquidity pools or in a stake, which is confirmed by the xUNISX tokens at the user’s wallet;
- to receive cashback on the commission for exchanging synthetic tokens through DEX liquidity pools. To receive cashback, a trader should have at least a set number of xUNISX tokens in the wallet that will increase as the turnover grows. Cashback is paid in UNISX tokens. A trader can get xUNISX by staking the acquired UNISX, as well as UNISX received as a reward for staking;
- xUNISX utility tokens can be bought and sold.
What’s next?
In the nearest future, we plan to launch the following products:
- uSPAC50 — a synthetic token that tracks the index of the 50 most active SPACs stocks, and which allows you to react more accurately to the changes on the markets;
- uSPAC-FinTech — an index that includes SPACs’ shares aimed at FinTech companies;
- uSPAC-EV — an index that includes SPACs’ shares aimed at Electro Vehicles and related companies.
- And many more.
The project team includes 8 highly qualified professionals with in-depth knowledge of finance and programming, MBA/PhD, more than 5 years of experience in the crypto market and 20+ years in the stock market.
