Umee /ˈumi/ — is the word for ocean. DeFi is for everyone. Umee is you and me.
Disclaimer for our Russian-speaking readers: the Russian version of this article will also be published on our blog!
Hello everyone Our team follows the new projects that appear in the crypto world. Some of them seem to us more interesting and promising tan the others, so we want to tell you about them in our blog. Today, attention is drawn to the Umee project. We have studied the whitepaper of the project, and highlighted (in our opinion) the most basics from it.
Umee is a decentralized infrastructure for inter-chain interactions between networks. Umee brings together users to create lending and borrowing positions, move capital along chains, open up new profit opportunities and explore DeFi applications that cross networks seamlessly and without trust.
Umee enables users to borrow or place assets as collateral on one blockchain in order to borrow assets on another blockchain. So in simple words: it allows to use previously received interest on deposits from one network as collateral in another network.
Technology
Briefly, what is the Umee based on:
● Cosmos SDK
● Starport Network
● Tendermint Consensus
● PoS
● Gravity Bridge
The Umee network is a protocol with a mechanism that is a decentralized bridging solution for interaction between Ethereum and Cosmos, led by the Interchain Foundation (ICF). The protocol assumes the use of Gravity Bridge for decentralization and compromises in the infrastructure. The network structure will include a set of repeaters that transmit transactions from the Ethereum blockchain to the Umee network via a Gravity Bridge. At the same time, as a result of the successful launch of the IBC protocol, the Umee network will be able to transfer tokens between other quick completion chains built on the Cosmos SDK. Thanks to this, Umee will be able to implement DeFi functionality for assets in the entire crypto ecosystem.
On their website, the developers identify 4 Umee tasks that are aimed to prove the DeFi sector. We will tell you in detail about each of them:
- Cross chain Support
Users easily interact with multiple networks without relying on centralized gatekeepers. The first iteration of Umee should facilitate lending and borrowing between the Ethereum and Cosmos ecosystems. Here is an example from the whitepaper: Alice connects Atom tokens to the Cosmos network. As long as she earns block rewards for staking, she can also use her staked Atoms as collateral to borrow DAI in the Ethereum blockchain. She can also use DAI to buy more Atoms and repeat this process.
Umee will also introduce a mechanism in which interest rates from placed POS assets can be immediately liquidated and used to pay interest on borrowed positions. How it works in the example: Bob stakes Atom tokens and chooses to immediately liquidate block rewards. He wants to borrow DAI from the Ethereum blockchain and subsidize the interest payments he would pay for borrowing DAI with the help of a stake rewards. So, if the reward for the staking is enough, then Bob takes DAI at 0% per annum.
2. Capital Efficiency
The capital between the networks will not be in isolated storage. Liquidity will be interconnected and available without borders. A Universal Capital Facility will be created using the Ethereum smart contract language, as well as the Cosmos architecture.
The borrowing activities will be carried out in the Universal Capital itself. User can be both a lender and a liquidity provider. Interest rates will depend on market conditions such as supply and demand, historical volatility, trading volume and market capitalization, total liquidity and total liquidity utilization ratios. Liquidity providers and depositors receive an interest rate when placing assets in the capital facility.
There will be two types of collateral tokens:
· uToken
· meToken
uToken. It will be minted when assets are locked on one blockchain. After that, they can be connected to another to be used as borrowing collateral. Users receive uToken in a ratio of 1:1 with the deposited asset, but the balance of uTokens increases over time by the base interest rate applied to deposits. Depositors of assets to the capital facility will receive uTokens conforming to the ERC 20 standard when placing assets on the Ethereum side, and uTokens based on IBC when placing assets on Cosmos.
meToken (fixed borrowing positions). Umee makes it possible to secure a borrowed position with collateral in the form of staked assets.
Now let’s look at examples. Back to Alice. She can stake her Atom tokens, and use them as collateral in order to borrow DAI. She will also pay interest on the DAI loan, and at the same time will receive rewards for the staked Atom tokens. When Alice stakes her assets, she receives meTokens in the ratio of 1:1. When Alice receives a reward for the staked Atom tokens (which will be send to the Cosmos validator network), meTokens, which exactly represents this staked position, also earns rewards in the form of meAtom, which will then be transferred to the selected wallet. Alice can withdraw staked assets at any time, as well as return them back to Umee.
Let’s look to another situation. Bob has also staked Atom tokens, but he wants the rewards be immediately liquidated for stablecoints. He can take out a loan in DAI, but the interest he will pay for borrowing DAI will be made up by the rewards for staking. Bob also receives a meTokens for the staked assets. If Bob wants to borrow stablecoins, he can cancel the interest he would have paid on the stablecoin loan and instead use the staking rewards as interest payment. For example, if the interest rate on a DAI loan is 6%, and Atom staking earn 7%, then Bob will lend DAI for free. He will pay 0% for his loan and earn 1% based on the difference between the DAI loan rate and the staking rewards. If Bob decides not to take out a loan, he will simply receive his liquidated staking rewards in the form of DAI.\
meTokens users will be able to choose which positions will be eliminated for their staking rewards. Unbounding meToken will take 21 days, unlike uToken holders, who can immediately withdraw Atom. meToken can be exchanged for uToken after 21 days after the start of unbounding
3. Money Legos meets PoS
The project pays special attention to the “Money lego” paradigm, which is developing thanks to the PoS consensus and the ability to confirm the presence of assets in several blockchain ecosystems.
4. DeFi Hub
The DeFi protocols will be implemented in the Cosmos and Ethereum blockchain. As the developers themselves say, in such cross-chain interest rate markets, the rates in one network will depend on the DeFi environment in another network. Confirmation of consensus will have a particular impact on rates. A long-term contribution to the overall ecosystem will also be the concept of the time value of a crypto asset, since temporary interest rate structures can be created using cross-chain assets and proof of stake.
Conclusion
So, this is everything regarding technology and network operation. We would also like to note that the project has a strong and experienced team. CEO and founder Brent Xu previously worked at ConsenSys and also led strategy at Tendermint, helping to create Cosmos and its Interblock Communication Protocol (IBC)). The project was supported by many large companies and investors, among them: Polychain Capital, IDEO Colab, Coinabse Venture, Alameda Research, CMS, Joseph Lubin of ConsenSys, BKCM, Tendermint.
Umee aims to create an interaction environment that will be similar to the World Bank. Since global finance can interact in different countries, now it’s time for capital to become able to interact through blockchains.
It also aims to become a universal center for lending and borrowing, using relevant technologies in order for assets on one blockchain to be fully used on another.
We were very intrigued by the concept and idea, so we supported the project and participate in their testnet!
Coinlist Sale
And great news, just the other day, registration for the Umee token sale on CoinList was opened! The sale will begin on December 1, 17:00 UTC and will have two public options. Read details here:
Link to the website and whitepaper:
