UMA Raises $2.6mm with the Pilot of the Range Token
Cryptonative treasury diversification now live for DAOs
The range token is a new treasury primitive that enables DAOs to access funds and diversify their treasury without directly selling their native tokens. Range tokens function as a loan a DAO can take against its own treasury — a sort of “crypto native convertible debt.”
As promised in our initial announcement, Risk Labs (the foundation supporting UMA) has minted the first ever Range Token backed by $UMA collateral. This inaugural range token was created to prove the concept and showcase the power of the primitive. $2.6mm worth of this token has been sold to a small group of DeFi enthusiasts, including Amber Group, BitDAO, Blockchain Capital, Robert Leshner and Wintermute Trading.
The range token is a truly crypto-native structure. No lawyers or middlemen were used to draft docs or escrow funds. The terms are purely reflected in the logic of the UMA smart contract.
How this Range Token works
The inaugural range token has a $4-$12 UMA price range and expires on August 31. The token was priced to have a 25% APY, at 0.963 USDC. This discount reflects the 25% annualized yield over the 2 months until expiry.
The following payouts happen at expiry:
- If $UMA is within the $4–12 range, the investor earned 25% APY paid in $UMA;
- If $UMA is > $12, the investor earns an effective APY higher than 25% (the investor has long exposure to a $12 call option);
- If $UMA is < $4, the investor earns an effective APY lower than 25% (the investor has short exposure to a $4 put option).
More details on the structure can be found here.
The Range Token is built using UMA’s LSP contract, which has been audited by Open Zeppelin. The deployed contract can be found here, and the token here.
How this Range Token was distributed
This initial Range Token was designed to be a proof of concept to showcase the idea to the DeFi ecosystem. We wanted to get some market makers, venture funds, and DeFi enthusiasts familiar with the concept. Our thinking is that the more investors understand the product, the easier it will be for future DAOs to launch these tokens.
Demand was encouragingly strong. We intended to only create $1mm of this of structure, but we ended up creating over $2.6mm.
Some of our first purchasers include:
- VC Funds: Blockchain Capital, IOSG, and Sybil Capital
- Market Makers: Amber Group and Wintermute Trading
- DeFi Enthusiasts: Stefan Cohen (Bain), Robert Leshner (Compound), Tony Sheng (Cozy), Ryan Yi, Will Price, Allan Matheson (Golden Pear Capital), Mirana Ventures
This initial range token was distributed privately via 1:1 conversations for the sake of speed and simplicity. In the future, we would expect to see more open and DeFi native processes used for this initial distribution.
How to Diversify your DAO’s Treasury
Our goal is to turn this into a primitive used by many DAOs to borrow against and diversify their treasury. Treasuries that hold huge concentrations of their native token should actively consider this. We are already in conversations with a number of projects that are interested in this concept, and we intend to help other DAOs design their own range tokens.
If you are a member of a DAO and would like to talk treasury diversification, please email hello@umaproject.org, start a conversation in Discord, or DM us on twitter.
Thanks
We’d like to thank Larry and Derek from Reverie for helping us think through the design of Range Tokens and how they could be used by DAOs managing their treasury.
