UMA is a decentralized financial contracts platform built with one mission in mind: to enable Universal Market Access. Our partners created the USStocks token so that anyone with access to the internet and digital money (Dai) could also invest in the US stock market. This launch helped prove both the proof-of-concept, as well as lay the groundwork to test some hypotheses around DeFi usage. Here’s what we learned…
First, some background on USStocks
- USStocks tracks the top 500 US exchange-listed equities by market capitalization, and is margined in Dai.
- It launched on 27 March, 2019 and grew to have over 1.1M DAI locked in the contract!
- OTC trading volume dominated exchange trading volumes; exchange trading volume on DDEX was muted.
- The token settles today, and can be redeemed for Dai at the final settlement value here.
What we learned
- People are excited about synthetic assets — regardless of geography or ideology, people are excited about adding UMA’s technology, a decentralized financial primitive, to the DeFi toolkit.
- Early adopters in crypto (the users of today) are seeking volatility, not “boring” real world assets; investors today are drawn to crypto for its intense volatility. Today’s crypto users are less interested in traditional assets; we expect this to evolve over time, but in the near term we expect investors to want “crypto-like” volatility.
- USStocks is one step closer toward universal market access, but other barriers still exist which we’re not addressing ourselves: in particular, people today that don’t have access to financial products like the US stock market often don’t have access to crypto or don’t have easy ways to manage their private keys and assets.
- Perpetual (or longer tenor) products may be key to driving adoption for unlevered products, because investment decisions tend to be made on a longer time horizon, and 8 weeks wasn’t enough time to provide risk exposure to those who did want it.
- The Ethereum community is uniquely awesome: USStocks was the product of a four-way partnership (UMA technology + Dai + decentralized exchange + liquidity provider), and the composability of our technology within existing DeFi projects has opened up new ideas and opportunities for the future.
Next hypotheses to test
- Will distribution via on-ramps or wallets (as opposed to DEX) make more sense for products like USStocks?
- Does UMA technology enable a better way to speculate on levered and inverse crypto + real-world assets than existing solutions?
- Does UMA technology enable more open financial innovation for structured products and/or make settlements/clearing more efficient?
- Are there other use cases for our decentralized oracle, launching later this year?
Questions for the community