UMA has launched a new system that resolves price requests without relying on an oracle for data.
The system works “optimistically,” meaning disputes are only raised if the requested data is wrong.
UUMA launched as a DeFi platform for synthetic assets but hopes to become a powerful tool for building any kind of financial contract.
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UMA unveils its “Optimistic Oracle.”
UMA Launches Major Update
UMA, the DeFi protocol aiming to create “Universal Market Access,” has launched a new system for resolving price requests called the “Optimistic Oracle.”
The project’s co-founder Hart Lambur announced the update in a Thursday blog post. The concept of an Optimistic Oracle is something Lambur has long discussed when promoting UMA.
The protocol initially launched as a platform that allowed anyone to create synthetic assets but has evolved at a fast pace over the last year. It’s hoping to become a platform for all kinds of financial contracts, and the Optimistic Oracle is one of the fundamental parts of its design.
Most DeFi protocols rely on oracles such as Chainlink to get accurate price data. Synthetix, for example, uses Chainlink. UMA works differently in that it runs a “priceless” mechanism. It works by allowing anyone to push an answer on-chain, and disputes are only raised if the data is incorrect.
The Optimistic Oracle system features three actors: one requesting a price for the contract (“the requester”), one proposing the price (“the proposer”), and another that can dispute prices they disagree with (“the disputer”). As it operates optimistically, there are rarely ever any disagreements; UMA says that it’s seen “fewer than five legitimate disputes” over the last year.
The dispute period gets set by the requester, to which the proposer posts a bond and suggests a price. If there are no disputes, the data gets finalized quickly at a low cost. When the disputer disagrees with the proposal, the request gets sent to UMA’s Data Verification Mechanism. Disputes are handled by UMA token holders within a 48-hour time window.
UMA’s, the DeFi “Blue Chip”
Although oracles are seen as a cornerstone of the DeFi ecosystem, UMA’s innovation could prove to be an effective system for pulling price information on-chain. An Optimistic Oracle is particularly useful, Lambur writes, for “super precise data” such as prices related to options, insurance, and financial contracts. Many popular oracles struggle to provide precise data when required.
The Optimistic Oracle code has been audited by OpenZeppelin and already secured $200 million worth of synthetic tokens. It can be integrated into any DeFi protocol; the post notes that Opium Protocol already has partnered with the project. Andrey Belyakov, the founder of Opium Protocol, said:
“We are happy to cooperate with UMA mixing their optimistic oracle approach with our financial primitives to create mind-blowing use cases. No spoilers, but we are shooting for the moon.”
Meanwhile, UMA has promised “more integrations, partnerships, and improvements” over the next few months.
UMA is one of Ethereum’s leading DeFi protocols, widely regarded as a “blue chip” of the ecosystem. It recently launched a joint project with YAM called Degenerative Finance; the teams began offering WallStreetBets-tracked stocks after the GameStop saga in March. UMA has enjoyed steady growth along with the rest of the market this year, with a market cap of just over $1.5 billion. The UMA token trades at roughly $25 today.
Disclosure: At the time of writing, the author of this feature owned ETH, SNX, and several other cryptocurrencies.
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