UMA's IUO: Who is the winner?
Content
UMA's IUO (Initial Uniswap Offerings, Uniswap-based initial token issuance), originally scheduled for 11pm (Beijing time) on April 29, was postponed to 1 a.m. on April 30. Many people stayed up late to grab tokens. But the actual result is that the participants in the first few minutes profited, and then the cost of the participants increased exponentially. This has also generated some controversy. Because many users do not understand Uniswap's exchange mechanism, they blindly participate because of FOMO emotions.
What is IUO? IUO (Initial Uniswap Offerings) is the first token offering on the decentralized exchange Uniswap. What is UMA? The UMA project has a greater enthusiasm in the encryption circle. One important reason is that it has a "no price feed" model design. However, it is not an oracle project in itself. It is a decentralized financial contract platform whose goal is to achieve universal market entry.
This is also the source of its name UMA, supporting Universal Makert Access, which is a grand dream. Through UMA contracts and the price-free model, people can use standards such as ERC20 to create their own financial products. In short, UMA can help people create financial products that do not require a license. For example, UMA allows any counterparty to design and create its own financial contracts. The difference between it and traditional financial derivatives is the automatic execution of smart contracts and the universal access to various financial assets. In order to help everyone understand, UMA also cited an operation case of financial derivatives. Two users, Alice and Bob, can trade Apple assets through UMA contracts.
Customized mutual agreement
Alice expects Apple to fall in the next six months. And Bob wants to do more because he thinks Apple is cheap now. Then both parties can use UMA smart contracts to implement transactions. 10% margin for each party.
Automatic execution
During the 6-month period, the price of Apple has risen and fallen, but the general trend is down. As the price drops, Bob automatically submits funds to meet his margin rate requirements.
Maturity settlement
The price of 6-month-expiration apples has fallen by 30%. Alice gets the income. In this process, Bob continues to make up the margin, and the contract is settled when it expires. In fact, the apple here can also be any other asset or any other thing. And here regarding the price of Apple, there is no need to rely on the oracle to feed the price. Its main mechanism is to encourage all parties to maintain the correctness of the price through an incentive mechanism. Participants must ensure a sufficient amount of mortgage, and the liquidator can liquidate the insufficient mortgage. Assets, thereby making a profit. If a dispute occurs, it will be resolved through dispute settlement.
For details, please refer to the "No Feeding Price Synthetic Tokens" previously released by Blue Fox Notes. In addition, users can use the UMA synthetic token builder to design ERC20 tokens that can track the price of anything, just like the Apple in the above example. The price can design ERC20 tokens; users create decentralized encrypted futures through UMA, similar to the creation of decentralized BitMeX. UMA tokens are governance tokens, allowing token holders to use UMA to participate in governance, which is different from Maker's governance. Participating in UMA governance can get token incentives, which is 35% of its tokens. This will be mentioned below.
This part of tokens is used to guide the formation of the ecology and is mainly rewarded to users and developers. In addition, UMA tokens will also be used when resolving disputes; finally UMA can capture the cost of its financial contracts, which is equivalent to all financial contracts that use UMA need to pay a certain tax. This part of UMA will be destroyed, which will lead to Increasing demand for UMA. UMA's IUO: Who are the beneficiaries? First, let’s take a look at the distribution of UMA tokens. The total number of tokens is 100 million. The specific distribution is as follows:
48.5 million UMA (48.5%, founder, early investor)
35 million UMA (35%, developers, users)
14.5 million UMA (14.5%, future token sales)
2 million UMA (2%, first issue on Uniswap)
From the perspective of overall distribution, 35% are given to ecological participants (developers and users), 48.5% are given to the team and early investors, and the remaining 16.5% are token sales to raise project development funds. The total number of tokens issued by IUO this time is 2 million, accounting for 2% of the total tokens. It is used for price discovery and also a way for it to obtain early project funds.
The tokens of founders, early investors, developers and users have a lock-up period. In the future, the main flow to the market should be the first 2 million UMAs and 14.5 million UMAs for sale in the future, that is, a total of 16.5 million UMAs. Only 2 million UMAs are currently in circulation. From this distribution, there is no problem, and it is also the distribution mode of many projects. However, the ICO is automatically market-making on Uniswap, which will result in a huge cost gap between different participants.
The project party deposited 2 million UMA and 2550 ETH in the Uniswap token pool, worth $535,000. At the time, the price of ETH was about $209.8. The initial price of the issuance is US$0.2675, and its overall valuation is US$26.75 million. Since the project is optimistic, this valuation seems to be good, and the initial price of the issuance is the same as the seed round. If you follow the previous Aixiou model, the first issue price of most projects will not change, it's just a question of whether you can grab the share. And this time the ICO, the price fluctuation is huge.
To understand the huge cost gap between different participants, the key is to understand the automatic market-making model on Uniswap, that is, the constant product model. Through this model, we can see the relationship between price and buying and selling. In the initial token pool, there are a total of 2,550 ETH and 2,000,000, the constant product of which is 2,550*2,000,000=5,100,000,000
From this Uniswap constant product market-making model, it can be seen that as the amount of ETH purchased for UMA increases, its price will become higher and higher, and for many participants who do not understand its operating mechanism, it is easy to form FOMO mood. This initial issuance model is beneficial to the project party, beneficial to a small number of purchasers who first participated in the transaction, but not to the subsequent purchasers. A very small number of people who participated first received extremely considerable benefits. From last night’s transaction history, the first transaction deposited 241 ETH, in addition to the handling fee, the final exchange was 172,223.86 UMA at a cost of 0.001399 ETH. According to the price of ETH at that time, the approximate cost was $0.2935, which was about 9.7% higher than the initial price. . The second transaction was still the purchase of 241 ETH (most likely the same person). After removing the handling fee, the final exchange was 144,879.9 UMA, and the price rose to 0.001663 ETH, an increase of 18.8% over the first transaction. The fourth transaction was still purchased at 241 ETH, and finally 122,719.20 UMA was exchanged. Its cost rose to 0.001963 ETH, a 40% increase over the first transaction.
