Protocol Overview
Last updated
Last updated
Umoja is a structured finance protocol that enables smartcoins: next-gen yield vault tokens (YVTs), supercharged by algo-trading. Smartcoins provide lower risk and higher yields than normal YVTs.
Smartcoins are similar to yield vault tokens (YVTs), which represent tokenized staked assets (e.g., stETH on Lido as tokenized staked ETH). Instead, smartcoins represent tokenized collateralized trading strategies designed to optimize targeted risk-to-return ratios.
Comparable to traditional finance (TradFi) structured products, smartcoins provide investors with reliable crypto yields while limiting their risk, eliminating the need for complex DeFi education & risk management. Even better, the protocol leverages a compliance regime that ensures that smartcoins are not considered securities and does not require collateral depositors (i.e., smartcoin minters) to undergo KYC.
Umoja's protocol architecture can be divided into the following, functional sub-groups:
Accept deposited collateral and mint smartcoins.
To mint smartcoins, specific collateral is required (e.g., $yBTC requires BTC). When a user provides collateral to the protocol, it is split between an off-exchange custodian, such as Ceffu and Liquid Technologies, and a permissioned vault. This ensures that the collateral is properly safeguarded and can be used in trading strategies across centralized exchanges and DeFi platforms. After the collateral is securely deposited and the smartcoin’s price is quoted, the smartcoin is minted.
Execute the underlying trading strategies of minted smartcoins by leveraging the Umoja Trade Engine, DeFi trade execution software.
Umoja uses the Umoja Trade Engine (UTE) to execute each smartcoin's underlying strategies across CEXs and DeFi protocols. The UTE is the first of its kind in crypto for managing trades and positions. The UTE allows protocols and applications to run advanced trading and asset management strategies across multiple exchanges and DeFi platforms simultaneously.
$UMJA and smartcoins may be staked to receive fee rebate rewards.
Users may stake Umoja's native token, $UMJA, to the Governance Pool to: accrue voter influence via $UMO, a non-transferable governance token; earn redistributed protocol revenues in smartcoins, and; earn working lottery eligibility, via which they can be randomly selected to receive bi-weekly $UMJA rewards (coming soon).
Similarly, smartcoin holders can stake their smartcoins in the Yield Stabilization Fund to earn additional smartcoin rewards (coming soon). The fund helps protect smartcoin holders from negative yields by burning smartcoins, increasing the net value of the remaining smartcoins.
Burn smartcoins (and $UMJA tokens, as a fee) and return the underlying collateral to the end user.
Smartcoin minters may burn smartcoins for their underlying collateral. To do so, they must burn an amount of $UMJA as a burn fee. The protocol uses a request-for-quote (RFQ) mechanism to determine the optimal principal and accrued yield to return to the user in the initial collateral token.
Umoja seeks to progressively decentralize its infrastructure to the extent that smartcoin collateral remains well-protected and monetized.
