What is UMA?
Universal Market Access — often referred to as just UMA — is a protocol for the creation of synthetic assets based on the Ethereum blockchain launched in December 2018. Synthetic assets are a class of assets that represent different, underlying assets and have the same value. Specifically, UMA allows users to design and create self-executing/enforcing financial contracts secured by economic incentives and run them on the Ethereum blockchain. As such, the system consists of two parts: priceless financial contract templates used by developers to create synthetic assets, and a decentralized oracle mechanism. This Optimistic Oracle, known as the Data Verification Mechanism (DVM), helps settle disputes by providing the price of an asset when network participants dispute the value of a collateral backing a synthetic token.
The Risk Labs Foundation supports UMA’s protocol development. The founding community members consist of alumni of Google, Goldman Sachs, venture-backed startups, and economics doctoral programs. The total supply of UMA is capped at 101,172,570 tokens. The Risk Labs initially created 100,000,000 tokens. Approximately, 48,500,000 are held by the Risk Labs founders, early contributors, and seed investors all subject to a multi-year vesting period. On April 29, 2020, UMA deposited 2,000,000 of their tokens into a Uniswap liquidity pool. 35,000,000 of the tokens will be distributed to developers and UMA users while the remaining 14,500,000 are reserved for future token sales.
What is the UMA token?
UMA is an ERC-20 token that serves primarily as a governance token. Decisions on how UMA operates and evolves over time are made by its holders. Holders can earn rewards for voting on price requests from financial contracts using the DVM & for governing the UMA ecosystem by voting on parameter changes and approving system upgrades. Token holders have a say on what types of contracts access the system and which asset types are supported. Voter participation is incentivized with an inflationary reward equal to 0.05% of the current UMA supply is distributed among active voters proportionate to their current stake.
In November 2020, UMA introduced a Developer Mining incentives program, which allows developers to earn ownership in a network that they help create. The Risk Labs Foundation committed to paying out 50,000 UMA tokens weekly as rewards for developers who build synthetic assets on the platform. The rewards are calculated based on the total value locked (TVL) in the newly created financial contracts.
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No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.
Wealthsimple has performed an assessment of whether UMA can be supported by Wealthsimple’s platform, including whether UMA is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated UMA based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of UMA, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created UMA;
- The supply, demand, maturity, utility and liquidity of UMA;
- Material technical risks associated with UMA, including any code defects, security breaches and other threats concerning UMA and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with UMA, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of UMA; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether UMA, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to UMA may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support UMA.
Like all other crypto assets, there are some general risks to investing in UMA. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading UMA. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024