DeFi Platform UMA launches “Optimistic Oracle”

2022-05-28, 14:39

Universal Market Access (UMA) is a decentralized virtual finance protocol created to enable you to manage your synthetic assets.

UMA gives you a decentralized platform to create traditional financial products, crypto-based products, and other virtual financial services.

UMA allows multiple parties to come together, share resources, and create financial products.

UMA’s enforcement is via the Ethereum smart contract.

UMA launched its Optimistic Oracle to allow parties to quickly and easily request and receive all forms of data.

The optimistic oracle will serve as the central escalation point between contracts that initiate requests and the data verification mechanism.
If you request an optimistic oracle, whoever gets it right gets a reward token. Soviet, if the answers given are incorrect, it will be disputed.

Optimistic oracle provides data protection to your smart contract and prevents manipulating users' external data.

Insurance, KPI options, complex computations, and financial contracts are some of the use cases of Optimistic Oracle.

Recently, UMA launched its Universal optimistic oracle. The UMA protocol initially built for synthetic assets now launches a new Optimistic Oracle protocol. The question is, "what does UMA do?" and "what does the new launch entail?

What Is UMA?

Image: Moralis Academy

UMA, the abbreviation for UNIVERSAL MARKET ACCESS, is a decentralized finance protocol created to enable everyone to create and manage their synthetic assets. Hart Lambur co-founded UMA.

Universal Market Access (UMA) is a synthetic-asset mechanism where you can recreate traditional financial products, crypto-based products, and a host of other virtual financial services.

UMA is hosted on the Ethereum blockchain, and it requires 14 network confirmations.

The Universal Market Access allows multiple counterparties to come together and create a financial contract. This financial contract is secured via economic incentives like collateral, and the enforcement is via Ethereum’s smart contracts.

Having identified the functions and operations of UMA, we can now examine the newly launched tool.

What Is UMA’s Optimistic Oracle?

Image: Medium

UMA’s optimistic oracle was built to allow contracts to quickly and easily request and receive all forms of data.

The Optimistic oracle was launched to serve as the central escalation point between contracts that initiate requests and the data verification mechanism (DVM). The Data Verification Mechanism is Universal Market Access (UMA)'s dispute resolution system.

Optimistic oracle protects your smart contract and prevents users' external data feed manipulation.

The unique feature of Optimistic Oracle is the protection against external data feed manipulation. Other types of Oracle solutions are just as secure as their data feed.

Anyone can propose answers when someone makes a request, and they will be rewarded. However, if your answers are incorrect, they will be disputed and not sent to the DMV.

If you propose incorrect answers, you will lose a certain token. So to win the reward, you must ensure the proposed data is correct.

Optimistic Oracle is flexible and has high-level security protocols. Since its launch, it has been utilized in building KPI options for Decentralised Autonomous Organizations (DAOs), SpaceX launch insurance, and several types of cross-chain messaging platforms.

You can use UMA's optimistic protocol to resolve markets and bring all data types on-chain. The optimistic protocol is primarily used for UMA financial contracts and can be integrated into other DeFi protocols.

The UMA optimistic protocol allows you to push an answer on a chain to any request, and you will only be disputed if the answer is wrong. You do not need an existing contract launched on UMA to plug into an optimistic oracle.

Having identified all the functions of the Universal Market access, the launch of the Optimistic Oracle, and its operations, we can now dive into the use cases of Optimistic Oracle.

Use Cases Of Optimistic Oracle

Image: Publish0x

When DeFi and blockchain developers need to get data on crypto prices, they can check chain links or Uniswap instead of the newly launched Optimistic Oracle.

However, when you need other data about the crypto market and want the data to be precise, experts advise the developers to use UMAs optimistic Oracle.

The other data that you can use Optimistic Oracle to check to include;

Insurance

Almost all DeFi protocols can write insurance contracts on financial transactions or events. DeFi is a powerful tool for real-world events as well.

However, none of these DeFi protocols can get data on those events except Opium. This is possible for Opium because it has integrated Optimistic Oracle into its operations.

Opium is a finance platform where you can create your decentralized market, and your DeFi developers can simultaneously create insurance on any measurable events.

Since the incorporation of Optimistic Oracle into Opium, developers can now work with any on-chain oracle to provide financial derivatives that were hitherto absent in DeFi. This is an addition to the Insurance industry.

Key Performance Indicator (KPI) Options

The KPI options of UMA enable you to check for arbitrary data other than the cryptocurrency prices. The key performance options entail synthetic tokens that give rewards based on a specific metric.

The data available via KPI options are not available on-chain; they can only be queried using Optimistic Oracle.

Aragon DAO migration, UMA’s TVL, and Badger’s DIGG token all have their contracts enforced by Optimistic ORacle via the KPI options.

Complex Computations

Most complex DeFi contracts now require advanced computations to calculate payouts in recent times. These calculations are so complex and attract high gas fees that they cannot be performed on-chain.

Experts devised a solution whereby you will use an Optimistic Oracle to perform these complex calculations off-chain and then verify on-chain using the same optimistic oracle.

It is cheaper to perform the calculation off-chain and then verify on-chain, and Off-chain observers can also verify the calculation during the dispute period.

Financial Contracts

Another use case of UMAs Optimistic Oracle enables DeFi developers to build financial contracts. The vision is to ensure that Optimistic Oracle can build financial contracts for all operations and services.

This is still a vision, and it is expected that the optimistic oracle is the best key to achieving this vision. Once these contracts can access the arbitrary data (data for anything), the vision becomes achievable.

Experts and DeFi developers are anticipating this innovation.

Conclusion

The Optimistic Oracle is a smart innovation expected to break boundaries. The launch is expected to make the activities and operations of DeFi developers easier and fast.

Some other features of UMA's optimistic oracle have not been launched (yet). There are high expectations of other improvements underway.
It is expected that there will be more partnerships between UMA and financial service providers, and several other systems will integrate the protocol into their operations.

Author: Valentine. A, Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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