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Ever heard of the term “derivatives?” These are essentially a type of asset which tracks the price of any popular underlying asset. For instance, silver derivatives accurately track the actual price of silver. When you trade derivatives, you’re betting on silver’s price without actually owning any.
The global derivatives market is much larger than you might imagine — as of this writing, its value is estimated at over $600 trillion. Unfortunately, retail investors aren’t able to access most lucrative derivatives, which are instead accessible only to institutional investors who are a part of major institutions such as banks. These institutions create, manage and enforce contracts which make any existing derivatives possible.
Several regulations are imposed to determine who can trade the derivatives market. For instance, many derivatives can only be traded in certain jurisdictions. A relatively new blockchain protocol, Universal Market Access, intends to solve this issue by making derivatives available for retail traders across the world. In this article, we’ll discuss the Universal Market Access protocol and the UMA token. Let’s dive right in.
Founded by Hart Lambur and Allison Lu in Q4 2018, the UMA protocol enables users to build decentralized financial protocols. Using UMA’s infrastructure, developers can create and manage their own derivatives and other DeFi products on the Ethereum network. The protocol offers customizable contract templates which allow developers to create a derivative for almost any asset, even ones which everyday investors can’t access.