[Coinlist] A Deep Dive into Umee: The Base Layer DeFi Hub
Last week, we announced the Umee Token Sale on CoinList, starting December 1 at 17:00 UTC. Umee is the decentralized infrastructure for cross chain interactions between networks. Umee connects users to create lending and borrowing positions, move capital across chains, discover new yield opportunities and explore DeFi applications in a seamless and trustless manner. This week, we sat down with the Umee team to break down what they are building, their native token, use cases, and recent traction.
Let’s dive in.
1. To begin, what is Umee and what problem does it solve?
Umee is a cross chain DeFi hub that interconnects between blockchains. As a base layer blockchain, applications and money lego primitives can be built on top of Umee to access cross chain leverage and liquidity. The Umee Blockchain facilitates interoperability between the Cosmos ecosystem, Ethereum network, side chain architectures, layer two scaling solutions, and alternative base layer protocols.
The Umee Blockchain serves as the global settlement layer for DeFi protocols to interconnect between blockchain networks in a gas efficient, highly scalable and interoperable fashion. Umee allows isolated capital to achieve cross chain functionality and participate in many DeFi use cases between networks. As a base layer protocol, Umee will allow DeFi rates, proof of stake, liquidity mining, and NFTs to cross collaborate.
2. Can you describe your target audience? What types of projects and use cases are best suited to build on Umee?
The target audience for Umee includes all users of DeFi, NFTs, and Proof of Stake protocols who wish to leverage their assets to participate in an interchain Web 3.0 world. Users with various digital assets will be able to deposit them into Umee and utilize the blockchain infrastructure for cross chain borrowing and lending. Users with Proof of Stake assets will be able to leverage their staking positions to borrow and earn yield concurrently. It is also on the roadmap to allow NFT holders to use their NFTs as collateral for DeFi products.
The Umee Blockchain is positioned as a Cross Chain DeFi Hub. This means that an entire suite of DeFi tools can be built on top of the Umee Blockchain. This includes DeFi debt instruments, interest rate protocols, as well as decentralized versions of real world financial paradigms like Libor and other base infrastructures. Users will include Web 3.0 advocates, folks from the degen world, NFT connoisseurs, and TradFi adopters.
3. What are the advantages you have found in building a base layer blockchain?
Building Umee as a base layer blockchain unlocks unlimited potential on what Umee can become. Umee allows cross chain lending and borrowing capabilities in connection with 30+ blockchains including Cosmos, Ethereum, Terra, Crypto.com, Binance Chain etc from day 1. This will give the ability to borrow and lend assets across blockchain protocols. Imagine earning ATOM staking rewards while holding ETH or staking LUNA while using it to earn Sushi Swap liquidity mining rewards.
The Umee Blockchain will also allow multiple DeFi and NFT tools to be built on top. Imagine holding NFTs and using them as collateral for borrowing and lending or using them to access Proof of Stake yield. You would be able to leverage NFTs to participate in Cross Chain DeFi while concurrently staking them. Various applications can be built on top of Umee to support these abundant use cases and products for connecting between blockchain worlds.
On our roadmap, we aim to build the Umee Blockchain out to be a global settlement layer in the blockchain ecosystem to bridge multiple assets together under a common interface. As more development occurs in the broader community, the Umee network will be able to onboard more high quality developers and contributors to the evolving Web 3.0 space.
4. What is the inherent use case for Umee’s native token, UMEE?
UMEE is the native Proof of Stake token of the Umee Blockchain. Blockchain participants use the token to pay for computation fees and to reward validators for providing Tendermint BFT consensus towards processing network transactions. The token is also a governance token for making decisions about the protocol configurations of Umee, parameters of the DeFi applications, as well as product and program proposals.
- Validator Infrastructure – The Umee Blockchain is built on a network of validators that contribute Tendermint BFT consensus to the protocol. Tokens are bonded to validators that stake to provide Proof of Stake consensus to the network. Validators come from an open ecosystem of contributors and infrastructure providers. Tokens can also be delegated to validators by users to participate in the underlying consensus mechanism.
- Network Fees and Proof of Stake Consensus – Network fees will be earned in the form of UMEE tokens by validator infrastructure providers. Similar to how ETH is used as a gas fee to pay for transactions on the Ethereum blockchain, UMEE is used as a gas fee to pay for transactions on the Umee Blockchain. Validators earn block rewards in the form of UMEE similar to how transaction fees are processed in native blockchain protocols.
- Protocol Governance – The native UMEE token is also a protocol governance token used to facilitate on-chain governance for the Umee Blockchain. The governance token can be used to vote on configurations of the protocol as well as network upgrades for improving functionality of the blockchain infrastructure. The UMEE governance token will additionally govern DeFi parameters of applications that sit on top of the Umee Blockchain.
The UMEE token will exist as both a Cosmos SDK based token as well as a native ERC-20 token. This allows the native token to seamlessly interoperate with all Cosmos and EVM based networks.
5. What about the protocol design of Umee makes it so attractive to users looking to explore DeFi applications?
The Umee blockchain is fast, cheap to use, highly scalable and interoperable with other blockchains. Umee is built on a Tendermint based BFT consensus protocol. This means that Umee is able to achieve fast finality transactions while maintaining safety over liveness. The underlying consensus protocol utilizes bonded validator sets as well as slashing conditions to maintain the safety of the network. Additionally Umee leverages the IBC (Inter-Blockchain Connection) protocol for connecting between fast finality networks. IBC is a Layer 0 protocol that allows interoperability between all Proof of Stake blockchains by implementing a standardized communication algorithm.
Umee will enjoy the best cross chain experience thanks to the IBC protocol that has been developed for over 5+ years. The protocol optimizes the balance between functionality and security. Users can send transactions across blockchains with 5-10 second fast finality. Such infrastructure makes it possible for a whole community of developers to build applications on top of Umee. A Cambrian explosion of use cases can be built using Umee’s core infrastructure, and the network intends to support innovative solutions as a new social, political, and economic paradigm.
6. What trends are you most excited about in the crypto space and DeFi more broadly?
The Umee ecosystem is very excited about the intersection between DeFi and TradFi. One metric we use is that there is close to $280 trillion USD worth of debt in the real world. It is expected that in the next 5 years, DeFi will gradually interconnect with TradFi for a more transparent financial system. A broader vision of Umee is to open source the financial markets.
Umee is incubating projects to be built on top of the Umee blockchain. This includes ideas around Debt facilities as well as reinterpretations of the term structure of interest rates or yield curves as they relate to Proof of Stake. Umee will be accelerating the development of many new tools and protocols.
Umee is also building the interface between DeFi and NFTs. In addition to NFTs being accepted as collateral for various borrowing and lending apps, the Umee network is also exploring how NFTs can be used to represent specific DeFi positions. This will result in a Metaverse where DeFi users and NFT collectors can collaborate on building the Web 3.0 future.
7. What is the best way for the community to get involved with Umee?
We currently have an Umeeverse Genesis Launch event. Folks are encouraged to find ways of interacting with the broader Umee ecosystem. Activities include:
- Create educational materials (articles, memes, tweets, blog posts, videos, podcasts)
- Translations of documents
- Documentation around network setup and configuration
- Contribute to Github repos, wiki docs, and technical discussions
- Participating in the validator network
- Finding bugs through the bug bounty program
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