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UMA surpasses Yearn.Finance as the largest DeFi protocol on Ethereum

September 1, 2020

The landscape of decentralized financing (DeFi) is changing rapidly from day to day. September 1st The UMA has surpassed annual funding as the largest “DeFi” protocol for Ethereum with a market capitalization of $ 1.3 billion.

Data from CoinMarketCap shows that six DeFi projects are now valued at over $ 500 million. The six projects are UMA, yearn.finance, Aave, Maker, Synthetix and Compound.

DeFi tokens on CoinMarketCap by market capitalization

UMA surpasses Yearn.Finance as the largest DeFi protocol on EthereumUMA surpasses Yearn.Finance as the largest DeFi protocol on Ethereum

DeFi tokens on CoinMarketCap by market capitalization. Source: CoinMarketCap.com

But It remains uncertain whether UMA can be called the DeFi protocol. and it depends on the perspective.

What is UMA and how does it compare to other projects like yearn.finance?

According to official UMA documents The project is building an “priceless” open source infrastructure for financial contracts on Ethereum. “

The UMA infrastructure consists of two main parts: Valuable draft financial contracts and data review mechanism (DVM).

The first allows users of the platform to create synthetic tokens. DVM is a decentralized oracle service like Chainlink and Band.

Conceptually UMA is closer to oracle projects than DeFi. However, given the importance of oracles for DeFi, the UMA is building an infrastructure for the DeFi sector. UMA says:

Together, these two technologies enable the creation of faster, more efficient and more secure synthetic derivatives on the Ethereum blockchain. UMA is focused on creating “priceless” derivatives on Ethereum. These financial contracts are designed to provide adequate collateral from counterparties without the use of a price feed in the chain. “

DeFi platforms in Ethereum and other major blockchain networks cannot directly access public data. Oracle such as Chainlink, Band, and UMA’s DVM help DeFi protocols obtain market data through smart contracts.

As a result, many analysts view Oracle projects as DeFi-related blockchains. For example, CoinMarketCap lists Chainlink, UMA and Band Protocol in the DeFi category.

However, UMA differs from platforms like yearn.finance in that it provides the underlying infrastructure for DeFi protocols that enable services like staking.

The DeFi market landscape is changing rapidly

A pseudonymous trader called “Hsaka” said the UMA, which has the highest APY pool for the sushi token, catalyzed its boom. In addition, the trader emphasized that incentives for the growth of DeFi-related projects are important. He said::

“This is how $ UMA became the most valuable DeFi token. I don’t think the highest APY pool for $ SUSHI is the only reason, but rather a factor that contributes to it. The fact that this helped change YFI, LEND, SNX, etc. It gives you an idea of ​​how powerful incentives can be right now. “

More and more DeFi protocols and DeFi-related projects are starting to cooperate with one another instead of competing with one another. For example yearn.finance said::

“To be clear, nothing we build is competitive. It’s collaborative. For example, an important element not listed in the ad article is the handling of the Black Swan events. Insurer: Nexus Mutual. Reinsurers: Nexus are mutually stronger together “.

Following the increasing popularity of DeFi protocols, major exchanges are starting to list more tokens. On September 1st, Binance, Huobi and OKEx listed SUSHI.

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