salveboccaccioNotes v2.2 September 4-September 11
I’ve been working on a scraper and wanted to share some of the protocols/products that I found.Upcoming Berachain Protocols:Berachain is quite new/hasn’t launched yet - so most of the protocols built natively have little information available.Native Protocols:(Protocols being built for Berachain) Name: Berasino Twitter: https://twitter.com/berasinocom Description: On-chain trustless games without KYC. Developing own gambling games. Name: BeraBets Twitter: https://twitter.com/BeraBetsGG Descri...
salveboccaccioDelta Neutral Stratagem
This is an older article that I am transferring over.Quick Primer on Delta Neutral Positions:The *delta (*Δ) is a measure of an option’s risk with respect to the direction of the movement in the underlying contract. A positive delta suggests that there is a desire for upward (bullish) movement, while a negative delta suggests that there is desire for downward (bearish) movement. The delta changes depending on underlying price, time or volatility changes. A position is delta neutral if the tot...
salveboccaccioProposals 1.1: October-November 2022
I want to see if it’s worth keeping a track of governance moves (especially if they are remotely interesting/related to tokenomics). This is for two reasons in particular:I imagine a lot of DeFi protocols with underperforming tokens & substandard tokenomic designs will attempt to fix this, by either limiting emissions or implementing a more explicit value accrual system.Proposals can help understand partnerships, new launches, new narratives, where the money/developers are flowing towards etc...
salveboccaccioNotes v2.2 September 4-September 11
I’ve been working on a scraper and wanted to share some of the protocols/products that I found.Upcoming Berachain Protocols:Berachain is quite new/hasn’t launched yet - so most of the protocols built natively have little information available.Native Protocols:(Protocols being built for Berachain) Name: Berasino Twitter: https://twitter.com/berasinocom Description: On-chain trustless games without KYC. Developing own gambling games. Name: BeraBets Twitter: https://twitter.com/BeraBetsGG Descri...
salveboccaccioDelta Neutral Stratagem
This is an older article that I am transferring over.Quick Primer on Delta Neutral Positions:The *delta (*Δ) is a measure of an option’s risk with respect to the direction of the movement in the underlying contract. A positive delta suggests that there is a desire for upward (bullish) movement, while a negative delta suggests that there is desire for downward (bearish) movement. The delta changes depending on underlying price, time or volatility changes. A position is delta neutral if the tot...
salveboccaccioProposals 1.1: October-November 2022
I want to see if it’s worth keeping a track of governance moves (especially if they are remotely interesting/related to tokenomics). This is for two reasons in particular:I imagine a lot of DeFi protocols with underperforming tokens & substandard tokenomic designs will attempt to fix this, by either limiting emissions or implementing a more explicit value accrual system.Proposals can help understand partnerships, new launches, new narratives, where the money/developers are flowing towards etc...
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Report on Umami Finance. Done August 1st (so data is outdated).
Umami Finance is a yield protocol built on Arbitrum that provides liquidity-as-a-service to other protocols on Arbitrum and returns the yield generated to its users.
The protocol initially launched as a rebase protocol, modelled after Olympus (OHM), on Arbitrum. Following the failure of OHM and the rebase protocol model, Umami Finance remodelled their tokenomics and protocol offerings.
Since the release of Umami v2 and the shift away from the OHM-like model on February 2nd, Umami’s TVL has grown from 1.44m to 18.16m.
The protocol currently offers two mechanisms to generate yield for its users: Earn: where users can stake their $UMAMI to earn a share of the revenue generated through Umami’s liquidity provision to liquidity pools on GMX and Uniswap v3. Yields returned are in the form of $WETH.
USDC Vault: where users can deposit $USDC to earn a share of the revenue generated through Umami’s liquidity provision to GMX. Yields returned are in the form of $USDC.
Earn is the first product developed by Umami to return yield generated from the protocol’s liquidity provision.
It allows users to stake their $UMAMI to earn a portion of the yields generated through the deployment of the protocol’s liquidity.
Liquidity is provided primarily into GMX’s $GLP liquidity pool. GLP is the liquidity provider token for GMX's exchange platform. $GLP collects 70% of the $ETH yield from fees on swaps and leveraged positions on the GMX exchange.
Additionally, Umami provides liquidity to various liquidity pools on Uniswap v3. These pools are either for Umami’s own token or for partner tokens. More specifically, these pools are:
$UMAMI-$ETH $UMAMI-$USDC $TCR-$ETH $TCR-$USDC $KROM-$ETH $KROM-$USDC
Umami’s liquidity provision to Uniswap v3 liquidity pools currently generate 37.37% APY.
To hedge out market exposure from its treasury holdings (in particular due to the composition of $GLP), Umami takes short positions on $ETH and $BTC on Tracer and GMX.
The yield generated from Umami’s liquidity provision is split between $UMAMI stakers and the protocol’s treasury. $UMAMI stakers receive the WETH emissions from the GMX $GLP liquidity pools, while the protocol directs all other yield to its treasury.
The value of the treasury as of August 1 is $6.16m and the treasury holdings as of August 1 are:
65% GLP, GMX, esGMX
12% Uniswap Liquidity pools
6% ETH
4.5% Hedge Short Positions
4.5% Stablecoins
8% Alt coins
Currently, Umami returns approximately half of the monthly yield from the revenue it generates through its protocol owned liquidity to pay out $ETH to $UMAMI stakers.
For the month of July, the revenue generated by the treasury holdings was $119,278.14, which means the protocol earned an APR of 1.93% for July, (23.2% annualized).
The treasury kept $49,406.43, and $69,871.71 was returned to $UMAMI stakers in the form of WETH.
Umami’s second product is the USDC vault, which was launched on the 27th of July. The USDC vault generates yield by providing liquidity to GMX’s $GLP liquidity pool.
Users deposit USDC into the vault. This USDC is used to mint $GLP on GMX and hedging derivatives, $3S-BTC/USD+USDC and $3S-ETH/USD+USDC, on Tracer.
$GLP collects $ETH yield from exchange fees and trader liquidations, which are returned to the user. The $GLP pool also receives $esGMX rewards, which Umami stakes for additional $ETH yield. The USDC Vault also stakes its Tracer hedges for $TCR emissions, which it swaps for $USDC and returns to the user.
Details about $GLP Pool:
$GLP is the counterparty to traders on GMX, and collects 70% of the fees and liquidations generated from the GMX exchange, in the form of $ETH.
As of August 1, 2022, the GMX exchange has earned $51,479,308 in revenue.
The $GLP token also receives $esGMX incentive emissions. These non-liquid rewards can be staked for $ETH yield just like their liquid counterpart, $GMX.
As previously mentioned, they also accrue $esGMX rewards and "Multiplier Points" (MPs), which are staked by Umami to improve $esGMX's $ETH yield further. $esGMX emissions and MPs are automatically compounded and used to pay out the $ETH yield to Vault depositors.
$GLP is composed of $ETH, $BTC, $LINK, $UNI and stablecoins.
Details about Tracer Hedges:
Tracer allows users to take leveraged long or short positions on assets such as $BTC or $ETH with zero risk of liquidation.
Each Pool is “two-sided,” presenting users with the option to take either a long or short position against the underlying asset. Users “Mint” either long or short Pool tokens by depositing $USDC as collateral via Tracer’s app.
The long and short sides of a Tracer pool are counterparties. The two sides of the pool swap $USDC collateral as needed to maintain their long or short exposure to the underlying asset as it changes in price.
Umami's USDC Vault hedges out its $GLP position's exposure to $BTC and $ETH using Tracer's 3x leveraged short tokens, $3S-BTC/USD+USDC and $3S-ETH/ USD+USDC. The Vault rebalances its hedges every 9 hours to retain as close to delta- neutral net exposure as possible.
Since Tracer incentivizes its pools with $TCR, Umami stakes its $3S-BTC/USD+USDC and $3S-ETH/USD+USDC to collect $TCR incentives, which it swaps for $USDC and returns to the user.
The $UMAMI token is the governance and fee generation token of the protocol. It is soft capped at 1,000,000 and will have zero emissions - unless the DAO votes to increase the max supply.
Token holders can Stake (Marinate), to receive approximately 50% of the protocol’s revenues in $ETH, or Compound their tokens, where their rewards are used to market buy and re-stake more $UMAMI. Staked or compounded tokens must remain staked until the end of each monthly epoch.
The non-inflationary nature of $UMAMI and the rewards it accrues incentivizes token holders to stake their tokens.
Effectively, each token is “backed” by $6.16 worth of assets based on the current treasury holdings (however, during the failure of OHM and its forks the backing didn’t matter as price dropped below it).
Since Umami launched as an OHM fork, there were no VCs or angel investors. Users acquired $UMAMI by bonding (effectively depositing $ETH to buy $UMAMI at a discount) or by buying off the market.
Supply: Circulating: 639,591 UMAMI Marinating: 437,358.645693 (of which, 241,300.327419 are Compounding) UMAMI In Primary Uni v3 LP: 60,761.5 Liquid (Unstaked) UMAMI: 141,470.854307
Non-Circulating: 360,409 UMAMI (includes 127,183 "dead" tokens permanently locked in defunct contracts) Main Treasury: 161,585 "Deployment" Treasury: 71,641
Deprecated "v1" Staking Contract: 121,550 Other Contracts Inactive For 100+ Days: 5,633
As it can be seen, liquid/unstaked UMAMI supply is quite small. 36% of the total supply of $UMAMI is non-circulating, either because they are part of the treasury or because they are in deprecated or inactive contracts. Of the 64% that is circulating, most are either marinating or compounding and are thus locked for the monthly epoch (meaning they cannot be unstaked/liquid until the end of the month).
It is important to note that the unlocks at the end of every month lead to users/stakers “dumping” their tokens, which can be increased if stakers feel uncertain about the market as a whole.
Liquid unstaked UMAMI amount rose from approximately 90,000 to approximately 141,470 over the last 8 days - which is a 57% increase. This is most likely due to the unlock due to the end of the epoch.
Demand:
$UMAMI stakers receiving approximately 50% of the protocols revenues generated in the form of ETH creates a large demand for $UMAMI. This has lead to 69% of the circulating supply to be staked, of which 38% is used to Compound by users - meaning that the rewards users receive are used to market buy and re-stake more $UMAMI.
$UMAMI stakers received $69,871.71 in total yield over the month of July, which comes to a monthly APR of 1.13% for July (13.6% annualized). Compared to GMX, which yields 20.41% APR, this is quite low.
However, of GMXs 20.41% APR, only 5.17% is in the form of ETH. The rest is in $esGMX, which is locked and is unlocked over 1 year. In this way, UMAMI is more comparable to $GLP, which offers 25.72% APR, of which 19.35% is in the form of ETH. $GLP, similarly to $GMX requires vesting and unlocking. Since $UMAMI requires only a month to unstake, it is likely that the majority of the demand for $UMAMI comes from it being a relatively more liquid option when compared to $GLP.
It should be noted that the introduction of new products such as the USDC Vault, and the upcoming BTC & ETH Vaults by Umami will likely reduce the demand for $UMAMI. Since comparable yields will be available to users of these vaults, who will now have the ability to hold stablecoins and bluechip tokens to access these yields, as opposed to $UMAMI, it makes little sense for those who stake $UMAMI for yield.
Cash-Flow Projects & Yield Protocols
Despite the general downtrend in digital assets and DeFi, there have been certain sectors that have developed a strong narrative and have seen increased attention and interest over the past few months.
There has been a strong demand for protocols that return revenue to users/holders in the form on non-dilutive, non-native tokens (i.e. stablecoins or ETH). This is potentially due to either the increased importance of “fundamentals” in the bear market, or because users are looking for cash-flow projects.
In either case, tokens such as SNX, GMX and CRV, which are associated with “Cash- Flow Projects” have outperformed both BTC and ETH since the June 2018 lows, and have garnered lots of attention.
Aside from users, protocols have also been shifting their focus and attention towards this narrative, as many projects such as Redacted Cartel, Perpetual Protocol, Jones DAO and SudoSwap have been moving towards a model that returns revenue to their users.
The structure and roles of Umami Labs team members can be found below:
Chief Executive Officer - Alex (Lex) O'Donnell (@DeFiAlpha).
• Twitter: @IntrinsicDefi • Previously an M&A reporter at Reuters and Mergermarket.
Chief Technology Officer - Michael E. (0xPrePop)
Chief Legal Officer - Alex Golubitsky
• Previously General Counsel and Of Counsel. • Worked on moving the Umami DAO Foundation to the Cayman Islands.
Lead Backend Developer - @0xToki
• 381 commits on Github since January 7 • Also works on Cronus Finance, an AMM built on Evmos.
Lead Frontend Developer - GreyPixel Backend Developer - @0xDapper
• Also a contributor to Synthetix & DefiLlama
Backend Developer - EncryptedBunny Frontend Developer - @0xBurden
• 174 commits on Github since starting to work on Umami last November.
Chief of Staff - Jefferson Chang
• Previously Chief of Staff at M^3 and MyMask Movement.
Treasury Manager - Wen Moon (@0xWenMoon)
• Publishes monthly treasury updates
Director, Business Development - Nick Westlake
• Previously a sales development executive at cryptocurrency prime brokerage SFOX.
• Background in business development,
Manager, Content & Community - Lucas K (@MrGrumpyPants)
• Posts weekly updates.
Strategist, Markets & Liquidity - Steven T.
• Publishes monthly treasury updates
Graphic Designer & Videographer - Edis M.
• Part of mobro.studio, a motion, graphic and website design company based in Slovenia.
Umami Labs LLC is a US-based professional services company that handles the day- t0-day management and operations of Umami protocol. The protocol itself is governed by Umami DAO - a community of $UMAMI holders.
Comments about the team:
***Positives:***
The team has been active throughout the bear market. Additionally, they were also able to successfully shift away from the OHM model after its failure.
It’s a positive sign that there’s importance placed on business development and a legal team. Most smaller DeFi protocols lack either. Here the most notable aspect is that the legal team moved the Umami DAO to the Cayman Islands, which shows that they’re forward thinking and are considering security designation/legality issues associated with returning revenue to users.
Negatives:
The main negative noticed in the team and the changes that have happened are that lots of team members have left over the past year.
This is likely not particularly important since there’s a lot of turnover in the space.
Notable names include:
0xCarnation - previous chief yield strategist and treasury manager is
now a part time advisor for the project.
0xpuffin - a core contributor for backend development has left.
0xChaosBi, a backend developer who has left.
GMX
Umami deploys most of its liquidity and products on top of GMX. The USDC vault in particular helps support GMX’s liquidity and protocol.
TracerDAO
Umami will support Tracer’s Perpetual Pools, by using protocol-owned treasury assets to support Tracer’s products.
Dopex & JonesDAO
Umami has partnered with Dopex and JonesDAO to deploy gOHM and support options trading on the Arbitrum ecosystem.
Banxa
Umami is on Arbitrum, an Optimistic Rollup that currently holds the most market share (at 51.49%) amongst all Layer 2 solutions. It’s seen steady growth in both users and monthly transactions, despite the general downtrend in DeFi. Arbitrum currently has just over 1 million total users, and a TVL of $1.36 billion (Optimism’s TVL is currently $596.16m).
Since Umami is currently only on Arbitrum, its success depends highly on the success of Arbitrum. Arbitrum being the most popular Layer 2 solution, despite not having a token is a good sign for Umami. It’s likely that after the relaunch and completion of Arbitrum’s onboarding event, Odyssey, Arbitrum will continue and further it’s dominance amongst Layer 2 solutions, at least until zk rollups become more popular.
In the future, it is likely that Umami also launches/deploys on Avalanche as well, since GMX is chain-agnostic and on both Arbitrum and Avalanche.
Confirmed Upcoming Updates:
Socket API will be added in August, to help bridge tokens from other chains.
ETH and BTC vaults in the style of the current USDC Vault will be added.
A community NFT will be launched.
Redacted Cartel is an Olympus fork built on Ethereum, that focuses on on-chain liquidity and governance.
It uses its protocol owned liquidity to accumulate assets such as CRV and CVX in its treasury through a bonding mechanism - where users can bond tokens in return for discounted $BTRFLY.
Redacted uses these accumulated assets to control and influence governance in DeFi (specifically in the Curve ecosystem) and receive governance incentives, fees and yield as revenue.
Redacted currently has two products: Hidden Hand and Pirex. Hidden Hand allows protocols to buy and sell governance incentives, while Pirex allows users to lock their CVX to earn autocompound and earn extra yield.
Users who stake receive their $BTRFL rewards in the form of $xBTRFLY, which is inflationary and dilutive. The governance incentives, fees and yield collected by the protocol is added to the protocols treasury. There are currently plans to move towards distributing a portion of the revenue to $BTRFLY holders. Once it’s launched, those who lock their $BTRFLY for $rlBTRFLY (revenue locked BTRFLY) will gain access to the fees from Hidden Hand, future Redacted products, and yield farming rewards from the treasury.
At its peak, Redacted Cartel had a TVL of $604.5m. Currently, its TVL sits at $35.7m. However, over the last 30 days, Redacted Cartel has seen a strong increase in its TVL, which has risen by 90.02%, while the total DeFi TVL has comparatively only risen by 21.34%.
Redacted’s treasury value is down overall, which makes sense, given the general downtrend in cryptocurrency prices. Since it’s peak in January at $126,587,617, its treasury value has dropped by over $96 million to its current value of just above $30.27m. It’s also important to note that the Redacted treasury had exposure to Luna, and thus the sharp drop that can be seen in the charts in May is due to the depegging of UST and subsequent downward spiral caused to Luna.
From February until August, Umami grew its treasury value from $5.61m to $6.16m. In the same time frame, Redacted Protocol has seen a decline in treasury value from $69.3m treasury to $30.27m
Tokemak is a decentralized market making platform and liquidity provider/router on Ethereum, that was launched in 2021. It’s a protocol designed to own assets and deploy them on exchanges to earn LP fees.
It achieves this by creating two-sided liquidity pools, which users can provide liquidity to by depositing single-sided assets. These pools are deployed onto various exchanges depending on the decision of Liquidity Directors, who are users who can vote on what pool to deploy to by staking their $TOKE.
Tokemak keeps the revenue and fees generated off of its protocol owned liquidity (the liquidity pools deployed into other exchanges). Those who provide liquidity to Tokemak instead earn yield/rewards in the form of $TOKE - which is inflationary and dilutive. $TOKE is a governance token that does not accrue value.
At its peak, Tokemak had a TVL of $1.4b. Currently, its TVL is only $105m. This is most likely not only due to the general disinterest and downturn in decentralized finance and lack of non-dilutive yields, but also because Tokemak held a lot of UST at the time of its depegging - which is likely the cause for the sharp drop in May.
Tokemak’s $TOKE stakers have similarly reduced dramatically over time. Total tTOKE holders at its peak in February was 5532, and currently is only 1247.
Despite the downtrend in its TVL and stakers, Tokemak has been steadily and consistently growing its treasury in terms of ETH. Tokemak’s protocol owned liquidity has grown from 11,150 ETH to 21,604 ETH over the past year. However in terms of USD value, the treasury value has increased only by 7.84%.
When compared to Umami, who as previously mentioned grew its treasury value from $5.61m to $6.16m (9.81% increase), Tokemak’s treasury value in USD has decreased15.65% in the same time frame.
When we look at to MC/TVL, it can be seen that Tokemak is the most undervalued relative to the other two protocols, while Umami is overvalued relatively. When FDV/ TVL is looked at, it can be seen that Umami is still comparatively overvalued. The relatively inflated market cap/FDV of Umami is a result of the narrative surrounding non-dilutive rewards/revenue distribution, which has led to the price of tokens such as UMAMI, GMX and SNX to rally.
We can also see that the rate in change of TVL for both Redacted and Umami are positive and quite high both over the last 7 days and last 30 days, when to the total DeFi TVL increase of only 4.43% in the last 7 days and only 21.34% in the last 30 days, meaning that both Redacted and Umami have had relatively more success with attracting users to their platform.
Regarding total revenue and total protocol revenue, it can be seen that there is no difference between the total revenue and protocol revenue for Tokemak and Redacted, since both protocols keep all of the revenue they generate to reinvest or hold in their treasury.
The most important metrics here are annualized total revenue and P/S. When these are observed it can be seen clearly that Umami is overvalued, specifically when compared to Redacted. Umami generates much less revenue than Redacted does, and both protocols have comparable token prices and fully diluted supply, leading to Umami having a much larger P/S when compared to Redacted. Here it should be noted that Umami’s fully diluted supply is capped at 1,000,000, while Redacted’s fully diluted supply can continue increasing depending on emissions paid out to users and bonding done by users.
An even more drastic difference is present between Umami and Redacted when their P/Es are compared. Since Umami only keeps a certain percentage of the revenue it generates, it’s annualized protocol revenue and annualized total revenue are different. In contrast, as previously mentioned, Redacted keeps all of its generated revenue, and reinvests it. This is also why Umami has a P/D, which represents price/distributed fees, since it returns part of the revenue it generates to its users.
Lastly, we can look at stakers rate of change to see if users are interested in the rewards that they get by providing liquidity to the protocols. It can be seen clearly that Tokemak has suffered greatly over the past 30 days, as their total number of stakers has dropped by 47.72%. The total amount of stakers for both Redacted and Umami have increased over both the last 7 days and last 30 days. However, in the past 7 days stakers of Redacted have increased more rapidly, potentially because market participants learned about the new rlBTRFLY update that is set to come.
Overall, all metrics imply that Umami is in some form or shape overvalued when compared to Redacted. As previously mentioned, this is most likely due to the heightened interest in cash-flow generating projects and non-dilutive yield. Important to note that, even though it is relatively overvalued if the narrative for “real yield” continues, it is likely that Umami will perform well.
Since neither Redacted nor Tokemak distribute any fees earned back to their users/ stakers/holders, it might be helpful to compare Umami projects to other projects that have similar rewards structures for their users.
Both GMX and SNX return yield back to their users in some form of non-dilutive manner. In the case of GMX, protocol fees are redistributed back to GMX and GLP stakers in the form of $esGMX or $ETH, while in the case of SNX, protocol fees are redistributed back in the form of $sUSD and $SNX. When Umami’s P/D is compared to that of GMX and SNX, it can be seen that Umami is relatively overvalued.
Further Development of The Real Yield Narrative
It’s likely that Umami continues to benefit from the narrative/heightened attention paid to “real yield”. This is especially the case if GMX continues to rally, considering that Umami is essentially a more liquid proxy for GMX/GLP.
Unfortunately, there are a couple of limitations to this. Firstly, it is likely that the real yield narrative is particularly prevalent and popular due to the bear market, where market participants pay more attention to the fundamentals of tokens.
Secondly, many protocols are noticing that market participants are paying particular attention to cash-flow generating projects and non-dilutive yield, which has lead to older protocols deciding to revamp their tokenomics to fit this bill (some protocols like Redacted, JonesDAO and Perpetual Protocol have already announced that they plan to distribute varying portions of their revenue to users). Additionally, it is likely that new protocols, who will likely command the attention of market participants since they’re new and shiny, will have already implemented some form of cash-flow generation and non-dilutive yield into their protocols (an example to this is SudoSwap).
If this is the case, it is likely that stronger/richer protocols will outperform Umami.
Team
The Umami team successfully pivoted away from being an OHM fork after the failure of OHM, and implemented tokenomics and products that function antithetically to it. Additionally, the team has been highly active during the bear market, showcased by them releasing a brand new and unique product and revamping their UX.
Most importantly however, the team has placed focus on business development and a legal team. As previously mentioned, this is something that most smaller DeFi protocols lack. The legal team moved the Umami DAO to the Cayman Islands, implying that they’re forward thinking and are considering security designation/legality issues associated with returning revenue to users.
Tokenomics
Umami has good tokenomics. Since Umami launched as an OHM fork, there were no VCs or angel investors. The token accrues value, the fully diluted supply is relatively small, and the circulating supply is even smaller since 36% of $UMAMI is locked in defunct contracts or wallets. Additonally the tokenomics design ensures that $UMAMI is mostly locked, meaning that liquid/unstaked $UMAMI is scarce .
Launch of New Vaults
The Umami team has announced that ETH and BTC vaults in the style of the current USDC Vault will be added in the future. Since there was significant demand for the USDC Vault when it launched (which lead to the team having to increased the TVL cap from 1m to 2.5m in a span of 36 hours), it is likely that there will be demand for these vaults too - although it’s likely it won’t be nearly as much as there was for the USDC Vault, due to general uncertainty regarding risk-on assets.
Cannibalization From USDC Vault.
Users might think that it makes little sense to buy and stake $UMAMI for the sake of passive rewards, if the same goal can be achieved through the newly launched USDC vault - where users feel safer. Additionally, if users are interested in buying $UMAMI for speculation or governance, it makes little sense to stake $UMAMI as well, which leads to a higher amount of unstaked/liquid $UMAMI tokens. It is likely that this was the reason that the previous monthly epoch lead to a lot more unstaking and selling of $UMAMI.
Scalability & Adoption Highly Dependent on GMX.
Since both of Umami’s strategies are built on top of GMX, its growth depends highly on the growth of GMX as well. It is likely that Umami will only be able scale in the near future by deploying on the chains that GMX is present on.
Legal
One of the main reasons that protocol tokens are in the form of governance tokens and don’t accrue value are due to regulatory concerns. Value accrual tokens fit into the definition of securities. Umami has taken some steps to prevent this from becoming an issue, however all of the doxxed members of the day-to-day management team Umami Labs are US-based, which could be cause for concern.
USDC Vault Concerns
The USDC Vault is:
not perfectly delta-neutral
not hedged against GLP counterparty risk
not directly hedged against smaller tokens part of the GLP such as UNI and LINK
This means that there are risks to the USDC Vault which would decrease confidence in the protocol as a whole. However, some of these are not particularly important concerns: since GMX traders have historically been losing GLP counterparty risk chance is low and not hedging directly against UNI & LINK is not particularly important since altcoins are highly correlated with BTC and ETH.
Smart Contract Risks
Although Umami is audited and insured, the protocol still carries smart contract risk. Additionally, since Umami relies on other external protocols, smart contract exploits on those protocols could potentially also effect Umami.
Umami has benefited significantly off the recent real yield and cash-flow generating protocol narratives, since it offers a high APR in the form of ETH while being relatively more liquid compared to alternatives such as $GMX and $GLP.
Although it is likely that Umami continues to benefit off this narrative, as new protocols (such as SudoSwap) and older protocols (such as Redacted, JonesDAO and Perpetual) have decided to implement some form of non-dilutive fee distribution for their holders/ stakers, it is likely that Umami, which previously benefited from being one of the rare liquid options for non-native yield, will eventually struggle.
Additionally, the launch of Umami’s USDC Vault, will likely lead to lower demand for $UMAMI, since it makes little sense for users to buy and stake $UMAMI for the sake of passive rewards, if the same goal can be achieved through the newly launched USDC vault - which users might feel is safer.
Report on Umami Finance. Done August 1st (so data is outdated).
Umami Finance is a yield protocol built on Arbitrum that provides liquidity-as-a-service to other protocols on Arbitrum and returns the yield generated to its users.
The protocol initially launched as a rebase protocol, modelled after Olympus (OHM), on Arbitrum. Following the failure of OHM and the rebase protocol model, Umami Finance remodelled their tokenomics and protocol offerings.
Since the release of Umami v2 and the shift away from the OHM-like model on February 2nd, Umami’s TVL has grown from 1.44m to 18.16m.
The protocol currently offers two mechanisms to generate yield for its users: Earn: where users can stake their $UMAMI to earn a share of the revenue generated through Umami’s liquidity provision to liquidity pools on GMX and Uniswap v3. Yields returned are in the form of $WETH.
USDC Vault: where users can deposit $USDC to earn a share of the revenue generated through Umami’s liquidity provision to GMX. Yields returned are in the form of $USDC.
Earn is the first product developed by Umami to return yield generated from the protocol’s liquidity provision.
It allows users to stake their $UMAMI to earn a portion of the yields generated through the deployment of the protocol’s liquidity.
Liquidity is provided primarily into GMX’s $GLP liquidity pool. GLP is the liquidity provider token for GMX's exchange platform. $GLP collects 70% of the $ETH yield from fees on swaps and leveraged positions on the GMX exchange.
Additionally, Umami provides liquidity to various liquidity pools on Uniswap v3. These pools are either for Umami’s own token or for partner tokens. More specifically, these pools are:
$UMAMI-$ETH $UMAMI-$USDC $TCR-$ETH $TCR-$USDC $KROM-$ETH $KROM-$USDC
Umami’s liquidity provision to Uniswap v3 liquidity pools currently generate 37.37% APY.
To hedge out market exposure from its treasury holdings (in particular due to the composition of $GLP), Umami takes short positions on $ETH and $BTC on Tracer and GMX.
The yield generated from Umami’s liquidity provision is split between $UMAMI stakers and the protocol’s treasury. $UMAMI stakers receive the WETH emissions from the GMX $GLP liquidity pools, while the protocol directs all other yield to its treasury.
The value of the treasury as of August 1 is $6.16m and the treasury holdings as of August 1 are:
65% GLP, GMX, esGMX
12% Uniswap Liquidity pools
6% ETH
4.5% Hedge Short Positions
4.5% Stablecoins
8% Alt coins
Currently, Umami returns approximately half of the monthly yield from the revenue it generates through its protocol owned liquidity to pay out $ETH to $UMAMI stakers.
For the month of July, the revenue generated by the treasury holdings was $119,278.14, which means the protocol earned an APR of 1.93% for July, (23.2% annualized).
The treasury kept $49,406.43, and $69,871.71 was returned to $UMAMI stakers in the form of WETH.
Umami’s second product is the USDC vault, which was launched on the 27th of July. The USDC vault generates yield by providing liquidity to GMX’s $GLP liquidity pool.
Users deposit USDC into the vault. This USDC is used to mint $GLP on GMX and hedging derivatives, $3S-BTC/USD+USDC and $3S-ETH/USD+USDC, on Tracer.
$GLP collects $ETH yield from exchange fees and trader liquidations, which are returned to the user. The $GLP pool also receives $esGMX rewards, which Umami stakes for additional $ETH yield. The USDC Vault also stakes its Tracer hedges for $TCR emissions, which it swaps for $USDC and returns to the user.
Details about $GLP Pool:
$GLP is the counterparty to traders on GMX, and collects 70% of the fees and liquidations generated from the GMX exchange, in the form of $ETH.
As of August 1, 2022, the GMX exchange has earned $51,479,308 in revenue.
The $GLP token also receives $esGMX incentive emissions. These non-liquid rewards can be staked for $ETH yield just like their liquid counterpart, $GMX.
As previously mentioned, they also accrue $esGMX rewards and "Multiplier Points" (MPs), which are staked by Umami to improve $esGMX's $ETH yield further. $esGMX emissions and MPs are automatically compounded and used to pay out the $ETH yield to Vault depositors.
$GLP is composed of $ETH, $BTC, $LINK, $UNI and stablecoins.
Details about Tracer Hedges:
Tracer allows users to take leveraged long or short positions on assets such as $BTC or $ETH with zero risk of liquidation.
Each Pool is “two-sided,” presenting users with the option to take either a long or short position against the underlying asset. Users “Mint” either long or short Pool tokens by depositing $USDC as collateral via Tracer’s app.
The long and short sides of a Tracer pool are counterparties. The two sides of the pool swap $USDC collateral as needed to maintain their long or short exposure to the underlying asset as it changes in price.
Umami's USDC Vault hedges out its $GLP position's exposure to $BTC and $ETH using Tracer's 3x leveraged short tokens, $3S-BTC/USD+USDC and $3S-ETH/ USD+USDC. The Vault rebalances its hedges every 9 hours to retain as close to delta- neutral net exposure as possible.
Since Tracer incentivizes its pools with $TCR, Umami stakes its $3S-BTC/USD+USDC and $3S-ETH/USD+USDC to collect $TCR incentives, which it swaps for $USDC and returns to the user.
The $UMAMI token is the governance and fee generation token of the protocol. It is soft capped at 1,000,000 and will have zero emissions - unless the DAO votes to increase the max supply.
Token holders can Stake (Marinate), to receive approximately 50% of the protocol’s revenues in $ETH, or Compound their tokens, where their rewards are used to market buy and re-stake more $UMAMI. Staked or compounded tokens must remain staked until the end of each monthly epoch.
The non-inflationary nature of $UMAMI and the rewards it accrues incentivizes token holders to stake their tokens.
Effectively, each token is “backed” by $6.16 worth of assets based on the current treasury holdings (however, during the failure of OHM and its forks the backing didn’t matter as price dropped below it).
Since Umami launched as an OHM fork, there were no VCs or angel investors. Users acquired $UMAMI by bonding (effectively depositing $ETH to buy $UMAMI at a discount) or by buying off the market.
Supply: Circulating: 639,591 UMAMI Marinating: 437,358.645693 (of which, 241,300.327419 are Compounding) UMAMI In Primary Uni v3 LP: 60,761.5 Liquid (Unstaked) UMAMI: 141,470.854307
Non-Circulating: 360,409 UMAMI (includes 127,183 "dead" tokens permanently locked in defunct contracts) Main Treasury: 161,585 "Deployment" Treasury: 71,641
Deprecated "v1" Staking Contract: 121,550 Other Contracts Inactive For 100+ Days: 5,633
As it can be seen, liquid/unstaked UMAMI supply is quite small. 36% of the total supply of $UMAMI is non-circulating, either because they are part of the treasury or because they are in deprecated or inactive contracts. Of the 64% that is circulating, most are either marinating or compounding and are thus locked for the monthly epoch (meaning they cannot be unstaked/liquid until the end of the month).
It is important to note that the unlocks at the end of every month lead to users/stakers “dumping” their tokens, which can be increased if stakers feel uncertain about the market as a whole.
Liquid unstaked UMAMI amount rose from approximately 90,000 to approximately 141,470 over the last 8 days - which is a 57% increase. This is most likely due to the unlock due to the end of the epoch.
Demand:
$UMAMI stakers receiving approximately 50% of the protocols revenues generated in the form of ETH creates a large demand for $UMAMI. This has lead to 69% of the circulating supply to be staked, of which 38% is used to Compound by users - meaning that the rewards users receive are used to market buy and re-stake more $UMAMI.
$UMAMI stakers received $69,871.71 in total yield over the month of July, which comes to a monthly APR of 1.13% for July (13.6% annualized). Compared to GMX, which yields 20.41% APR, this is quite low.
However, of GMXs 20.41% APR, only 5.17% is in the form of ETH. The rest is in $esGMX, which is locked and is unlocked over 1 year. In this way, UMAMI is more comparable to $GLP, which offers 25.72% APR, of which 19.35% is in the form of ETH. $GLP, similarly to $GMX requires vesting and unlocking. Since $UMAMI requires only a month to unstake, it is likely that the majority of the demand for $UMAMI comes from it being a relatively more liquid option when compared to $GLP.
It should be noted that the introduction of new products such as the USDC Vault, and the upcoming BTC & ETH Vaults by Umami will likely reduce the demand for $UMAMI. Since comparable yields will be available to users of these vaults, who will now have the ability to hold stablecoins and bluechip tokens to access these yields, as opposed to $UMAMI, it makes little sense for those who stake $UMAMI for yield.
Cash-Flow Projects & Yield Protocols
Despite the general downtrend in digital assets and DeFi, there have been certain sectors that have developed a strong narrative and have seen increased attention and interest over the past few months.
There has been a strong demand for protocols that return revenue to users/holders in the form on non-dilutive, non-native tokens (i.e. stablecoins or ETH). This is potentially due to either the increased importance of “fundamentals” in the bear market, or because users are looking for cash-flow projects.
In either case, tokens such as SNX, GMX and CRV, which are associated with “Cash- Flow Projects” have outperformed both BTC and ETH since the June 2018 lows, and have garnered lots of attention.
Aside from users, protocols have also been shifting their focus and attention towards this narrative, as many projects such as Redacted Cartel, Perpetual Protocol, Jones DAO and SudoSwap have been moving towards a model that returns revenue to their users.
The structure and roles of Umami Labs team members can be found below:
Chief Executive Officer - Alex (Lex) O'Donnell (@DeFiAlpha).
• Twitter: @IntrinsicDefi • Previously an M&A reporter at Reuters and Mergermarket.
Chief Technology Officer - Michael E. (0xPrePop)
Chief Legal Officer - Alex Golubitsky
• Previously General Counsel and Of Counsel. • Worked on moving the Umami DAO Foundation to the Cayman Islands.
Lead Backend Developer - @0xToki
• 381 commits on Github since January 7 • Also works on Cronus Finance, an AMM built on Evmos.
Lead Frontend Developer - GreyPixel Backend Developer - @0xDapper
• Also a contributor to Synthetix & DefiLlama
Backend Developer - EncryptedBunny Frontend Developer - @0xBurden
• 174 commits on Github since starting to work on Umami last November.
Chief of Staff - Jefferson Chang
• Previously Chief of Staff at M^3 and MyMask Movement.
Treasury Manager - Wen Moon (@0xWenMoon)
• Publishes monthly treasury updates
Director, Business Development - Nick Westlake
• Previously a sales development executive at cryptocurrency prime brokerage SFOX.
• Background in business development,
Manager, Content & Community - Lucas K (@MrGrumpyPants)
• Posts weekly updates.
Strategist, Markets & Liquidity - Steven T.
• Publishes monthly treasury updates
Graphic Designer & Videographer - Edis M.
• Part of mobro.studio, a motion, graphic and website design company based in Slovenia.
Umami Labs LLC is a US-based professional services company that handles the day- t0-day management and operations of Umami protocol. The protocol itself is governed by Umami DAO - a community of $UMAMI holders.
Comments about the team:
***Positives:***
The team has been active throughout the bear market. Additionally, they were also able to successfully shift away from the OHM model after its failure.
It’s a positive sign that there’s importance placed on business development and a legal team. Most smaller DeFi protocols lack either. Here the most notable aspect is that the legal team moved the Umami DAO to the Cayman Islands, which shows that they’re forward thinking and are considering security designation/legality issues associated with returning revenue to users.
Negatives:
The main negative noticed in the team and the changes that have happened are that lots of team members have left over the past year.
This is likely not particularly important since there’s a lot of turnover in the space.
Notable names include:
0xCarnation - previous chief yield strategist and treasury manager is
now a part time advisor for the project.
0xpuffin - a core contributor for backend development has left.
0xChaosBi, a backend developer who has left.
GMX
Umami deploys most of its liquidity and products on top of GMX. The USDC vault in particular helps support GMX’s liquidity and protocol.
TracerDAO
Umami will support Tracer’s Perpetual Pools, by using protocol-owned treasury assets to support Tracer’s products.
Dopex & JonesDAO
Umami has partnered with Dopex and JonesDAO to deploy gOHM and support options trading on the Arbitrum ecosystem.
Banxa
Umami is on Arbitrum, an Optimistic Rollup that currently holds the most market share (at 51.49%) amongst all Layer 2 solutions. It’s seen steady growth in both users and monthly transactions, despite the general downtrend in DeFi. Arbitrum currently has just over 1 million total users, and a TVL of $1.36 billion (Optimism’s TVL is currently $596.16m).
Since Umami is currently only on Arbitrum, its success depends highly on the success of Arbitrum. Arbitrum being the most popular Layer 2 solution, despite not having a token is a good sign for Umami. It’s likely that after the relaunch and completion of Arbitrum’s onboarding event, Odyssey, Arbitrum will continue and further it’s dominance amongst Layer 2 solutions, at least until zk rollups become more popular.
In the future, it is likely that Umami also launches/deploys on Avalanche as well, since GMX is chain-agnostic and on both Arbitrum and Avalanche.
Confirmed Upcoming Updates:
Socket API will be added in August, to help bridge tokens from other chains.
ETH and BTC vaults in the style of the current USDC Vault will be added.
A community NFT will be launched.
Redacted Cartel is an Olympus fork built on Ethereum, that focuses on on-chain liquidity and governance.
It uses its protocol owned liquidity to accumulate assets such as CRV and CVX in its treasury through a bonding mechanism - where users can bond tokens in return for discounted $BTRFLY.
Redacted uses these accumulated assets to control and influence governance in DeFi (specifically in the Curve ecosystem) and receive governance incentives, fees and yield as revenue.
Redacted currently has two products: Hidden Hand and Pirex. Hidden Hand allows protocols to buy and sell governance incentives, while Pirex allows users to lock their CVX to earn autocompound and earn extra yield.
Users who stake receive their $BTRFL rewards in the form of $xBTRFLY, which is inflationary and dilutive. The governance incentives, fees and yield collected by the protocol is added to the protocols treasury. There are currently plans to move towards distributing a portion of the revenue to $BTRFLY holders. Once it’s launched, those who lock their $BTRFLY for $rlBTRFLY (revenue locked BTRFLY) will gain access to the fees from Hidden Hand, future Redacted products, and yield farming rewards from the treasury.
At its peak, Redacted Cartel had a TVL of $604.5m. Currently, its TVL sits at $35.7m. However, over the last 30 days, Redacted Cartel has seen a strong increase in its TVL, which has risen by 90.02%, while the total DeFi TVL has comparatively only risen by 21.34%.
Redacted’s treasury value is down overall, which makes sense, given the general downtrend in cryptocurrency prices. Since it’s peak in January at $126,587,617, its treasury value has dropped by over $96 million to its current value of just above $30.27m. It’s also important to note that the Redacted treasury had exposure to Luna, and thus the sharp drop that can be seen in the charts in May is due to the depegging of UST and subsequent downward spiral caused to Luna.
From February until August, Umami grew its treasury value from $5.61m to $6.16m. In the same time frame, Redacted Protocol has seen a decline in treasury value from $69.3m treasury to $30.27m
Tokemak is a decentralized market making platform and liquidity provider/router on Ethereum, that was launched in 2021. It’s a protocol designed to own assets and deploy them on exchanges to earn LP fees.
It achieves this by creating two-sided liquidity pools, which users can provide liquidity to by depositing single-sided assets. These pools are deployed onto various exchanges depending on the decision of Liquidity Directors, who are users who can vote on what pool to deploy to by staking their $TOKE.
Tokemak keeps the revenue and fees generated off of its protocol owned liquidity (the liquidity pools deployed into other exchanges). Those who provide liquidity to Tokemak instead earn yield/rewards in the form of $TOKE - which is inflationary and dilutive. $TOKE is a governance token that does not accrue value.
At its peak, Tokemak had a TVL of $1.4b. Currently, its TVL is only $105m. This is most likely not only due to the general disinterest and downturn in decentralized finance and lack of non-dilutive yields, but also because Tokemak held a lot of UST at the time of its depegging - which is likely the cause for the sharp drop in May.
Tokemak’s $TOKE stakers have similarly reduced dramatically over time. Total tTOKE holders at its peak in February was 5532, and currently is only 1247.
Despite the downtrend in its TVL and stakers, Tokemak has been steadily and consistently growing its treasury in terms of ETH. Tokemak’s protocol owned liquidity has grown from 11,150 ETH to 21,604 ETH over the past year. However in terms of USD value, the treasury value has increased only by 7.84%.
When compared to Umami, who as previously mentioned grew its treasury value from $5.61m to $6.16m (9.81% increase), Tokemak’s treasury value in USD has decreased15.65% in the same time frame.
When we look at to MC/TVL, it can be seen that Tokemak is the most undervalued relative to the other two protocols, while Umami is overvalued relatively. When FDV/ TVL is looked at, it can be seen that Umami is still comparatively overvalued. The relatively inflated market cap/FDV of Umami is a result of the narrative surrounding non-dilutive rewards/revenue distribution, which has led to the price of tokens such as UMAMI, GMX and SNX to rally.
We can also see that the rate in change of TVL for both Redacted and Umami are positive and quite high both over the last 7 days and last 30 days, when to the total DeFi TVL increase of only 4.43% in the last 7 days and only 21.34% in the last 30 days, meaning that both Redacted and Umami have had relatively more success with attracting users to their platform.
Regarding total revenue and total protocol revenue, it can be seen that there is no difference between the total revenue and protocol revenue for Tokemak and Redacted, since both protocols keep all of the revenue they generate to reinvest or hold in their treasury.
The most important metrics here are annualized total revenue and P/S. When these are observed it can be seen clearly that Umami is overvalued, specifically when compared to Redacted. Umami generates much less revenue than Redacted does, and both protocols have comparable token prices and fully diluted supply, leading to Umami having a much larger P/S when compared to Redacted. Here it should be noted that Umami’s fully diluted supply is capped at 1,000,000, while Redacted’s fully diluted supply can continue increasing depending on emissions paid out to users and bonding done by users.
An even more drastic difference is present between Umami and Redacted when their P/Es are compared. Since Umami only keeps a certain percentage of the revenue it generates, it’s annualized protocol revenue and annualized total revenue are different. In contrast, as previously mentioned, Redacted keeps all of its generated revenue, and reinvests it. This is also why Umami has a P/D, which represents price/distributed fees, since it returns part of the revenue it generates to its users.
Lastly, we can look at stakers rate of change to see if users are interested in the rewards that they get by providing liquidity to the protocols. It can be seen clearly that Tokemak has suffered greatly over the past 30 days, as their total number of stakers has dropped by 47.72%. The total amount of stakers for both Redacted and Umami have increased over both the last 7 days and last 30 days. However, in the past 7 days stakers of Redacted have increased more rapidly, potentially because market participants learned about the new rlBTRFLY update that is set to come.
Overall, all metrics imply that Umami is in some form or shape overvalued when compared to Redacted. As previously mentioned, this is most likely due to the heightened interest in cash-flow generating projects and non-dilutive yield. Important to note that, even though it is relatively overvalued if the narrative for “real yield” continues, it is likely that Umami will perform well.
Since neither Redacted nor Tokemak distribute any fees earned back to their users/ stakers/holders, it might be helpful to compare Umami projects to other projects that have similar rewards structures for their users.
Both GMX and SNX return yield back to their users in some form of non-dilutive manner. In the case of GMX, protocol fees are redistributed back to GMX and GLP stakers in the form of $esGMX or $ETH, while in the case of SNX, protocol fees are redistributed back in the form of $sUSD and $SNX. When Umami’s P/D is compared to that of GMX and SNX, it can be seen that Umami is relatively overvalued.
Further Development of The Real Yield Narrative
It’s likely that Umami continues to benefit from the narrative/heightened attention paid to “real yield”. This is especially the case if GMX continues to rally, considering that Umami is essentially a more liquid proxy for GMX/GLP.
Unfortunately, there are a couple of limitations to this. Firstly, it is likely that the real yield narrative is particularly prevalent and popular due to the bear market, where market participants pay more attention to the fundamentals of tokens.
Secondly, many protocols are noticing that market participants are paying particular attention to cash-flow generating projects and non-dilutive yield, which has lead to older protocols deciding to revamp their tokenomics to fit this bill (some protocols like Redacted, JonesDAO and Perpetual Protocol have already announced that they plan to distribute varying portions of their revenue to users). Additionally, it is likely that new protocols, who will likely command the attention of market participants since they’re new and shiny, will have already implemented some form of cash-flow generation and non-dilutive yield into their protocols (an example to this is SudoSwap).
If this is the case, it is likely that stronger/richer protocols will outperform Umami.
Team
The Umami team successfully pivoted away from being an OHM fork after the failure of OHM, and implemented tokenomics and products that function antithetically to it. Additionally, the team has been highly active during the bear market, showcased by them releasing a brand new and unique product and revamping their UX.
Most importantly however, the team has placed focus on business development and a legal team. As previously mentioned, this is something that most smaller DeFi protocols lack. The legal team moved the Umami DAO to the Cayman Islands, implying that they’re forward thinking and are considering security designation/legality issues associated with returning revenue to users.
Tokenomics
Umami has good tokenomics. Since Umami launched as an OHM fork, there were no VCs or angel investors. The token accrues value, the fully diluted supply is relatively small, and the circulating supply is even smaller since 36% of $UMAMI is locked in defunct contracts or wallets. Additonally the tokenomics design ensures that $UMAMI is mostly locked, meaning that liquid/unstaked $UMAMI is scarce .
Launch of New Vaults
The Umami team has announced that ETH and BTC vaults in the style of the current USDC Vault will be added in the future. Since there was significant demand for the USDC Vault when it launched (which lead to the team having to increased the TVL cap from 1m to 2.5m in a span of 36 hours), it is likely that there will be demand for these vaults too - although it’s likely it won’t be nearly as much as there was for the USDC Vault, due to general uncertainty regarding risk-on assets.
Cannibalization From USDC Vault.
Users might think that it makes little sense to buy and stake $UMAMI for the sake of passive rewards, if the same goal can be achieved through the newly launched USDC vault - where users feel safer. Additionally, if users are interested in buying $UMAMI for speculation or governance, it makes little sense to stake $UMAMI as well, which leads to a higher amount of unstaked/liquid $UMAMI tokens. It is likely that this was the reason that the previous monthly epoch lead to a lot more unstaking and selling of $UMAMI.
Scalability & Adoption Highly Dependent on GMX.
Since both of Umami’s strategies are built on top of GMX, its growth depends highly on the growth of GMX as well. It is likely that Umami will only be able scale in the near future by deploying on the chains that GMX is present on.
Legal
One of the main reasons that protocol tokens are in the form of governance tokens and don’t accrue value are due to regulatory concerns. Value accrual tokens fit into the definition of securities. Umami has taken some steps to prevent this from becoming an issue, however all of the doxxed members of the day-to-day management team Umami Labs are US-based, which could be cause for concern.
USDC Vault Concerns
The USDC Vault is:
not perfectly delta-neutral
not hedged against GLP counterparty risk
not directly hedged against smaller tokens part of the GLP such as UNI and LINK
This means that there are risks to the USDC Vault which would decrease confidence in the protocol as a whole. However, some of these are not particularly important concerns: since GMX traders have historically been losing GLP counterparty risk chance is low and not hedging directly against UNI & LINK is not particularly important since altcoins are highly correlated with BTC and ETH.
Smart Contract Risks
Although Umami is audited and insured, the protocol still carries smart contract risk. Additionally, since Umami relies on other external protocols, smart contract exploits on those protocols could potentially also effect Umami.
Umami has benefited significantly off the recent real yield and cash-flow generating protocol narratives, since it offers a high APR in the form of ETH while being relatively more liquid compared to alternatives such as $GMX and $GLP.
Although it is likely that Umami continues to benefit off this narrative, as new protocols (such as SudoSwap) and older protocols (such as Redacted, JonesDAO and Perpetual) have decided to implement some form of non-dilutive fee distribution for their holders/ stakers, it is likely that Umami, which previously benefited from being one of the rare liquid options for non-native yield, will eventually struggle.
Additionally, the launch of Umami’s USDC Vault, will likely lead to lower demand for $UMAMI, since it makes little sense for users to buy and stake $UMAMI for the sake of passive rewards, if the same goal can be achieved through the newly launched USDC vault - which users might feel is safer.
Banxa allows users to instantly on-ramp currencies from fiat accounts directly to the Arbitrum network.
Socket
Socket API will be added in August, and will enable users to easily bridge tokens into Umami products from most major chains (including Mainnet, Polygon, Optimism, Binance, Fantom, Avalanche & more) in a single transaction
Banxa allows users to instantly on-ramp currencies from fiat accounts directly to the Arbitrum network.
Socket
Socket API will be added in August, and will enable users to easily bridge tokens into Umami products from most major chains (including Mainnet, Polygon, Optimism, Binance, Fantom, Avalanche & more) in a single transaction
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