Research

UMEE Network - Global overview and user metrics

In a thriving Cosmos ecosystem full of discussions regarding new consumer chains or standalone appchains, a money market is missing as a consumer chain. Could UMEE become one?

Author

Imperator

Date

Aug 9, 2023

Abstract representation of the Cosmos ecosystem, with fluid shapes and architectural structures, pondering UMEE's potential as a vital money market consumer chain in the expanding universe of appchains.
Abstract representation of the Cosmos ecosystem, with fluid shapes and architectural structures, pondering UMEE's potential as a vital money market consumer chain in the expanding universe of appchains.
Abstract representation of the Cosmos ecosystem, with fluid shapes and architectural structures, pondering UMEE's potential as a vital money market consumer chain in the expanding universe of appchains.

The methodology used for retrieving data is leveraging Numia data for all charts and data, unless specified otherwise, since some data is already available either in Astrolabe or the general app.

Introduction

UMEE is a lending algorithm built as a blockchain. As a base layer blockchain secured by a decentralized validator set, anyone with an internet connection is able to access Umee's services. Umee is permissionless, meaning anyone can access debt markets on Umee regardless of things like their location or financial history.

All Umee users must be properly over-collateralized at all times in order to borrow funds. Users who fail to remain properly over-collateralized will have their collateral liquidated in order to minimize risks of insolvency and provide a high degree of security to lenders.

Once the foundational interest rates are built, the crypto format for debt primitives such as notes, bills, bonds, CDS, structured products, and other assets can be built on top of Umee.

Although this report is not focused on UMEE token, it’s essential to know the basic economic use of it, which will come towards the end of the report.

Transactions

Let’s go straight to the juice. The number of transactions on UMEE are always very high; if one takes a look at mapofzones, it has around 500k transactions per day.

For instance, if we take the first day of 2023, it had a total of 719063 transactions. However, 550k of those are aggregate exchange rate vote and rate prevote, and that seems to be the reason behind the high number of transactions. Those actions come from the oracle module, as prices per exchange rate are submitted on-chain via pre-vote and vote messages using a time-weighted average price (TWAP).

With regards to transaction fees, throughout the whole of 2022 and 2023 so far there have been 243k UMEE spent for transaction fees, and that’s around $1.1k with the current price.

IBC Transfers

IBC transfers happen between two IBC connected chains, and is a way of measure the transfer between them and how much they are connected.

The number of IBC transfers per day has decreased since inception, reaching a peak of around 30k transfers in a single day on September 2022, to around 2k IBC transfers daily currently.

Depositing and Borrowing

The number of available assets for depositing and borrowing has been increasing steadily in UMEE, to reach around 20 assets.

In that regard, numbers are pretty clear; there has been a huge demand for supplying and borrowing in UMEE despite market conditions; numbers are around an ATH on both sides, reaching $13.2M USD supplied and $4.2M borrowed.

Figure taken from UMEE website

The number of users depositing is also reaching a steady amount, reaching up to 140 users depositing daily and currently sitting at around 40-60, and with stATOM, USDC and ATOM being the most used assets.

Revenue

The sources of revenue are:

  • Transaction fees

As seen in the first section, transaction fees are very small, reaching only 243k UMEE in almost two years.

  • Validator commission

Validator rewards will depend on their commission. For instance, top 1 validator with a 20% commission is receiving around 18M yearly UMEE (roughly $74k atm). A top 20 validator with 5% commission is earning around 500k yearly UMEE (around $2k), and so on.

  • Oracle rewards

After researching a few more and reaching out to devs on UMEE, this part is not yet clear on instructions regarding the way of querying it, so I will not speculate with them for the moment.

UMEE as a consumer chain

Within the AEZ, there's a key primitive missing: a money market, and according to Thyborg from Informal Systems, UMEE could be a potential consumer chain candidate for the following reasons:

  • UMEE is a great partner for Neutron and Timewave, so the Cosmos Hub could lend part of the liquidity in the community pool.

  • UMEE is a great partner for Stride and Duality, making use of hybrid stable pools and therefore processing Stride's liquidations with lower slipage.

  • Atomic IBC would enable flash loans for the first time in Cosmos

Roadmap

There are three upcoming phases, with full detail here:

Marina

  • Ojo price feeds to expand the range of DeFi products, incorporating safety parameters via the IBC rate limiting module.

  • Establish a robust smart contract framework to facilitate the seamless onboarding of dApps onto the Umee blockchain.

  • Optimize Umee's infrastructure to minimize validator operational costs and overhead, thereby enhancing overall efficiency.

  • Provide community incentives to foster the growth and expansion of the Umee ecosystem.

Hali

  • Expansion of leverage offerings to accommodate diverse use cases and markets.

  • Introduction of an improved Liquidation Protocol to ensure the stability of the loan stack, implementing incremental position liquidation (approximately 5%) for effective loan rebalancing.

  • Enhancement of governance features to address emergency scenarios and establish robust response mechanisms.

  • Development of a cross-chain interface prototype with the Ethereum ecosystem, enabling seamless interoperability and broader accessibility for Umee.

Yara

  • Implementation of new tokenomics.

  • Introduction of Outpost and Virtual Liquidity mechanisms.

  • Integration of superior interest rate algorithms to enhance the lending experience, accompanied by innovative fixed duration lending tools for the development of a native cryptocurrency yield curve.

  • Expansion of product development to onboard the global bond markets into the realm of DeFi.

All of them are highly important, but looks like Marina with validators operational costs minimization, expanding DeFi applications, and Hali with leverage and improved liquidations are a good points in which to focus.

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