Smartcoin Protocol: Automated Asset Management

TL;DR:

• Umoja is an asset management protocol that automates capital management with ‘smartcoins’ — AI-driven digital assets that maximize yields and minimize risks automatically.
• Umoja is focused on developing various digital assets designed to generate income through trading. They employ a strategy known as “vampire-asset,” where they create improved versions of already popular assets, such as stETH, USDe, and aUSDC, which are structured to generate higher yields.
• Additionally, Umoja is innovating by creating entirely new types of assets, like a version of Bitcoin that earns interest, referred to as yield-bearing Bitcoin (yBTC).
• Since February 2024, Umoja has processed $23M+ in notional transaction volume & grown a community of 100k+ members. With the growing interest in digital assets, this shift will likely enhance the legitimacy and integration of digital assets within traditional investment portfolios, leading to the development of new cryptocurrency-related investment products and the inflow of more institutional capital into the market in the near future.

There is a rising demand for user-friendly financial tools independent of traditional financial institutions like banks. This trend is particularly evident among individual investors seeking platforms that offer personalized investment strategies.

Remarkably, retail investors roughly manage more than half of global assets under management (AUM), a figure projected to grow to 61% by 2030 — equating to nearly $86T. Despite this significant market share, retail investors typically earn four times less than their institutional counterparts.

Improved financial tools could democratize access to high-yield investment opportunities — such as private equity, venture capital, and specific real estate ventures — traditionally reserved for a limited group, thus leveling the playing field for the average investor.

The ROI Paywall

The global financial system often fails to provide a universally accessible, censorship-resistant avenue for wealth creation, disproportionately sidelining retail investors from lucrative opportunities. Traditional financial mechanisms, not only complex and risky, are generally beyond the comprehension and management scope of the average individual.

Barriers such as high capital requirements, restricted market information, regulatory constraints, and limited financial literacy further alienate regular investors, making them the most vulnerable to significant losses during market downturns.

An ROI (Return on Investment) paywall refers to a strategy where access to certain content, tools, or services is restricted behind a payment barrier, with the expectation that the investment made to gain access will yield measurable returns or benefits. This approach is often used to help users achieve greater financial gains or efficiencies than what they initially paid.

With the emergence of digital currencies such as Bitcoin and Ethereum, Digital Asset Management (DAM) platforms have become indispensable. They assist investors in mitigating security risks, adhering to regulations, and navigating the volatile and complex cryptocurrency market.

The sector is poised for substantial growth; crypto asset management is expected to quadruple, increasing from $1B to $4B by 2030. Concurrently, traditional asset management, which is rapidly transitioning to blockchain technology, is projected to expand twelvefold, from $400B to $5.4T in the same period.

You would think creating a fit-for-purpose platform would be simple, but many of the current platforms, like Aave, Uniswap, or Goldfinch, present inflexible investment options that need more straightforward automation for their users.

Automating Money Itself & An Introduction to ‘Smartcoins’

Umoja is launching the world’s first ‘smartcoin protocol,’ where digital assets, called ‘smartcoins,’ autonomously manage themselves. These smartcoins combine digital currencies like BTC and ETH with tokenized trading strategies, known as ‘synths,’ to create hyper-competitive digital assets that can minimize their own risk and maximize their yields.

Umoja offers automated asset management that is as simple as buying a token, enabling everyday investors to access sophisticated strategies for protecting their funds, and optimizing their gains. Replicating the asset management services big investors have without the high costs & complexity.

How it works

Umoja tokenizes trading strategies called “Synths.” These Synths compose digital assets with better yield, risk protection, and liquidity. By tokenizing these strategies, Umoja allows investors to buy into a trading method crafted to optimize specific investment outcomes.

These could include generating higher yields (returns on investment), offering risk protection (safeguarding against market volatility or downturns), and enhancing liquidity (making it easier to enter or exit positions within markets). Synths can be used directly to automate a particular strategy or to create smart assets that sustain themselves.

Umoja earns variable fees on synth tx volume. The more smart assets, the more revenue.

In its Beta release , users have access to the first synth: Synthetic Options. Synthetic Options are the inaugural strategies that the Umoja protocol has released, and are executed via an underlying perpetual futures trading strategy that provides 10x leverage, zero-liquidation risk, and more flexibility and affordability than traditional options. More specifically, there are two types of Synthetic Option: Synthetic Put Options and Synthetic Call Options.

Synthetic Put Options

Synthetic Put Options are a financial safeguard, particularly useful when anticipating a market downturn. Using a hedge (synthetic put option) with Umoja, you can secure your profits against potential price declines, effectively protecting your investment from unfavorable market movements. Employing a Synthetic Put Option enables you to assume a 10x leveraged short position without the risk of liquidation.

Synthetic Call Options

Synthetic Call Options allow you to speculate on the price increase of an asset without the need to possess or purchase it physically. Through Umoja, employing a Synthetic Call Option enables you to assume a 10x leveraged long position, but without the usual risks of liquidation that come with standard trading practices.

Umoja’s Advantages:

• Automated Trading & Asset Management Primitives.

Umoja offers an extensive collection of automated strategies, known as “Synths,” which users can employ directly or incorporate into new financial products like structured notes. These Synths are designed to reduce risk and increase liquidity, with options that are 30x more liquid than traditional ones and carry no liquidation risk.

• Competitive Edge with Lower-Risk, Higher-Yield Products.

Umoja’s digital assets are structured to offer higher returns and lower risks compared to conventional single-token protocols. This approach ensures relevance and effectiveness, even as market conditions evolve.

• Broad Strategy Support Across DeFi and CEXs. Umoja leverages decentralized and centralized exchange strategies to ensure deep liquidity and avoid the limitations of specific blockchain networks, enhancing asset performance and availability.

Recent Updates

Umoja is in progress with partnering with the following organizations to accelerate near-term growth:

• Bringing Smartcoins to BitVM (Bitcoin)

Umoja has partnered with Merlin Chain to deploy Bitcoin’s first structured digital assets. Merlin Chain is the largest Bitcoin L2 by TVL, supporting over $3.6B in AUM. As one of the first DeFi protocols deployed on the network, Umoja will likely benefit from extreme liquidity concentration on the network.

• Scaling Access to Retail Yield for 700k Users

Umoja is developing a partnership with one of the world’s largest Bitcoin reward debit cards and Bitcoin-back shopping app to enable its 700,000 users to earn yield through the protocol by the end of Q2 2024, with an anticipated minimum notional volume of $70M generated from the partnership.

• Major Partnership with CryptoBanter’s Sniper School

Umoja has secured an exclusive partnership with CryptoBanter, an influencer with over 1M followers. As the inaugural crypto options partner for Sniper School, Umoja will onboard around 4,000 students monthly to their platform. This initiative is expected to attract 12,000 new users and generate a minimum of $52M in notional value in Q3 2024.

• Developing Partnership with Premier Wallet Partnership

Umoja is also in the process of developing a wallet launch partnership with one of the largest self-custodian wallets to bring the native protocol to the wallet’s 50M users.

Umoja’s introduction of smart coins is designed to offer lower risk and higher yields than traditional crypto assets. By strategically developing these smart coins from well-established and popular existing cryptocurrencies, Umoja enhances their appeal and reliability, ensuring they stand out in the highly volatile crypto market.

This approach leverages the strengths of proven cryptocurrencies and incorporates advanced trading strategies and risk management techniques embedded within smartcoins. As Umoja continues to expand its offerings, it aims to maintain this competitive edge by consistently providing investors with safer, more profitable investment options that redefine asset management in the digital age.

Asset Management Market Landscape

The global asset management market is set for rapid growth, projected to escalate from $373B in 2022 to an estimated $4T by 2030, showcasing a CAGR of 34.7%. While an estimate, assets under management are definitely expected to increase significantly, driven by advancements in digital finance and macroeconomic trends.

Particularly noteworthy is the expansion of tokenized assets like Liquid-Staked Tokens and stablecoins, with projections suggesting that tokenized Real-World Assets could reach $10T by 2030.

A significant factor in these changes is the use of artificial intelligence (AI), specifically generative AI, within the asset management sector. AI has become a crucial tool for identifying investment opportunities, analyzing potential investments, making investment decisions, and managing those investments.

Nickel Digital Asset Management , a London-based digital asset hedge fund manager, released a study that found wealth managers and institutional investors, who collectively manage $108B assets, have been looking more favorably on digital assets since the start of the pandemic.

With the growing interest in digital assets, this shift will likely enhance the legitimacy and integration of digital assets within traditional investment portfolios, leading to the development of new cryptocurrency-related investment products and the inflow of more institutional capital into the market in the near future.

The Team Behind Umoja

The Umoja Protocol’s core developer is Umoja Labs, a team of alumni from Goldman Sachs, Credit Suisse, ConsenSys, Coinbase, Qualcomm, Mastercard, and Google with 10+ years in TradFi, blockchain, engineering, and marketing (each).

Initially spun out of ConsenSys as ‘ConsenSys Social Impact,’ Umoja Labs has developed and deployed dozens of dApps across 17+ countries with a specific focus on financial applications. Umoja Labs’ Founder, Robby Greenfield IV , has personally been in crypto since 2011, is ex-Goldman Sachs, Amazon, Cisco Systems, and was the former Head of Social Impact at ConsenSys. Needless to say, Umoja’s core developer team knows crypto, and knows finance.

Notable Backers

Umoja’s notable backers include Coinbase Ventures, Orange DAO, Norrsken, Quantstamp, Inc. , 500 Global , Selini Capital, Avalanche Blizzard, Blockchain Founders Fund , and UTXO Management, amongst others.

Concluding Thoughts

Umoja is having a big impact on the asset management and yield-bearing token markets, facilitating immediate access to a diverse range of on-chain, tokenized financial products tailored for traditional finance (TradFi) and decentralized finance (DeFi).

With Umoja offering yield generation and market volatility protection, this universally accessible and censorship-resistant protocol aims to produce a virtually limitless array of high-performance financial instruments by tokenizing asset management.

References

This is a repost of Pione3rs — Issue #10 written by Aly Madhavji on Medium on May 15, 2024.