- UMA has launched the first priceless synthetic token, ETHBTC, through Uniswap V2.
- ETHBTC follows the price relationship between Ethereum and Bitcoin.
- The new token is experimental, but opens the door for even more of DeFi’s derivatives.
DeFi unlocks never-before-seen ways to do derivatives.
The Universal Market Access (UMA) project announced Wednesday the launch of the ETHBTC synthetic token on Ethereum mainnet, initially available at Uniswap V2. This ‘Ethereum-Bitcoin’ token is the first real-world test of UMA’s ‘invaluable’ synthetic token smart contract design, marking the beginning of a new era of derivative products powered by blockchain technology.
The ETHBTC token follows the price ratio between Ethereum and Bitcoin. If ETH rises (or falls more slowly) than BTC, the token value increases and vice versa as Bitcoin leads. The tokens are considered “priceless” because they do not rely on data from oracles to price swaps, but rely on a Community-led dispute mechanism.
ETHBTC tokens can be exchanged with DAI on Uniswap V2 and initially cost around 0.02 DAI per token. Anyone can create and sell ETHBTC tokens using UMA’s open source command line tool by depositing DAI as collateral. Tokens will expire on August 1 and can be redeemed depending on the final prize ratio between ETH and BTC.
In the announcement, UMA co-founder Hart Lamber explained that ETHBTC was chosen as the mainnet’s first precious synthetic token because it is related to DeFi while highlighting the friendly competition between the two leading cryptocurrencies. ETHBTC also offers exposure to widespread success or adoption of one crypto over another without actually holding either, a new product in the DeFi landscape.
Uniswap V2 launched a few days ago with a host of new features, including direct ERC20 token swaps that allow ETHBTC tokens to be exchanged directly for DAI. In the previous version of Uniswap, ERC20 token swaps were routed through ETH trades, increasing costs and making pair trades less viable.
Lamber warned in the release that the ETHBTC Priceless Synthetic Token is an experimental alpha product and should be approached carefully and starting small amounts. The smart contract code has been checked by OpenZepplin and an emergency stop can be initiated by holders of a UMA token.
The author’s views and opinions are for informational purposes only and do not constitute financial, investment or other advice.