Summary: Opium and UMA combine their efforts and tools to show how off-chain data can be brought to Ethereum to grow the DeFi ecosystem. UMA’s Optimistic Oracle solution brings real-world data to Blockchain in a seamless, cheap and fast way. Coupled with a Decentralized insurance contract (CDS) of Opium, it shows the potential to create a theoretically limitless number of new products.
UMA was founded by ex-Goldman Sachs bonds traders, and Opium’s founder is a funds manager and derivative trader.
We’ve been saying it over and over: mass adoption is our main goal here at Opium. We relentlessly explore possibilities to make our protocol more robust and transactions faster, cheaper and more convenient to our users. After launching on BSC and Polygon (ex-Matic), we have partnered with Uma to plug in their Optimistic Oracles.
UMA, which stands for Universal Market Access, is a decentralized financial contracts platform that enables developers to create synthetic assets in a seamless way. UMA designed Optimistic Oracles to resolve markets and get cheap, precise data on almost anything. This will bring real-world data to blockchain and expand DeFi with an almost limitless number of products linked on traditional assets.
As the name suggests, the Optimistic Oracle operates on the assumption that everything is just fine. One party sends a request and another party pushes the answer on-chain. This is the likely and optimistic outcome. However, any first or third party can raise a dispute in case the answer is wrong. Otherwise, the transaction is completed quickly and with the minimum amount of gas involved.
The disputes are designed to be very rare: according to UMA, they received less than 5 legitimate disputes over one year, the Optimistic concept passed the test of periods of significant crypto volatility and remained a reliable way to get accurate data on almost everything.
In the rare case a dispute happens, and someone disagrees with a proposed answer, they follow a process and escalate the dispute to UMA’s Data Verification Mechanism (DVM). UMA token holders resolve the dispute within 48 hours. Both reward and penalty are monetary: the disputer will earn money if they are right and lose money if they are wrong.
Finally, Optimistic Oracles can be plugged into any DeFi protocol – and Opium was the first one to try it out.
So if you have a chance to make a product, let’s say insurance, on any measurable event, including real-world events, and the fantasy is your only limit, where do you start? We decided to shoot for the moon – quite literally in this case.
Using Uma’s Optimistic Oracle, Opium Protocol launches decentralized financial derivatives for SpaceX flight—the very first of its kind! The financial instrument can be used to hedge financial risks related to the SpaceX launch and even to generate some income. The derivative is built on decentralized financial infrastructure and therefore accessible by anyone in the world.
SpaceX has revolutionized the space transportation industry, being the very first private company to successfully launch rockets into space. As if that’s not enough, serial entrepreneur and futurist Elon Musk is now moving into the rocket ride-sharing business by introducing SpaceX Smallsat Rideshare—a program that allows multiple payload bookers to share space rides.
Using the SmallSat Rideshare program, organizations can send lighter and smaller payloads to space for as low as $1M. This drastically lowers the barriers to entry for operators of small satellites, for which space transportation services used to be out of reach. The very first rideshare launch named the “Transporter 1”, took place on January 24, 2021, when a Falcon 9 rocket carried 143 satellites into space.
SmallSat Rideshare flights carry smaller payloads owned by multiple operators. The value of these payloads is relatively low in comparison to the average payload value in the space transportation sector. However, the value still amounts to millions of dollars, and owners of these payloads, mostly satellite operators, might want to hedge the risk of a failed launch, which may destroy their valuable payload. There are other stakeholders that have a financial stake in the success (or failure) of a SpaceX flight, who might seek to hedge their financial risks.
In addition, SpaceX rocket launches are incredibly exciting events that draw attention from millions of space enthusiasts all over the world. Many spectators speculate on the outcome of a SpaceX flight, some even put wagers on either success and failure.
Decentralized financial derivatives allow for risk management and speculation in a globally accessible and non-custodial manner.
Opium Protocol has designed and launched a decentralized financial derivative contract that can be used to hedge the financial risks related to a SpaceX Smallsat Rideshare launch. Buyers of the derivative—a binary options contract—purchase insurance against a failed launch and pay a premium to the derivative seller. The derivative seller essentially offers insurance coverage for a failed launch by locking an amount of money as collateral, earning a premium in the process.
Creating and listing an exotic financial derivative like this in traditional finance would have required months of work and millions of dollars. Using Opium Protocol, we were able to configure the derivative parameters in under one hour.
Decentralized finance will disrupt and expand the global derivatives market, create new use-cases and enable advanced trading strategies for hedging risks and speculating on real-world events.
As SpaceX is conquering space and growing the addressable market size for space transportation, Opium is building the future of financial products and services.