The latest yield farming incentive from Yam Finance, dubbed ‘uGas,’ allows for synthetic futures contracts on Ethereum gas prices.
Yam Finance, in partnership with UMA, has launched something called ‘Degenerative Finance.’ Its first offering is uGas, a synthetic futures contract that settles to the 30-day median Ethereum gas price at the end of each month.
The offering is the first in a collaborative effort between Yam Finance and UMA. The pair has plans to develop a suite of innovative derivatives targeting ‘DeFi degens.’
Stepping on the Gas
The new uGas tokens can be minted by depositing Ethereum as collateral. They are named after the month that they expire, for example, uGAS-JAN21 expires on Feb. 1. Upon expiry, the token will settle at the median gas price of all Ethereum transactions for the past 30 days.
According to BitInfoCharts, the current median gas fee is $1.47 though the actual gas price at the moment is much higher.
“Each uGAS token represents 1,000,000 GAS, so if the median gas price over the 30 days before expiry was 70 Gwei, the uGAS token would be worth 0.07 ETH.”
The Yam Finance blog post goes on to explain that the synthetic tokens are not priced as farmers initially mint at the Global Collateralization Ratio (GCR.) This ratio is calculated by dividing the total amount of collateral deposited by the total number of uGAS tokens outstanding.
uGAS tokens can also be used in the Uniswap uGAS/ETH liquidity pool in order to earn UMA liquidity provider rewards.
The mining rewards are managed by the Yam community and the distribution structure is as follows; 10% goes into the Yam Finance treasury, 40% for dApp mining on the Degenerative Finance app, and the remaining 50% goes into liquidity mining rewards for users.
In mid-November, Yam Finance launched a new protection protocol called Umbrella, which offers pool-based security against smart contract exploits and hacks.
YAM and UMA Price Update
The Yam Finance native token, YAM v2, has dropped nearly seven percent on the day in a fall to $5.01.
Like most of its DeFi brethren, prices spiked when the protocol was launched in early September, but have since dumped almost 90% to current levels.
UMA’s token has tanked 6% on the day, dropping back to $8.43 as the broader crypto market takes a beating. UMA also surged to an all-time high in early September and, in a similar pattern, has declined 67% from that peak.
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