UMA Rewards Overview
Last updated
Last updated
Yam Synths and UMA use rewards to bootstrap liquidity by attracting investors/community members who will mint synthetic tokens and provide them to the market. UMA uses a "developer mining" system (see section below) to incentivize projects to build synths with their contracts and front-ends for them. UMA rewards are given to the synth creators and dApps, like Yam Synths. Yam Synths then passes 82% of these rewards on to minters and for some products we add in $YAM token rewards on top.
Typically, liquidity rewards only go to those who mint AND LP the synthetic tokens.
Risk Labs foundation (Part of UMA) will pay out 50,000 $UMA weekly to developers that deploy synthetic assets using UMA. Each developer’s share of the rewards will be weighted by the value locked in their synthetic asset contract: the more popular a synth is, the greater share of the weekly rewards that the developer will receive.
Read more about it in the Medium Article.
On Yam Synths, the UMA rewards are distributed in the following way:
82% Liquidity Miners (those who mint and LP)
10% Developer mining to Synth deployer (YAM Finance Treasury)
8% dApp Mining to Synth frontend (Yam Finance Treasury)
This rewards structure applies to synths minted on Yam Synths. UMA tokens will be airdropped to anyone who mints and provides liquidity for synths. UMA rewards will be distributed directly to accounts on a weekly cadence after they are received from UMA.
As you can see, the UMA rewards model is somewhat complex, so let's break it down.
Any whitelisted UMA synthetic contract will earn rewards in proportion to the $USD amount of collateral locked in that contract compared to the amount of collateral locked in all whitelisted UMA contracts. This means that dApps like Yam Synths want to maximize their percentage of total TVL to earn more rewards.
But for individual minters, all that matters is how much of the rewards are directed to those who mint and LP. Different frontends give between 50-100% of rewards to minters. Yam Synths gives 82% of available rewards to minters and the remaining 18% goes to the YAM treasury.
Rewards accrue in proportion to duration and amount of liquidity provided. Liquidity miners have full flexibility to enter and exit the synth position and there are no lock-ups.
Example: Let's say UMA rewards for uGAS for a given week were 1,000 $UMA. If you provided 50%* of the liquidity (and you minted that liquidity) for 3 days, and then you were 25% of the liquidity for the next 4 days, you'd get (50%*3/7*1000) + (25%*4/7*1000) = ~357.5 UMA.
*Actual calculations use total liquiditySeconds provided and not a percentage of time.
