UMA Protocol’s New “Yield Dollar” Raises Security Concerns for Bitcoin in DeFi

Key Takeaways

  • Decentralized protocol UMA has announced the launch of the Yield Dollar on renBTC, a coin representing Bitcoin on the Ethereum network.
  • The launch will enable users to mint renBTC and lock it into UMA to use as collateral to mint uUSD.
  • Users will also be able to farm by staking uUSD into Balancer pools to farm BAL, REN, and UMA.

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DeFi platform, UMA Protocol, has recently launched a “Yield Dollar” alongside a three-asset yield farming incentive. Unfortunately, the company providing the synthetic BTC has yet to distribute control of the over 9,000 Bitcoin it currently holds.

UMA and Ren Protocol Announce Three-Asset Incentive

The new launch was made in partnership with Ren protocol, a permissionless liquidity protocol.

UMA now enables its users to lock renBTC, an ERC-20 coin representing Bitcoin on the Ethereum network, into UMA. renBTC can then be used as collateral to mint uUSD, UMA’s Yield Dollar token, which can be used to purchase more renBTC and create a permissionless leveraged position.

This is the first time the novel concept of a Yield Dollar has been applied to Bitcoin.

The uUSD token is essentially a fixed-rate, fixed-term loan. Put simply, the token is a perpetual contract whose value approaches $1 as it reaches its date of expiry—once expired, it is redeemable for $1 of the collateral asset.

The token opens up a slew of different possibilities for end-users. Aside from being able to create a permissionless leveraged position using renBTC, UMA users will also be able to access yield farming.

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According to the company’s announcement, Risk Labs and Ren will offer farming rewards to users that contribute uUSD minted from renBTC and USDC to a Balancer pool.

As Balancer has whitelisted the Balancer pool, those using it to farm will collect rewards from three DeFi assets at once—REN, UMA, and BAL.

The pool will receive 10,000 UMA tokens and 25,000 REN tokens every week, while BAL tokens will be distributed…

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