UMA surpasses Yearn.Finance as the largest ‚DeFi‘ protocol at Ethereum

The decentralized finance (DeFi) landscape is rapidly changing day by day. On September 1, UMA surpassed yearn.finance as the largest „DeFi“ protocol at Ethereum with a market capitalization of USD 1.3 billion.

CoinMarketCap data shows that six DeFi projects are now above $500 million in valuation. The six projects are UMA, yearn.finance, Aave, Maker, Synthetix and Compound.

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But whether UMA could be described as a DeFi protocol remains uncertain, and depends on perspective.

What is UMA and how does it compare to other projects like yearn.finance?
According to UMA’s official documents, the project builds invaluable „open source infrastructure for financial contracts“ at Ethereum.

UMA’s infrastructure consists of two main parts: invaluable financial contract designs and Data Verification Mechanism (DVM).

The first allows users of the platform to create synthetic tokens. DVM is a decentralized oracle service like Chainlink and Band.

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Conceptually, UMA is closer to oracle projects than DeFi. However, UMA is building infrastructure for the DeFi sector, given the importance of oracles to DeFi. UMA says:

„Together, these two technologies enable the creation of fast, efficient and safe synthetic derivatives in the Ethereum block chain. UMA is focused on creating „invaluable“ derivatives in Ethereum. These financial contracts are designed to ensure adequate collateral by the counterparties without the use of an on-chain price feed“.

The DeFi platforms at Ethereum and other major blockchain networks cannot obtain public data directly. Oracles such as Chainlink, Band and the UMA DVM help DeFi protocols to obtain market data through intelligent contracts.

Therefore, many analysts consider oracle projects as DeFi related block chains. CoinMarketCap, as an example, lists Chainlink, UMA and Band Protocol, all in the DeFi category.

However, UMA differs from platforms such as yearn.finance in that it provides the underlying infrastructure for DeFi protocols that enable services such as staking.

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The landscape of the DeFi market is changing rapidly
A pseudonymous trader known as „Hsaka“ said that UMA, which has the highest APY group for Sushi token, catalyzed its rise. More than that, the trader emphasized that incentives are important for the growth of DeFi related projects. He said:

„So, $UMA became the most valuable Crypto Cash token. I don’t think having the highest APY pool for $SUSHI is the only reason, rather a contributing factor. The fact that it helped change YFI, LEND, SNX, etc. gives you an idea of how powerful the incentive can be at this point.

More DeFi protocols and DeFi related projects are beginning to collaborate with each other, rather than compete. For example, yearn.finance said:

„To clarify, nothing we build is competitive. It’s collaborative. For example, one important element not in the ad article is how the black swan events are handled; Insurer: Nexus Mutual. Reinsurer: Nexus Mutual stronger together“.

Following the rise in popularity of the DeFi protocols, major exchanges are beginning to include more tokens. On September 1, Binance, Huobi, and OKEx included SUSHI.