While the majority of effort in the crypto space focuses on how to get the new market to compete against the traditional financial markets, blockchain startup, UMA has focused on uniting the old and new.
According to a blog post dated March 27, UMA has partnered with the decentralized stablecoin company, MakerDAO, to launch on the Ethereum blockchain, a new token dubbed USStocks.
Per the update, the USStocks token will represent “synthetic ownership of an index of the 500 largest exchange-listed US stocks.” In other words, those who hold the token are investing in the top 500 largest stocks listed on the New York Stock Exchange (NYSE) and NASDAQ.
To purchase USStocks tokens, interested investors would have to visit DDEX, the only exchange on which sales are available for now and swap their Dai stablecoin(s) for the token.
Given that Dai stablecoin is pegged 1:1 against the USD, each unit of USStocks will also represent:
$1 × the stock index level which is calculated from the top 500 largest stocks.
UMA notes to create USStocks for public trading, the asset's liquidity providers will deposit units of Dai within the token’s smart contract.
As the level of the stock index increase, the providers would top up the smart contract with more Dai in a way that there will also be a >108.5% collateralization according to UMA. In a more straightforward sense, USStocks tokens would be backed by the Dai supply until the investment duration expires.
UMA notes that the first duration of the investment contract will expire on May 15th, after which investors will redeem their USStocks tokens to get paid in Dai stablecoin the current value of the stock index.
The concept of tokenizing securities has taken on increased significance in recent times following the advent of blockchain technology. We recently reported that the Thai SEC legalized the new funding model for local companies.
Subscribe to our Telegram channel to stay up to date on the latest STO and crypto regulations news