A Proposal for the UMB Token Staking, Rewards and Distribution

EXECUTIVE SUMMARY

• Introduction: Umbrella is a community owned, layer 2 Oracle built on Ethereum
• Problem: Oracles are failing the Defi ecosystem with an insufficient number of datapoints and infrequent updating that forces projects to choose between an impossible compromise of security and data accuracy
• Solution: Umbrella Network is DeFi’s premier Oracle architecture delivering cost efficiency, speed, and security
• Umbrella Network Product Demo Guide: available here Umbrella Demo Guide
• Community Focused Token Launch: Community receives 67% of UMB Utility Tokens minted
• UMB Utility Token Distribution: Public Sale participants will initially get 99.5% of the daily rewards
• Become a Validator Node operator for DPoS consensus: by staking UMB tokens to earn rewards, Validator Nodes share in user fees paid to the network

INTRODUCTION

Umbrella is a community owned, layer 2 based Oracle built on Ethereum. Oracles provide the critical data on which popular DeFi projects operate including: Synthetix, Uniswap, Loopring, Aave, Celsius, and yEarn. It’s used for rebalancing AMMs, pricing options, managing risk on debt, as well as other data driven DeFi functions. An Oracle provides the foundational data for a functional DeFi ecosystem. Because of an Oracle’s importance to the foundation of the DeFi’s industry, Umbrella believes that Oracles should also belong to the community (this was covered in a previous post: DeFi’s Oracles Are Too Centralized).

Unlike Oracles being used in the market today, Umbrella is a Layer 2 solution that enables Umbrella to be secure but also more scalable and cost efficient.

To give potential users and the Umbrella community a feel for the product, Umbrella launched a demo app along with accompanying instructions, which can be found in the Medium post: Umbrella Demo Guide. The Umbrella Demo Guide gives details of how Umbrella uses a Merkle Tree to scale while maintaining cost efficiency.

Umbrella was released on Testnet on 23 November 2020.

Current Oracle Data is Insufficient and Stale

Oct 28: Harvest Finance Exploited for $25 Million

Nov 17: Yield Generating Stablecoin Origin…Hacked

Nov 26: Oracle Exploit Sees $89 Million Liquidated From Compound

In the past 30 days, we’ve seen three popular Oracles hacked or exploited. Perhaps the most surprising of these failures is Compound because it is such a respected and well known project. For a more comprehensive review of recent Oracle exploits, read samczsun’s So You Want to Use a Price Oracle. Unfortunately, DeFi has an Oracle problem.

Today, there are over 8,000 cryptocurrency pairs available on Uniswap. Meanwhile, the leading Oracle today, supports under 100 ethereum data points. Diving even deeper, key prices like DAI/USD are updated by Chainlink only once every 24 hours. For the DeFi ecosystem to reach its potential, Oracles need to provide far more data points that are more frequently updated. In short, we have a data problem — both by breadth and speed.

Should DeFi projects be forced to compromise between data availability and security? Of course not.

Unlike today’s popular Oracle’s, Umbrella solves these problems. Umbrella’s mission is to provide the volume of data points available and update these data points with optimal frequency. Umbrella’s Oracle will result in an explosion of innovation and growth while putting an end to the Oracle hacks that are so devastating and far too commonplace.

Now that We Understand the Problem, why is Umbrella Network the Solution?

Today’s popular Oracles write each data point as a separate transaction on chain. In contrast, Umbrella utilizes a system of Merkle Trees to effectively store hundreds of data points on a single ethereum transaction. As a result, Umbrella’s marginal costs are a fraction of other Oracles. In sum, Umbrella can achieve better results than today’s popular Oracles at a fraction of the cost.

The Umbrella Network Difference

• DeFi’s premier Oracle architecture delivering cost efficiency, speed, and security
• Make more crypto currency data available
• More types of data including volatility data, Time Weighted Average Price (TWAP)
• Update the data more frequently
• Works with layer 2 applications
• Community ownership and governance
• Staking rewards for UMB token holders

TOKEN UTILITY

Umbrella utilizes a Delegated Proof of Stake (DPoS) that benefits from the active participation of the community and token holders. UMB Utility Token holders will 1) select Validator Nodes, 2) participate in governance, 3) stake tokens in consensus rounds, and 4) generate rewards for staking tokens.

The DPoS system puts the power in the hands of UMB holders to select Validator Nodes who participate in the consensus process of determining market data. UMB holders are incentivized to select the best Validator Nodes that are the most likely to consistently vote in the majority in consensus rounds. Their tokens will be used by the Validator Nodes in the staking process. In addition, they will receive a portion of the user fees paid to their elected validator node. UMB holders that stake their tokens with a Validator Node will receive rewards in the form of native tokens. Details about the rewards can be found below.

Validator Pools

By participating in Validator Pools, UMB holders can generate yield on their UMB holdings. They will receive a pro-rata share of fees paid by developers using the Umbrella Network — net of any direct costs.

Validator Nodes will open a vault into which UMB holders can allocate their tokens. Validator Nodes will use these tokens during consensus rounds as part of their tokens at stake. Provided the Validator Node votes with the majority, then they will participate in the sharing of user fees. Incorrect, or false, vote by a Validator Node will be penalized by losing a portion of the tokens put at stake.

The Umbrella Foundation will receive 25% of User Fees. The proceeds will be used for the continued development of the network as well as operating costs. The balance of the tokens will be split on a pro-rata basis between Validator Nodes according to how many tokens were put at stake by each Validator Node. Validator Nodes that vote with the majority will receive a pro rata portion of 25% of the User Fees. Validator Nodes will then pass their portion of User Fees onto the participants in the Validator Pools on a pro-rata basis.

Rewards

Rewards are triggered by achieving business milestones; alternatively, the rewards are triggered on a specified timeline if the business milestones are not yet achieved by the specified timeline. There will be 4 milestones which are primarily based on the number of data requests made for Umbrella Oracle data.

For the first milestone round, Milestone 1, Umbrella will generate 125,571 rUMB₁ everyday after launch. As previously mentioned, rUMB₁ will be redeemable for 1 UMB when certain business milestones are reached or 1 year from the start of Milestone 1. Each day, a maximum of 251,241 rUMB₁ can be exchanged for UMB. This rUMB₁ for UMB exchange process will take 6 months or less.

The Second Milestone Round, Milestone 2, will mirror the first. The main difference is that rUMB₂ for Milestone 2 will be issued each day until business milestones are reached or 1 year from the start of Milestone 2. Once milestones are reached or time expires, up to 251,241 rUMB₂ will be redeemable for UMB. Same as for Milestone 1, this Milestone 2 rUMB₂ for UMB exchange process will take 6 months or less.

Milestones 3 and 4 will be similar except for using rUMB₃ and rUMB₄.

Future Medium posts will discuss details of Milestones 1–4.

TL;DR

A community focused Launch whereas from Day 1, the Community will own nearly 99.5% of the publicly available tokens. By the time that all tokens are minted and distributed, the Community will own 67% of all UMB tokens.

UMB Launch Date: TBD pending security audits

Total Supply: Maximum 500 million UMB

Minimum Price: $0.02 / UMB

Auction Volume: 50 million UMB

No Pre-mined tokens other than those dedicated to the auction and liquidity on Uniswap

UMB will be auctioned on TBD date from the Umbrella Network website. The public auction will last 3 days and will be a Dutch Auction whereby all buyers will pay the same price for an UMB token.

Fully Diluted Token Allocation

Two-thirds (66.66%) of the entire token pool will be allocated to the Community. The Community consists of individual token buyers, validator node operators, decentralized applications, and data providers.

Token Summary

Token Symbol: UMB

Token Standard: ERC20

UMB Token on Etherscan: TBD

UMB TOKEN DISTRIBUTION

Per the chart below, the UMB token pool has long vesting schedules for all participants.

COMMUNITY

Public Sale

A public sale will be conducted whereby 50 million UMB tokens will be sold via a Dutch style auction. There will be a single clearing price based on the bids submitted. The clearing price will be the highest price at which the entire allocation of tokens will be sold. There is a floor price of $0.02 per UMB token. Tokens will be available promptly following the close of the auction.

Token Rewards(rUMB)

On a daily basis, UMB token holders will be rewarded with rUMB tokens. rUMB is an ERC20 token that will be convertible 1:1 to UMB. rUMB conversion to UMB will commence on a future date based on reaching business milestones or a predetermined time. Once the milestone or predetermined time has been met, rUMB will be converted to UMB. The conversion will occur pro rata on a weekly basis over the timespan of 6 months (26 weekly increments).

On a daily basis, 125,571 rUMB tokens will be issued. Tokens will be distributed on a pro-rata basis based on the total number of tokens staked.

Node Fund

The Node Fund will be linearly distributed over a 4 year period. The Node Fund will have access to tokens only once they are minted and allocated to the Node Fund. The tokens are to be used for incentivizing and subsidizing nodes during the early stages of the Umbrella Network ecosystem. Unallocated tokens will be burned at the end of the 4 year term.

Partner Fund

The Partner Fund will be linearly distributed over a 4 year period. The Partner Fund will have access to tokens only once they are minted and allocated to the Partner Fund. The tokens are to be used for incentivizing and subsidizing partners during the early stages of the Umbrella Network ecosystem. Unallocated tokens will be burned at the end of the 4 year term.

FOUNDATION

Development Fund

The Development Fund will be used to continue the development of the Umbrella Network product and operate the business. Operations include business development, marketing, finance, HR, legal, and administration.

Treasury & Liquidity Fund

The Liquidity Fund will primarily be used to provide liquidity on Uniswap. Treasury & Liquidity tokens will be mined at launch.

TEAM

Founding Team

The Founding Team will be rewarded 10% of the UMB tokens over 4 years to be linearly distributed. This is in recognition of the time, risk, and financial commitments made by the team during the early stages of the development of the foundation and product, and to incentivize continued commitment.

Early Contributors

Early Contributors provided financial assistance, technical consultation, strategic guidance and marketing support when Umbrella Network was merely an idea. For this commitment, they will be rewarded UMB tokens vesting linearly over 18 months.

TOKEN DISTRIBUTION AT LAUNCH

Umbrella’s token launch will not have pre-mined tokens. There are no balloon distributions to any of the other participants. Therefore, the public will have an overwhelming majority of the publicly available tokens. Excluding the Treasury & Liquidity pool, the public will control 99.5% of the float on Day 1.

In sum, the Public Sale participants will initially get 99.5% of the daily rewards assuming 100% of the tokens are staked.

After 1 year, fewer than 150 million out of 500 million (30%) UMB tokens will be in circulation.

UNISWAP AMM POOL

Umbrella will establish an AMM Pool on Uniswap to facilitate and ease transacting for validators, developers and stakers to participate in bootstrapping the network in the early stages. This will serve two purposes: 1) organic price discovery, and 2) allow participants to rebalance their positions based on the utility of the network.

Umbrella will allocate 15 million Umbrella tokens and equivalent ETH value in Uniswap for liquidity of the UMB token. The Uniswap UMB/ETH pool terms are subject to change. Change of venue, added and updated parameters are also possible.

Note that the pool parameters are subject to change. Other pool configuration parameters can be added, updated, and/or changed.

FINAL WORD

The founding team and early contributors of the Umbrella Network strongly believe the future of DeFi is dependent on 1) a community owned Oracle that is not beholden to the interests of a few, and 2) an Oracle that address the data insufficiency problem that is leading to projects being exploited. We also believe that such a fundamental shift in the Oracle market will lead to an explosion of business models and innovation that will ultimately fuel the growth of DeFi and cryptocurrencies in general.

We eagerly look forward to working with the initial members of the Umbrella community to bootstrap the network, evangelize its products, govern the network and fuel the growth of the DeFi industry.

Please join us on Telegram, follow us on Twitter and Medium.

DISCLAIMER: UMB UTILITY TOKENS ARE FOR USE IN THE UMBRELLA NETWORK DECENTRALIZED PROTOCOL ONLY AND ARE USED TO OPERATE THE ORACLE FUNCTIONALITY OF THE UMBRELLA NETWORK DECENTRALIZED PROTOCOL. ACQUIRING/HOLDING/OWNING/USING TOKENS OF ANY SORT, INCLUDING UMB UTILITY TOKENS, DOES NOT PROVIDE/GUARANTEE YOU OR ANYBODY ELSE DIVIDENDS OR ANY KIND OF RETURNS. SPECULATING WITH THE UMB UTILITY TOKEN IS NOT ALLOWED. UMB UTILITY TOKENS ARE NOT A SECURITY, ARE NOT SEEKING TO BE A STORE OF VALUE, AND SHOULD NOT BE USED AS A CURRENCY OF ANY KIND. ACQUIRING UMB UTILITY TOKENS DOES NOT PROVIDE YOU WITH ANY RIGHTS IN ANY JURISDICTION. UMB UTILITY TOKENS ARE AN INTERNET DIGITAL UNIT OF UTILITY THAT CAN BE USED SOLELY IN THE UMBRELLA NETWORK DECENTRALIZED PROTOCOL. ANY WORDS THAT MAY, IN OTHER CIRCUMSTANCES, BE USED TO DESCRIBE OR ARE OTHERWISE ASSOCIATED WITH A SECURITY OR CURRENCY ARE TO BE INTERPRETED IN A WAY THAT REJECTS THE DEFINITIONS TO BE ASSOCIATED WITH A SECURITY OR CURRENCY. THE UMBRELLA NETWORK DECENTRALIZED PROTOCOL SHALL NOT BE LIABLE TO YOU OR ANYBODY ELSE FOR ANY DAMAGES AND/OR LOSSES IN ANY WAY IN CONNECTION WITH UMB UTILITY TOKENS. IF YOU DO NOT AGREE WITH THE CONTENTS OF THIS DISCLAIMER, IN PART OR IN WHOLE, THEN PLEASE LEAVE THIS WEBSITE AND DO NOT ACQUIRE/HOLD/OWN/USE UMB UTILITY TOKENS.