Looking for help to launch a synthetic asset tracking metal price.
I have zero knowledge of defi. Looking to collaborate if anyone is interested.
Are you talking ferrous or non-ferrous metals? Do you have one specific type of metal you would like to track or multiple types like a recycling center would posts daily?
Yes, I want to start with lithium, price sourced from 3rd party feed. The price is supposed to go up as per every projections, so it could be a great candidate for synthetics.
What do you think?
Absolutely a great idea for synthetics.
Here is a link to UMA’s guide for creating a UMIP to register a new price identifier with UMA’s DVM.
There, you can determine if your 3rd party feed is applicable and gather more information on how the process works when adding new price identifiers (lithium) to the DVM.
A short explanation for you:
Need to have the price updated constantly to determine the value of collateral needed to cover the value of the synthetic token (lithium).
I will try and break this down so you can have a better understanding since you wrote that you have zero knowledge of Defi and Im not sure how much you know.
To make it easily understandable I will compare getting a loan:
I = sponsor
My house = wETH ( wETH is “wrapped” Ethereum and makes it tradeable in a smart contract)
Loan = Synthetic Token (Lithium)
I (sponsor) put my $150 house ( wETH) up for collateral for a $100 loan (Lithium).
The bank wants to appraise my house 15,000 times a month to make sure that my house will cover the loan if I default or run off with the $100.
Collection Agencies (liquidator bot) receive and monitor those appraisals in real- time.
If the house’s value drops to $149 a collection agency will buy my loan from the bank and take possession of my house.
When you create Lithium as a synthetic token you build a storefront (Dapp) where sponsors interested in getting exposure to (lithium) will come to mint (create) your Lithium tokens.
They will put up collateral to get your tokens transferred into their wallet.
You can set up a pool on a 3rd party Dapp for the sponsors to put their tokens in and
earn interest, rewards.
For creating this market you will receive rewards from UMA based on how many people use your product/how much value generated by using your product.
This is all done here with computer code inside a smart contract.
The contracts expire at a predetermined date.
When those contracts expire the sponsor returns to your Dapp where they give back (redeem) the lithium tokens for the expiry price and retrieve the collateral they put up.
So that’s why your price feed of Lithium is an important part of creating a synthetic token.
That is just a brief summary I wrote real quick. I may have missed somethings. If I did Im sure someone will chime in. I hoped it helps you get at least very basic understanding of creating your synthetic token with UMA.
This is super. I’m getting the concept slowly. Thanks much.
The spot metal price is currently updated on weekly basis because there’s no facility to trade on paper. So the next updated price will be released as per schedule. This limitation can be handled in UMA/smart contract?
Can you please write couple of lines on redemption process?
How the user is going to profit?
If metal price goes up, the token value goes up?
The collateral value is effected by the metal price?
I had to ask this - if you know someone who can collaborate in writing the smart contracts, can you please introduce to me. I can share contacts.
@CarelessDoge thought you would be interested in this.