The Future of Umami: Revamped Tokenomics & Protocol Mechanics

Umami is renovating the kitchen

The past several weeks have been a challenging time in the markets, especially for projects with tokenomics and protocol mechanics like Umami Finance’s. The bearish trend in price action for UMAMI and its recent decline below treasury-backing has prompted Umami’s core team to take a long hard look at its model.

As always, Umami has put its community first and solicited input through a recent Snapshot vote to determine the best path forward. We posed several options to the community, including continuing the project with revised tokenomics and product offerings, or winding it down to return treasury assets to the token holders.

The majority of the community (~57%) voted to continue with Umami’s next chapter, while a sizable minority (~41%) voted to exchange their UMAMI for their claim on backed treasury assets. In light of this community feedback, the Umami team is taking several actions to deliver value to the community.

Restructuring Umami’s Tokenomics

Umami Finance has never been a reserve currency, and its reserve currency-based tokenomics model is no longer serving its community. Starting immediately, Umami will begin restructuring its tokenomics to adopt a more sustainable approach. Here are the steps that will be taken:

1. End rebases and discontinue staking

Rebase emissions have continually diluted backing per UMAMI and contributed to the decline in price. Meanwhile, staking APY, which rewards stakers in emitted UMAMI, does not give the community a direct claim on the value Umami generates from its treasury assets.

Therefore, Umami will adopt a new model that gives its community a direct benefit from its treasury returns in the form of dividends from treasury yields. This means that sUMAMI and wsUMAMI will no longer be used. You can unstake and unwrap your tokens in the app now.

2. Discontinue bonding

Bonding has been a powerful tool for bringing new assets to Umami’s treasury, but the current bonding structure no longer serves the community. At current prices, any new bond issuances using the 5-day vesting model for bonds would be unsustainable.

In the absence of Umami’s rebase rewards, the discounts required to make bonding to the Umami treasury appealing over a 5-day vesting period would be dilutive for Umami holders. The Umami team is working to develop a more sustainable approach to raising capital that will produce better returns for bonders and holders alike.

3. Unlock marinated UMAMI and restructure the Marinate offering

Umami’s time-locked Marinate offering has been one of its most successful innovations. But given the current market environment and Umami’s broader tokenomics overhaul, the team does not find it in the best interest of its community to require current UMAMI Marinators to keep their tokens locked for their full vesting period.

To get around the limitations of the original Marinate smart contract, our developers will disable withdrawals on the existing smart contract. They will then deploy a new smart contract allowing Marinators to mint and redeem the correct amount of tokens, effectively unlocking them.

Soon after, the team will unveil a restructured Marinate option that will function as the primary source of value accrual for its holders. Marinating will return a portion of treasury yields, denominated in the token assets in Umami’s treasury, to time-locked Marinators. There will be a token, likely mUMAMI, representing Marinated UMAMI tokens, similar to veCRV.

Self-service Redemptions At Treasury Backing

About 40% of Umami’s community asked to redeem their UMAMI at treasury backing. The Umami team respects its community’s wishes and is working to make a redemption offering available to holders who want to exchange their tokens at backing for treasury assets. More details on this will follow soon as we work out the details of this mechanism.

Deploy Treasury Assets into Diverse, Yield-Generating Investments

Umami has ~$6 million in treasury holdings including core crypto assets such as BTC and ETH, gOHM, as well as exciting Arbitrum-native projects including GMX, DPX, and MAGIC. With this shift in the tokenomics model, the team will also be adjusting the treasury strategy and looking for diversified opportunities in low and high risk deployments to achieve the tastiest, most sustainable yields.

Umami NFTs

The team is working on a Genesis Umami NFT collection that is deeply integrated with the new mechanics of the protocol. Moreover, this initiative seeks to test the community’s appetite for a more comprehensive gamification of protocol mechanics. More details on the NFT collection will be announced as progress continues.

Arbi’s & Umami

As many of you know, Umami is one part of the broader Arbi’s ecosystem, alongside Cheems and Arbi’s autocompounders. This structure was designed to provide ARBIS holders with fees from all products in the ecosystem. As time has gone on, the team has concluded that this structure leads to fragmented liquidity and increased maintenance overhead. We’re exploring a merger of Arbi’s and Umami, and we will have more details to share on this soon.

A Bright Future Ahead

The Umami team wants to thank its community for their steadfast support of the project even in these trying times. In the weeks ahead, the team will announce more details around the tokenomics revamp, redemptions, treasury deployment strategy, and Arbi’s merger. We will make sure the community is part of every decision along the way.

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Sustainable, Risk-Hedged Arbitrum Yields