Umami Finance: The Yield Protocol Powering The Future Of DeFi

Taste the future of DeFi.

We are at the vanguard of a new era for Decentralized Finance. And as the liquidity provider on one of Ethereum’s fastest-growing Layer 2 scaling chains, Umami is leading the way.

Umami uses its protocol-owned treasury assets and growing arsenal of DeFi products to provide liquidity that fuels the growth of the Arbitrum network’s ecosystem.

The treasury returns the value it generates to its holders through its core passive-income product, Marinate v2, in addition to an expanding array of new, yield generating use-cases for its UMAMI token.

Unlike many of its peers, the UMAMI token has an intrinsic floor value grounded in its wholly owned treasury capital, which Umami carefully preserves & grows by eschewing virtually all inflationary token emissions.

A New Recipe for DeFi

A better future for finance.

The rise of Decentralized Finance has created a viable alternative to the traditional, centralized financial sector. It’s an unprecedented opportunity to enhance financial & personal freedom for investors around the world. However, steep barriers-to-entry have so far limited access to DeFi’s benefits to a fortunate few.

  • High gas fees, especially in Ethereum Mainnet, push transaction costs into the hundreds of dollars.
  • Extreme crypto market volatility makes many promising DeFi products too risky for most investors.
  • The DeFi ecosystem’s Byzantine complexity creates an insurmountable learning curve for many potential crypto investors.
  • Fragmented cross-chain liquidity increases cost & security frictions for many asset deployments.

Fortunately, a global cohort of blockchain innovators are addressing these issues & setting powerful macro-trends in motion that are transforming DeFi for the better.

L1→L2 Migration:

  • Billions of dollars in TVL (Total Value Locked) are migrating from Ethereum Mainnet to Layer 2 scaling chains such as Arbitrum. These chains integrate Mainnet’s unmatched security & decentralization but offer faster finality & far lower gas fees.

Cross-chain Interoperability & Fiat <> Crypto Onramping

  • New protocols are simplifying cross-chain bridging & fiat <> crypto onramping. It’s now possible to frictionlessly migrate assets directly onto Layer 2 scaling chains from virtually anywhere in the world.

DeFi & Governance Innovations

  • Protocol-Owned Liquidity — Protocol-owned on-chain capital is enabling long-term, strategic asset deployments & stable ecosystem liquidity.
  • On-Chain Governance — Advancements in blockchain governance structures are empowering decentralized networks of investors, developers & business innovators to coordinate to address complex challenges.
  • Trustless Capital Raising — Trustless-smart contracts allow projects to efficiently crowdsource millions of dollars in capital entirely on-chain.
  • Decentralized Derivatives — Sophisticated data Oracles are driving a proliferation of decentralized derivative products, enabling projects & investors to hedge against market risk

A Comprehensive DeFi Platform

A new era in DeFi.

Umami Finance is fully embracing these emerging trends. It is emerging as the primary entry-point to the Arbitrum ecosystem & the network’s premier liquidity-as-a-service (LaaS) provider.

Umami’s current & upcoming capabilities include:

  • ~$6m in protocol-owned, risk-hedged treasury assets allocated into yield-generating LaaS & farming-as-a-service (FaaS) deployments on Arbitrum.
  • A core product, Marinate v2, that generates a growing monthly stream of passive income in ETH for UMAMI token holders.
  • An affiliated project, Arbi’s Finance, that operates a suite of autocompounders that maximize yield for farms & vaults across Arbitrum.
  • An growing suite of use-cases for Marinated UMAMI (mUMAMI) tokens, including lend/borrow functionality & mUMAMI autocompounders that covert ETH passive income into high-yielding Arbitrum token rewards.
  • A platform for building & managing Liquidity Pairs on Uniswap v3, the lowest-cost & most capital-efficient Decentralized Exchange (DEX) on Arbitrum.
  • An innovative capital-raising product that crowdsources non-dilutive capital for its protocol-owned treasury from virtually any on- or off-chain account.
  • A high-yielding stablecoin vault & an Arbitrum index vault that offers focused exposure to Ethereum’s hottest L2.
  • A unique series of branded NFTs that provide utility in Umami’ ecosystem.
  • A wide & growing array of UMAMI use-cases across the Arbitrum ecosystem created in partnership with other leading Arbitrum projects.

Why Arbitrum?

One of Ethereum’s fastest-growing L2 scaling chains.

Arbitrum is an Optimistic rollup built on the security and decentralization of Ethereum that has attracted ~$3 billion in TVL in less than a year since its launch. The ongoing migration of assets from Mainnet to L2s is continuing to drive new liquidity & users to the network. Arbitrum’s growth is expected to accelerate even further when it deploys its much-anticipated Nitro upgrade, which will make it one of Ethereum’s fastest & most gas efficient scaling chains.

Emissions & Supply Schedule

UMAMI is a non-inflationary, low-emission token that generates value for holders via a unique passive income product, Marinate v2.

Circulating supply: ~291,000

Total supply: ~350,000 (Note: excludes ~90k UMAMI permanently locked in retired contracts.)

There is no maximum supply of UMAMI. However, new UMAMI is only emitted to support non-dilutive capital raises (see: v2 Bonds). A small amount of emissions will also support team compensation, which is capped at ~10% of total supply.

Net Asset Value (NAV)

Each UMAMI token is a claim on the Net Asset Value (NAV) of its treasury. UMAMI token’s NAV can be calculated by dividing Umami’s total treasury assets after operational expenses over the circulating supply of UMAMI tokens.

Umami’s circulating supply calculation takes into account all tokens held in external wallets (including team wallets). It excludes tokens in Umami’s treasury & its primary liquidity pair, which are also not counted towards Umami’s treasury value.

In theory, UMAMI’s NAV ought to provide a floor on its trading price, with any additional premium reflecting market expectations of future revenue growth from fees & treasury yields.

V2 Bonds

Umami’s v2 bonds are an innovative tool for crowdsourcing non-dilutive treasury capital.

Umami bonders receive UMAMI at a modest (5–10%) discount to NAV in exchange for depositing assets such as ETH to Umami’s treasury. The UMAMI is automatically deposited into the mUMAMI autocompounder to maximize returns (see: mUMAMI autocompounder). Umami has integrated cutting-edge APIs into its bonding interface to enable investors to onboard assets into Umami’s treasury from any chain, or directly from fiat accounts.

Bond payouts are the primary source of UMAMI emissions. Umami carefully manages its Cost of Capital to ensure that bond discounts are rapidly offset by revenue from capital deployments, avoiding dilution for existing holders.

Treasury Management

A growing treasury of Protocol-Owned Liquidity.

Umami employs a unique treasury strategy that hedges against macro-risk & provides targeted exposure to the growth of the Arbitrum network.

Umami’s current treasury assets include:

  • ~$4m in GLP, an index of major crypto-assets & stablecoings yielding ~45% APR
  • ~$350k 3S-ETH/USD & 3S-BTC/USD from TracerDAO Perpetual Pools yielding ~60% APR. The leveraged short positions, which can never liquidate, hedge out ~$1m in crypto market exposure.
  • ~$800k in ARBIS tokens, the fee-generating governance token of Arbis Finance
  • ~$200k in liquid ETH to support Marinate v2 payouts & Uniswap v3 LPs
  • ~$500k in LPs on Uniswap v3 (see “Uni v3 Platform”)

Marinate v2

Uncork for powerful passive-income.

Marinate v2 pays out monthly rewards in ETH from Umami’s treasury, financed by yield & fee revenue from its products & capital deployments.

  • ETH payments are made at nearly daily frequency. Marinated UMAMI (mUMAMI) is timelocked for 1-month.
  • Umami’s treasury allocates 50% of its fee & yield revenues to Marinators & reinvests the other 50% to increase passive income in the future.
  • Formula for APR on Marinated UMAMI: [(% Treasury APR * NAV)*(50% for Marinator payouts)]/Price per UMAMI]

Arbi’s Autocompounders

A perfect pair.

Umami Finance’s affiliate project, Arbi’s, operates a suite of autocompounders that deploy liquidity across the Arbitrum network & maximize yield for depositors. Autocompounders enhance yield on vaults & farms by automatically reinvesting reward tokens back into yield-generating strategies.

The ARBIS governance token enables its community & partners to determine the distribution ARBIS token incentives. It also pays out a robust stream of fee revenues to stakers.

Arbi’s autocompounders collect 8% fees on compounded assets. They also collect a 0.5% deposit fee & a 1% fee on any withdrawals made in less than 30 days. The Umami treasury collects 50% of autocompounder fees. The remaining 50% are distributed to ARBIS stakers.

Total ARBIS Supply: 50 billion

Supply Distribution:

  • Circulating Supply: 14 billion
  • Incentive Reward Allocation: 10 billion
  • Team Compensation: 10 Billion
  • stARBIS Umami Treasury Holdings & ARBIS LP Liquidity: ~15 billion

mUMAMI Autocompounder

The Arbi’s mUMAMI autocompounder increases rewards for Marinated UMAMI & enhances the capital efficiency of Umami’s treasury.

mUMAMI Autocompounder Mechanics:

  • ETH payouts to mUMAMI depositors are auto-swapped for additional mUMAMI via Umami’s Uniswap v3 LP.
  • Depositors into mUMAMI gain an increasing share of circulating UMAMI supply & a larger claim on future ETH passive-income.
  • The mUMAMI Autocompounder is currently incentivized with ARBIS token rewards & fees from Arbi’s other autocompounders. As a result, mUMAMI offers some of the highest APY of any non-emissions-based tokens.
  • The mUMAMI autocompounder produces no UMAMI emissions.

The mUMAMI autocompounder is the first of many new use-cases for mUMAMI. Soon, users will be able to borrow UMAMI tokens against their deposited mUMAMI.

They will also be able to choose from a wider array of mUMAMI autocompounders, allowing them to compound ETH rewards into a variety of Arbitrum-native token rewards.

Uniswap v3 Platform

The most capital-efficient DEX on Arbitrum.

Umami’s Uni v3 platform builds & actively manages LPs for partner projects to improve trading liquidity on Arbitrum & generate a growing stream of LP fees for the Umami treasury.

Uniswap v3 LPs provide targeted trading liquidity at certain price levels, improving capital efficiency & reducing fees & price slippage for trades. The Uni v3 model is an innovative iteration on traditional LPs, which provide an even distribution of trading liquidity at each price point.

Uniswap v3 is the most capital efficient DEX on Arbitrum. Projects that use Umami’s platform free up large amounts of LP capital for other deployments while still reducing price slippage & fees for their investors.

Umami is also deploying numerous UMAMI-paired LPs for low-liquidity Arbitrum assets on the Uni v3. Eventually, Umami aims to position the UMAMI token as the most liquid trading asset on Arbitrum, with thousands of fee-generating transactions routed through its wholly-owned LPs every day.

Umami Vault Strategies

Umami is preparing to launch one of the highest yielding stablecoin vaults on any chain, providing >30% APR on an array of stables including USDC, DAI & FRAX.

Vault Mechanics:

  • Users deposit stables, USDC, DAI & FRAX, which are used to mint GMX’s GLP index token & Tracer DAO’s 3x leveraged perpetual pool tokens.
  • Tracer tokens generate >60% APR & fully hedge against market risk from GLP index assets. GLP generates 45% APR.
  • After 1 month, depositors withdraw stablecoin principal in original token denomination & collect rewards in TCR, ETH & GMX.
  • Umami retains esGMX rewards in its treasury.

Umami is also preparing to build a vault that deposits into a variety of Arbitrum-native tokens & leverages Arbi’s autocompounders to maximize yield for depositors.

Key Value-Creation Flywheels

V2 Bonds → mUMAMI Autocompounder Flywheel

  • mUMAMI autocompounder generates mechanical buy pressure ETH → UMAMI
  • ETH → UMAMI demand pushes UMAMI price to NAV or higher
  • UMAMI at NAV enables non-dilutive bonding
  • Bonders’ deposits increase Treasury Value, Treasury yield revenue & ETH payouts to Marinators
  • Bonders’ UMAMI compensation is auto-deposited into mUMAMI compounder; ETH → UMAMI buy pressure increases
  • Added UMAMI price support enables further non-dilutive bonding

ARBIS Governance Flywheel

  • Arbis autocompounders direct liquidity to farms & vaults across Arbitrum via ARBIS incentive rewards.
  • Soon, the ARBIS governance token will enable its holders to influence how many ARBIS incentive reward tokens are allocated to each autocompounder.
  • Arbitrum protocols & community members acquire ARBIS tokens to gain governance influence over Autocompounder incentives
  • Voting on autocompounder incentives also requires holding mUMAMI (see: mUMAMI autocompounder flywheel)
  • Competition for ARBIS tokens (fixed supply 50bn) increases USD-value of ARBIS incentives
  • Higher USD-value incentives lead to greater competition for ARBIS tokens

Uni v3 LP Flywheel

  • Umami creates ETH, USDC & UMAMI paired LPs on Uni v3 for partners on Arbitrum
  • Increased trading liquidity on Uni v3 attracts more trading activity to DEX
  • Umami collects fees on all LPs, reinvests proceeds in building additional LPs, including more UMAMI paired LPs
  • Uni v3 becomes primary DEX for Arbitrum native projects, w/ UMAMI-paired LPs primary cross liquidity between projects
  • Increasing volume of Arbitrum-project token swaps & LP <> LP arbitrage trades enhance fees to Umami treasury, which are reinvested for more trading liquidity & fee revenue

High-Yield Stablecoin Vault Flywheel

  • High yielding stable vault with cross-chain bridging APIs & fiat <> crypto onramp SDKs onboards TVL to Arbitrum & surge liquidity to projects like GMX & TCR
  • Increased liquidity & TVL increase usage & fee revenue on Arbitrum ecosystem projects
  • Higher fee revenue enhances vault returns, attracting more TVL to vaults & enhancing fee revenue to Umami treasury

Umami NFT Flywheel

  • Umami mints unique NFTs with utility for mUMAMI holders via increased ETH payouts; Umami maintains NFT:UMAMI supply ratio of ~1:4 via periodic minting of new NFTs
  • Umami NFTs raise additional capital to Umami treasury via direct payments for NFTs & incentives for bonding &/or depositing LP shares to Umami’s treasury
  • Influx of non-dilutive capital to Umami treasury supports higher yield revenue & NAV for mUMAMI & enhances utility for NFTs
  • Enhanced NFT utility attracts further non-dilutive capital in subsequent mints, accelerating growth of treasury yield, UMAMI TVL & NFT utility

Partnerships

Umami actively partners with projects across Arbitrum & beyond to support the growth of the network’s ecosystem & generate returns via bespoke, yield-generating capital deployments.

Partners include:

Umami-chan NFTs

Say “Hi” to Umami-chan!

In celebration of its origins as a decentralized, crypto-native project created by a community of Manga Otakus, Umami is delighted to introduce its mascot and spokeswoman, Umami-chan!

Umami-chan is not only Umami’s best advocate. She is also the star of a series of unique NFTs that Umami is minting for its community. The NFTs feature original art from Japanese Anime artists & also offer valuable utility for UMAMI holders.

Umami-chan NFTs can be staked alongside mUMAMI to enhance Marinate returns & unlock additional rewards for their holders.

Arbitrum Insider

Get an Inside look at Arbitrum’s fast-growing ecosystem.

As part of its commitment to promoting the Arbitrum ecosystem, the Umami team hosts a podcast, Arbitrum Insider, that profiles a wide array of Arbitrum-native projects.

Umami conducts biweekly live AMAs with Arbitrum project teams on its @UmamiFinance account’s Twitter Spaces. The recorded content is shared via Spotify across all major podcast distribution platforms.

Team

A global team passionate about improving DeFi.

The Umami Finance team has extensive experience in blockchain development, technology startups, traditional finance, graphic design, crypto-investing, business development & more!

DeFiAlpha — Project Lead

Luffy Owls — Co-Founder & Lead Developer

0xPuffin — Co-Founder

Winston Wolf — Chief Advisor & Head of Growth Marketing

Kitsune — Senior Advisor (Operations)

Nick W— Senior Advisor (Business Development)

0xToki — Senior Solidity Developer

Invader — Solidity Developer

Steven-T — Head of Uni v3 LP Management

Carnation — Head of Treasury Management

JulianXDT — Director of Operations & Lead Community Manager

eLectorul— Head of Visual Design

MrGrumpyPants — Senior Marketing Strategist & Community Manager

Tyche — Front End Developer

0xBurden — Front End Developer

Arugulo — Solidity Developer

Encrypted Bunny — Solidity Developer

R0cketman — NFT Strategist

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store