uForex - Foreign Exchange Market on UMA

# uForex - Foreign Exchange Market on UMA ## Background [uForex](https://uforex.finance/) is a decentralized foreign exchange market based on [UMA protocol](https://umaproject.org/). We try to leverage the current DeFi ecosystem and toolsets to provide an open and permissionless platform for trading & hedging national currency volatilities on Ethereum blockchain. ## What does uForex offer? At the start, uForex provides 2 synthetic tokens: [uCNYUSD-APR](https://etherscan.io/address/0x56Fb1aCAfF95c0B6Ebcd17C8361A63D98B1a5a11) and [uEURUSD-APR](https://etherscan.io/address/0xD49fa405DCe086c65d66Ca1CA41f8E98583812B4). Those two tokens track the exchange rates of CNY and EUR respectively, and will expire on April 30th. You can create and redeem these tokens at [uForex's website](https://uforex.finance/) with MetaMask. The workflow is similar to other UMA-based projects. Example spec for uEURUSD-APR tokens are shown as folows: :::info :bulb: **uEURUSD-APR Specifications** ![](https://i.imgur.com/hUlXqDg.png) ::: ## How to use uForex synthetic tokens? The best way to understand how to leverage uForex synthetic tokens work is to walk through some detailed examples. Here we use uCNYUSD-APR as an example. ### Alice the Trader <div style="text-align: center"><img width="130", height="130", src="https://i.imgur.com/peaphVH.png"/></div> <br> Alice is a trader who thinks that CNY/USD price will rise in March and decides to buy the uCNYUSD-APR token. She connects her wallet to [Uniswap](https://app.uniswap.org/#/swap?outputCurrency=0x56Fb1aCAfF95c0B6Ebcd17C8361A63D98B1a5a11) and prepares to buy 10,000 uCNYUSD-APR with her USDC. The price on Uniswap shows 1 uCNYUSD-APR = 0.1538 USDC. Alice needs to pay 1538 USDC to buy 10,000 uCNYUSD-APR. Expectations for CNY/USD price rise and the uCNYUSD-APR token can now be exchanged for 0.16 USDC per token. Alice sells her 10,000 uCNYUSD-APR tokens and receives 1600 USDC in return for a profit of 62 USDC. ### Bob the Holder <div style="text-align: center"><img width="150", height="150", src="https://i.imgur.com/z7okhgz.jpg"/></div> <br> Bob is a CNY holder who thinks that CNY/USD price will decline in March and would like to use the uCNYUSD-APR token as a hedge and secure his future loss now. The price of CNY/USD on March 1st is 0.1538 (1 USD = 6.5 CNY). Suppose Bob could exchange 65,000 CNY for 10,000 USD in March, however, he doesn't. Unfortunately, CNY/USD price declines in the next month to 0.138, Bob needs to pay 72,464 CNY for 10,000 USD. So Bob lost 7,464 CNY. To fully hedge his loss, Bob would need to mint and then sell 65,000 uCNYUSD-APR tokens. Bob connects his wallet to uForex finance and selects uCNYUSD-APR. He clicks on `Manage Position`, selects `Create - Mint new synthetic tokens` Under `Tokens (uCNYUSD-APR)` he enters `65,000` and then under `Collateral (USDC)` he presses `MIN`. With the Global Collateral Ratio (GCR) at 1.1, the resulting number is 10,996 USDC (`1.1 * 65,000 tokens * 0.1538 USDC per token`). Bob clicks `Create` and mints 65,000 uCNYUSD tokens while depositing 10,996 USDC. Bob then connects his wallet to Uniswap and sells his 65,000 uCNYUSD-APR tokens at a price of 0.1538 USDC each and receives 10,000 USDC. Notice that Bob is now committing 996 USDC (10,996 USDC collateral - 10,000 USDC received). Expectations for CNY/USD price decline and the uCNYUSD-APR token can now be exchanged for 0.138 USDC per token. Bob exchanges 8970 USDC back to 65,000 uCNYUSD-APR tokens and redeems his 10,996 USDC Collateral. Finally, Bob earns 1030 USDC and covers his loss. For USDC holders, use the same operation logic but expect CNY/USD price to rise. ## Developer Mining & Liquidity Mining At the current stage, uForex will distribute all UMA reward tokens to the community. To reward early participants and help create better liquidity, **uForex will initially grant all earned UMA tokens to liquidity providers who both mint AND provide synthetic tokens (either uCNYUSD or uEURUSD) along with USDC on Uniswap for two weeks.** ## Conclusion uForex is a simple way for traders to speculate currency volatilities or hedge their risk. We hope the protocol will be well received and would like to create a series of these tokens in the near future depending on the feedback. We appreciate any feedback - good or bad - to help us improve and improve this product. ## Resources and References - [uForex Portal](https://uforex.finance/)</u> - [uCNYUSD-APR on Uniswap](https://info.uniswap.org/pair/0x2164ceb1e1495b10660525c5201e86e9a1fafc9a) - [uEURUSD-APR on Uniswap](https://info.uniswap.org/pair/0x80ea1835838910eb5a7a3c7c1bb2b3c3dff679a0) - [uCNYUSD-APR contract](https://etherscan.io/address/0x0388f65C185a7E7D857BB142185381d97a4bc747) - [uEURUSD-APR contract](https://etherscan.io/address/0x9bB1f39b6DB45BD087046385a43EAb7b60C52e7D) - [UMIP29](https://github.com/UMAprotocol/UMIPs/blob/master/UMIPs/umip-29.md) - [UMIP32](https://github.com/UMAprotocol/UMIPs/blob/master/UMIPs/umip-32.md)