Union is a decentralized network focusing on driving DeFi adoption by making it user-friendly via reducing cost, addressing risks, and easing access.
The total value locked (TVL) in decentralized finance (DeFi) protocols has breached $11 billion, as of the 30th of September 2020. However, despite its rise in value, the massive adoption of DeFi systems is still at a crossroads.
These networks lack uniformity, with each of them having different sets of yield farming or liquidity mining strategies. As such, even liquidity providers do not operate at their optimum.
Apart from uniformity, security and gas fees are other stumbling blocks in the current DeFi ecosystem. With most DeFi protocols harnessing the power of the Ethereum blockchain, scalability has been another giant in the room. Although non-Ethereum-based decentralized protocols are being built to power DeFi products, Union is at the forefront of streamlining the space.
Table of Contents
Background
Union is backed by the top minds in law, business, finance, and technology. It was founded by Michael Beck and Jarrod Perry. Beck’s experience spans 20 years, which are spread across wealth management, finance, and healthcare. Becks attended Columbia University for his BA in Economics and Columbia Business School of his MBA.
Perry has ten years of experience as a corporate attorney. He has served as a general counsel to a blockchain-focused company in New York. Here, he specialized in compliance and corporate governance.
Perry is an admitted attorney at the United States Supreme Court, United States District Court.
Union’s technical advisor is Michael Zargham, who has a PhD in systems engineering. He has a special focus on the control and optimization of distributed systems. Zargham is the founder and CEO of BlockScience, a company dealing with researching, analyzing, designing, and engineering complex decentralized networks.
What is Union?
Union is a decentralized network focusing on driving DeFi adoption by making it user-friendly via reducing cost, addressing risks, and easing access. Notably, the protocol addresses the high transaction costs on Ethereum, which hinders the active movement of rewards from yield mining. In the current state of DeFi, sometimes the gas fees are higher than the rewards being moved across the network.
DeFi users majorly interact with the protocols through lending and or yield farming. But with the growth of platforms enabling such services and incorporating complicated strategies, there are still inefficient re-deployments of capital. Most of the inefficiencies come from a gap between zero human intervention and little human involvement.
Another aspect under Union’s radar is insurance. The network is moving away from conventional methods that insure the value locked in a smart contract.
For Union, the whole path can be insured, consequently enhancing trust among DeFi enthusiasts. To insure a path, Union envisions a world where tokenization and underwriting can be done on a trading strategy, an individual trade, a portfolio, or a trade group.
Why Union addresses the high transaction costs on Ethereum
The Union team believes that Ethereum is already overwhelmed by DeFi products built on the platform. As is the norm with most blockchain platforms, congestion attracts a rise in gas fees, hindering the movement of capital.
For instance, when a new yield farming opportunity arises, a farmer conducts roughly three transactions to exit an active strategy and enter a new one when it’s still profitable. But with high gas fees, a small capital holder cannot enter a new strategy even if it has higher yields than the current one. These locks out small participants since only large capital pools can afford the costs.
For Union, the DeFi space should be favorable to both small and large capital holders. By addressing the high transaction costs, the protocol allows the re-deployment of capital without encountering unnecessary friction.
3 Ways the Protocol Addresses the High Transaction Costs
The first way is by commoditizing demand for complicated functions. The second is by providing lower collateral coverage, and third is minimizing transaction urgency for gas.
Although Union’s approach to reducing gas fees leads to reliance on sophisticated approaches when dealing with large capital, the protocol is already one step ahead. It tackles this problem by reviewing a number of strategies that are believed to cause the accumulation of capital and an increase in risk.
The platform also addresses problems emanating from reducing transaction costs by looking at the reliability of off-chain scaling solutions when dealing with large capital amounts. This can even be through the adoption of a layer-2 solution.
Union and BlockScience
To provide a comprehensive DeFi-focused product, Union and BlockScience entered into a strategic partnership. BlockScience is active in the blockchain scene, where it engineers complex systems to drive a sustainable digital currency economy.
Led by Zargham, the firm is experienced in turning theoretical cryptocurrency-powered networks into usable systems. The company has worked with Ocean Protocol, a platform that enables the creation of marketplaces that allow the publishing, exchange, and consumption of data without compromising security and/or privacy.
Other companies it has worked with include Balancer, a platform for automated market making supporting multiple coins. Also, it has worked with The Graph, a system for building decentralized applications (Dapps) on the Ethereum blockchain.
By partnering with BlockScience, Union seeks to enhance its insurance models, pricing, and other economic designs. The two also collaborate on research and development. The partnership saw Zargham, BlockScience’s CEO, join the Union team as a technical advisor. However, the two have been collaborating on various projects since 2017.
Conclusion
The DeFi adoption wheels are spinning slowly due to the high costs of transactions, the insurance models used in the space, and scalability issues on the Ethereum network. Although DeFi protocols are using other blockchain platforms such as NEO, the ETH-powered network still accounts for the highest number of DeFi-based products.
The high cost of gas has caused small capital holders to give these protocols a wide berth. Union addresses these issues by first addressing the high cost of transactions when a DeFi user wants to re-deploy their capital from one strategy to another. This levels the ground for both small and large capital holders.
Furthermore, by insuring the entire path instead of just funds in a smart contract, Union enhances confidence when interacting with DeFi networks. A collaboration with BlockScience indicates a platform determined to remove imperfections in the DeFi markets.
