Union Finance is providing a tailored solution which will provide protection from risks and reduce costs in decentralised finance (DeFi).
What is Union Finance?
Union Finance is a technology platform that combines bundled protection and a liquid secondary market with a multi-token model. The Union platform guarantees full-stack DeFi protection to all users as it seeks to reduce the risks and cost within DeFi ranging from Layer-1, smart contract, transaction completion risks, and exposure.
Since its introduction, Union finance has had a considerable impact in the cryptocurrency space and is composed of experts with years of experience in their respective sectors. Union’s protocol offers a unique combination of traditional insurance and the blockchain’s tremendous efficiency through its broad coverage and costs-savings model specific to the DeFi sector’s needs.
Similarities With Traditional Insurance
Furthermore, Union’s algorithm addresses the apparent break between DeFi and CeFi unlike any other blockchain-based solutions as it provides protection to various layers of coverage and segregated underwriter exposure, with a multi-token protocol that cleanly separates governance from the market dynamics of protection buying and writing.
Similar to traditional insurance companies, the Union Protocol prides itself on total protection and coverage under their blockchain-based bundled insurance packages. However, the platform takes it further, by utilizing the blockchain concept of decentralization, freeing the platform from “members only” models and KYC requirements. Furthermore, Union offers an effective governance process to safeguard the validity of claims and the solvency of pools to meet coverage applications.
Union’s team also offers a secondary market enabling the management of DeFi-related risks which facilitates the protection of traders and protection writers within the DeFi ecosystem. Additionally, this frees up capital and distributes risk, allowing the DeFi sector to scale more efficiently while reflecting the current market trends.
The blockchain solution has a distinct economic model that has sustainably grown the decentralized ecosystem, along with a capital and pricing model that balances the supply and demand curves while adapting dynamically to economical conditions set by the market and keeping transparent reporting of financial and risk key performance indicators (KPIs) to create trust and increase adoption of the protocol.
Overall, Union Finance’s DeFi protection platform is managed through a three-token system comprised of the UNN, uUNN, and pUNN tokens.
UNN is the core token of the financing platform as it is used for governance purposes. UNN users are granted voting rights within the company, giving them influence on protection claims and related conflict resolution protocols, adjusting risk parameters, and adjusting incentive programs, etc.
uUNN and pUNN Tokens
As for the uUNN token, it is used by clients of the platform and protection buyers enabling them to impact the platform’s protection policies. The pUNN token on the other hand is given to writers of the protection, representing a percent share of the protection pool that the writer is powering.
uUNN and pUNN tokens are only available on Union’s secondary market, which guarantees the separation of governance tokens from protection tokens, preventing a conflict of interest within the platform.
Additionally, through the three-token based system, Union finance enables users to benefit from a dynamic and unique pricing model for the protection premium that provides an efficient and real-time price discovery mechanism, as well as a capital model that adjusts leverage, which maximizes solvency of protection pools while providing returns through surplus capital. Furthermore, a multi-layer governance, claim, and challenge mechanism ensures all operations are handled fairly and transparently.
Key Components of Union Finance
A protection contract is automatically generated as a buyer purchases a protection product(s) on the platform. Upon purchase, each contract specifies the:
- type of protection – this identifies which protection pool writes the protection and in return, earns the premium;
- the cover amount;
- the term of the insurance (start date/end date); and
- the premium level.
The purchase of the protection contract is confirmed when buyers receive uUNN tokens which demonstrate their right to the token protection policy. Then, the protection protocol will begin later after the premium is deposited or the start date of the protection contract. Buyers who stake UNN tokens through reliable decentralized exchanges (DEX) like Uniswap will receive a discount in the protection premium.
The capital model is a fundamental component that optimizes the leverage of protection writers, locking capital to meet solvency based on stringent standards used in insurance and finance while providing economic incentives that attract protection writers and help fund ecosystem development. Additionally, protection writers can use their pUNN tokens and stake for more UNN, enabling them to share in a small portion of UNN that accrues every block.
UNN holders can stake their holdings to earn additional UNN through liquidity mining, which is split into two distinct categories; liquidity providers and locked tokens for governance purposes. Union will soon allow UNN holders to provide liquidity on different DeFI ecosystems such as Uniswap. As for the second category, UNN users will have control over decisions regarding the future of the UNN token through the decentralized governance process.
Union Finance’s arrival to the DeFi sector came at a time when the potential risks and problems DeFi users have been facing on a daily basis have become too overwhelming. Thankfully, the platform simultaneously manages to resolve those risks through its distinct ecosystem and protection products.
Union Finance protocol has the potential to elevate the DeFi sector by further impacting and empowering investors within the blockchain, as it decreases the barriers to entry for retail users and lays the foundation for institutional investors, thereby creating a trustworthy DeFi ecosystem.
The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur.