Universal Protocol

Introduction

The term “utility tokens” made waves following the ICO craze of 2017 that saw the overall market cap of the crypto space explode to unexpected (and untenable) levels. Initial Coin Offerings, where projects crowdsourced funds from investors to fund their projects, on the notion that the token would rise in value over time, accounted for some of the most lucrative crowdsourced fundraises in history — such as Filecoin’s $257 million ICO selling out in minutes.

The hype eventually faded, and investor sentiment returned to earth from its meteoric levels, but the promise of utility tokens remained. At their core, utility tokens began as token standards on Ethereum, primarily the ERC-20 standard. The tokens are fungible and standardized with virtually all Ethereum wallet interfaces and can be sent anywhere on the Ethereum network.

However, with the onset of new smart contracts networks like Cosmos and Tezos, the idea of utility tokens expanded to be exchangeable with other network tokens via bridges, atomic swaps, and other clever innovations. But the independent networks still need a form of mesh to hold them together, enabling users to seamlessly port value across networks. This is opposed to isolating value transfer intra-network, even if the network is language-agnostic, unlike Ethereum.

That’s where the concept of the Universal Protocol was produced, and the Universal Protocol Token (UPT) plays a critical role in the overall utility of the network.

Utility Tokens — A Misunderstood Narrative

Utility tokens are consistently disparaged among many crypto market participants stemming from their poor track record when you tie them to the litany of failed ICO projects over the last several years. Viewed as little more than cash grabs among some circles, utility tokens may have formerly been tools for deception, but the core idea is more robust than meets the eye.

It wouldn’t be forthright not to admit how many utility tokens were ill-conceived over the years, but some niche cases have found sustained use cases.

For example, exchange tokens fall under the nebulous umbrella of “utility tokens” that function as mediums for traders on major exchanges to reduce their trading fees, voting on token listings, participate in competitions, and (hopefully) accrue value over time. Binance’s BNB token is the most eminent example, having soared more than 37,000 percent in price since its inception as the exchange has become an industry powerhouse.

The exchange token model has translated well to the world of DeFi too. Many native tokens of DeFi platforms are explicitly designed as incentive vehicles for reducing costs of transactions, increasing interest yield on deposits (e.g., Celsius Network), and most importantly, participating in governance processes of networks or applications.

As the wheat has separated from the chaff, utility tokens today (for the most part) don’t pretend to be something they’re not — securities. Much of that has to do with the regulatory fallout of the ICO craze, but it’s also because projects are quickly learning what works and what doesn’t work.

In the context of the Universal Protocol, the UPT token performs an explicit utility — facilitating the transfer of value between networks. And that’s a powerful incentive when you coalesce a variety of digital assets under a single, standardized network.

What is Universal Protocol

The Universal Protocol Platform is a culmination of the efforts of an alliance of like-minded cryptocurrency companies and blockchain pioneers (“UP Alliance”). Our ambition is to help decentralized ledger technology achieve mainstream adoption as a universal method for transferring value over the internet. The project addresses two major challenges facing the blockchain industry:

• The lack of a common language required for optimal innovation and mass adoption.

• The lack of conventional user safeguards characteristic of assets in mature financial markets.

• The lack of focus on practical products with mass-market utility.

The Universal Protocol Platform is a digital reserve ecosystem that provides value substantiation, investor protection, and interoperability for blockchainbased assets. It makes cryptocurrencies and crypto assets safer to own and easier to convert across networks.

The UP Alliance, a coalition of cryptocurrency companies and blockchain pioneers, is launching the platform to provide users with a more convenient way to access a comprehensive array of assets through a single protocol, and thereby accelerate the adoption of blockchain as a mainstream financial technology.

The Universal Protocol Platform addresses one of the biggest challenges facing blockchain users by allowing the instant and seamless transfer of value across different decentralized networks. Providing a ‘common language’ through which incompatible protocols can ‘reason’ with each other, the platform reduces the time, cost and risk of converting digital assets.

Put simply, the project enables blockchains to ‘talk’ to each other using existing technologies. Unlike alternatives such as atomic swaps and exchanges, the Universal Protocol Platform provides a scalable solution that can be applied across many blockchains rapidly.

The ecosystem will be activated through the creation of the Universal Protocol Token (Symbol: UPT) and a family of Universal Proxy Tokens, each representing a different asset.

The platform’s goal is to facilitate seamless, decentralized conversion of tokenized assets – including commodities, equities, cryptocurrencies and debt.

The UPT Token & Interoperability Costs

The rise of public blockchain networks with standardized communication protocols, such as the IBC in Cosmos, raised the possibility of rapidly, cheaply, and trivially porting value between different networks. While a promising “break the glass ceiling” concept, the idea still faces a major problem — porting value between networks like Cosmos and that of Ethereum, another standalone blockchain.

Cosmos’ iteration of making such a bridge between networks is known as Ethermint. However, not only is the design of Cosmos sophisticated, but Ethermint requires intensive developer labor to introduce — it’s not a practical solution for connecting to other blockchains in the long-term.

That’s why Universal Protocol opted for a more straightforward route, called proxy tokens.

Proxy tokens ostensibly allow any developer to spin up an analog of a specific asset, whether a fiat currency, digital currency, commodity, or equity that is pegged to the real value of that asset. Crucially, however, the token functions on the standardized communication of the Universal Protocol. No more intensive building of bridges between networks; exchanges, retail investors, institutions, and innovators can craft their own tokens that are immediately transferrable with a thriving ecosystem of other tokens.

The UPT utility token operates as the “gas” for exchanging assets on the UP Protocol. For example, if Alice has UPUSD and wants to exchange it for UPBTC with Bob, they would pay a minimal transaction fee in UPT. Proxy tokens are the “conversion layer” of the network that makes any asset compatible in Ethereum’s language, and UPT is the oil for the system’s engine.

Without UPT, the UP Protocol would have no method for precluding spam transactions sent over the network without an inherent cost. If the UP Protocol had relied on a non-native asset (e.g., ETH) to perform the function of the UPT, then the entire concept of proxy tokens on an interoperable network would be moot. Therefore, with the simple heuristic that UPT performs an exclusive utility that allows the UP Protocol to exist as a framework for interoperable digital assets, its use case is entrenched with the network’s value.

There’s a trade-off in every decision, and when it comes to the interoperability of blockchains, the costs are transaction fees. Networks like Cosmos and Polkadot wield native utility tokens to pay intra-network fees. At the same time, the UPT functions as a distinct mechanism for paying both intra-network and inter-network fees since proxy tokens are representations of real-world or digital assets from other systems.

That’s a far cry from BananaCoin’s “utility” within a specious network design, and a manifestation of the need for incentives when digitally porting value between siloed assets. In 2020, we’ve hopefully shed the utility token narrative of the past and moved into the era where tokens play key roles in networks out of necessity — not greed.

Token info

Ticker: UPT

Type: Utility-token

Token price in USD: 1 UPT= 0.01 USD

Accepted currencies: BTC, ETH

Token distribution:

35% - Token Sale

22% - Alliance Partners

25% - Stakeholders

15% - Treasury

3% - Ecosystem Partners

Funds allocation:

50% - Initial Technology Set Up

35% - Engineering and Development

5% - Marketing

5% - Legal and Regulatory

5% - Operations and Administration

The native token of the Universal Protocol Platform ecosystem, UPT represents the most cost-effective and convenient way to buy Universal Tokens since it shares their ERC-20 compatible protocol. This enables the seamless conversion of UPT into any Proxy Token on chain.

Users must hold UPT in order to perform Universal Proxy transactions on the blockchain because all trading fees are payable in UPT only.

UPT will be listed on centralized and decentralized exchanges alike, and may be converted into any Universal Proxy at the prevailing market rate. In essence, UPT plays the role of the most cost-effective gateway into the tokenized asset ecosystem, while simultaneously being the medium that facilitates transactions and collects fees within the UP Platform.

The fungibility of the Universal Protocol Token means that diversifying a digital currency and asset portfolio has never been easier, since UPT acts as a seamless hedging device, enabling users to move between asset classes with speed and dexterity in response to changing market conditions.

Universal Proxy Tokens

Universal Proxy Tokens are an important innovation because they can represent the value of any cryptocurrency (or other asset) and render it accessible and seamlessly convertible through a single blockchain network.

Built on an extension of the ERC-20 Standard, Universal Proxies have embedded smart contracts that use IFTT (If This, Then That) logic to determine the validity of any transaction on-chain. For example, they can interact with the Universal Protocol Platform's issuance contracts [the mechanism by which Universal Proxy Tokens are matched to underlying assets and priced] to calculate how many Universal Litecoins are required to buy one Universal Bitcoin. If the conditions are met, the agreements will execute instant trade and settlement, with the correct number of tokens sent to each party’s Ethereum wallet.

One platform for all assets

At the core of the Universal Protocol Platform's value proposition is the creation of a simple, compliant, and interoperable platform for trading virtually all asset classes in tokenized form on a single blockchain.

The vision of the UP Alliance (see 05.2 below) is that transacting across digital asset platforms should be as easy as navigating across the internet; and its ultimate goal is to develop a fully-decentralized model that enables users to trade tokenized assets 24/7 worldwide, while enjoying all the safeguards expected of mature asset classes.

The Universal Protocol Platform provides the foundational architecture to make this a reality, introducing a highly-integrated asset conversion ecosystem that enables anyone to easily access and convert different forms of digital value, while having the choice of using either decentralized or centralized trading venues. The platform enables a myriad of new blockchain functionalities beyond the limitations of existing networks, including increased cryptocurrency connectivity, spendability, and security.

Similar to the way Web 2.0 changed digital commerce for millions of banks, businesses, and individual users, the Universal Protocol Platform empowers a new generation of digital transactors by combining easy onboarding to the cryptocurrency world with seamless integration between legacy financial institutions and decentralized platforms. Consequently, the Universal Protocol Platform can be thought of as one of many essential components of client infrastructure needed for the creation of Web3.

While the Universal Protocol Platform is initially designed to support integration with applications on Ethereum, in practice the platform can run on any blockchain network that supports smart contracts. The model enables the creation of many previously unattainable exchange pairs (e.g., Universal Bitcoin to Universal Private Equity), expanding user choice far beyond that of offerings available now on centralized or decentralized exchanges.

The first Proxy Tokens to be launched will be UPUSD and UPBTC in March 2019. The UP Alliance then plans to launch UPEUR in Q2 2019, and will then determine the sequence of new Proxy Tokens through regular polling of UPT holders.

On-chain conversion of UPT into Proxy Tokens

UPT holders can buy Universal Bitcoin (and all other Proxy Tokens) using smart contracts on Ethereum to facilitate trustless and cost-efficient on-chain conversion.

The reserve facilitates the transaction by supplying bid and ask pricing for all UPT trading pairs to the Exchange contract. A ‘freshness’ parameter for pricing, and certain reserve protection measures, also determine the feasibility of any transaction.

To buy Universal Tokens with UPT, the user calls the Exchange contract stating the value of Proxy Tokens they wish to buy. The Exchange contract calculates the amount of UPT required based on the current rate for the specific trading pair. The UPT is withdrawn from the user’s wallet, and the Exchange contract instructs the Proxy Token contract to send the right amount of Proxies to the user’s wallet. On-chain or off-chain conversion of any Proxy Token requires payment in UPT, which means users need to hold sufficient UPT to cover both the desired transaction, plus the commission involved. Conversion of UPT into Proxy Tokens will be possible as soon as UPT is listed on exchanges.

To provide sufficient liquidity for on-chain conversion, a float of substantiated Proxy Tokens (already-matched 1:1 with reserve assets) is created at the introduction of every Proxy Token.

Building Necessary Connections

The world of decentralized assets has grown up without any sort of central design philosophy, and that is one of the biggest challenges to adapting decentralized digital assets into a form that could be widely used.

Universal Protocol has addressed these challenges, and it has a number of partnerships that could help digital assets easily penetrate into new markets.

There are always new opportunities emerging in the world of blockchain, and Universal Protocol is worth keeping an eye on.