Decentralized finance (DeFi) is one of the main cornerstones of the cryptocurrency ecosystem. While DeFi has witnessed a massive influx of capital and rising demand, it also has seen problems like high gas fees and smart contract exploits.
Union Finance is venturing to address these issues and bridge the gap between CeFi and DeFi.
The project offers a decentralized protection platform with no KYC requirements. The project also features:
- The UNN token
- $uUNN (the protection policy token)
- $pUNN (the protection pool token)
- $rUNN (the rewards token)
- hUNNy Badger NFTs
- C-OP (Collateral Optimization and Volatility Protection)
- U-CDS (UNION Crypto Default Swaps)
The native token, $UNN, provides several utilities to its holders. Its supply is finite and subject to deflationary pressure.
The project launched $UNN via an entity incorporated in the Cayman Islands. The project’s website and other functionalities are administered via an entity established in Panama.
The project is currently stagnating, and its product has not seen traction. Well-known data providers do not track product-related metrics. The project token $UNN has seen minuscule activity on exchanges driving negative sentiment in the community.
Our researchers gave Union Finance a final rating of D. The rating scale is available at the end of this report.
PRODUCT & COMPANY DESCRIPTION
Introduction to Union Finance
UNION Finance is a non-KYC peer-to-peer permissionless protection marketplace. The UNION Protocol Foundation is seeking to enable the development of tools and software that introduce intelligent, non-monopolistic intermediary functions, simplifying access to the DeFi ecosystem while reducing risk and cost for its participants (ref. 1).
The core motivation for building the Union Finance ecosystem is increasing composability and reducing friction. The ecosystem addresses the issues of high gas costs by:
- Commoditizing demand for complex functions.
- Supplying lower collateral coverage.
- Decreasing transaction urgency for gas.
The platform’s notable features include:
- Bundled protection.
- A decentralized protection platform without KYC requirements.
- A decentralized secondary market.
- Multi-token protocol (ref. 2).
Illustration of the bundled protection. Source: Whitepaper
The platform will provide the following protocol components to achieve the above features:
- An economic model: aimed at rewarding and sustainability.
- A capital model: effectively utilizing capital while maintaining solvency.
- A pricing model: balance the supply and demand curves while dynamically adjusting to macro conditions.
- A suite of products: targetting evolving DeFi market.
- Governance process: including incentives for governance.
- Reporting: aimed at transparency (ref. 3).
The ecosystem currently includes the following elements:
Union Finance has published a whitepaper outlining essential topics relevant to the project, including economics, risk factors, and the capital model. However, the whitepaper does not fully explain tokenomics. The paper is reasonably detailed and most suited to an audience with an advanced DLT/blockchain understanding level. However, there is a blog post addressing additional aspects related to tokenomics.
Interested readers can explore Union Finance’s Knowledge Center, which has several educational blog posts related to DeFi and Union Finance. The project also regularly posts product updates on Medium (ref. 7).
Union’s Project Lead confirmed that the platform is on the mainnet, and the codebase is deployed on two networks (Ethereum and Avalanche). Besides those two, it’s also possible to launch the project’s app on Polygon and IoTeX. The app offers buyer protection, seller protection, and claim protection. However, Union’s TVL is not tracked by any third-party data providers.
Current State of Affairs
Understandably, the project is currently in a state of stagnation. Some of the key takeaways are as follows:
There is no evidence that Union’s product has gained adoption. As mentioned earlier, the project is not tracked by any data providers. The team’s efforts to integrate with multiple networks do not seem to generate results. Given the context, the project’s Product-Market-Fit aspect is uncertain.
The social media presence of the project is witnessing a deteriorating trend. The ongoing discussions on its Telegram are also centered around uncertainties about the project’s existence and future direction. This situation could be a manifestation that the project severely lacked on the part of marketing.
The UNN token has plummetted by about 97% from its all-time-high levels. On the other hand, the token does not have sufficient liquidity on exchanges. The total market capitalization of the project is around $350k at present. Notably, the project has raised more than $3 million. To add to that, AscendEx has delisted $UNN recently.
Whether the project could emerge from this state is heavily dependent on many areas of importance.
MARKET CONDITIONS AND COMPETITION
Even though the market is still reeling from the Terra LUNA collapse, there are also encouraging signs. For example, despite the economic downturn, DEX volume in May was higher than in the last three months.
DEX Volume. Source: The Block
The number of total DeFi users has been steadily increasing and is not showing signs of slowing down.
Total DeFi users over time. Source: Dune
Union Finance faces competition from multiple decentralized insurance protocols with unique advantages and disadvantages to users. As per data provided by DefiLlama, currently, there are 19 tracked insurance protocols in the market. These protocols hold a combined Total Value Locked (TVL) of $689.27 million (as of June 7th, 2022). There are also other untracked projects like NAYMS that have been under development for quite some time.
There is a distinct demand and a handful of working models progressing rapidly. More particularly, four different insurance platforms represent the primary types of insurance provided to DeFi users. These platforms are optimal for succinctly introducing governance, the economic models, and the kinds of coverage granted to DeFi users. The four platforms are the following:
- Nexus Mutual — decentralized KYC insurance mutual: Nexus Mutual is a well-established insurance protocol with a track record of meeting claims.
- yInsure (underwritten by Nexus Mutual) — decentralized no-KYC insurance mutual: yInsure has been endorsed by Andre Cronje, the founder of Yearn Finance. yInsure made it possible for users of yVault to gain coverage underwritten by Nexus Mutual without KYC.
- Opyn – decentralized derivatives options pricing: Opyn is developed on Convexity. While it’s not an exact fit for insurance, there are facets of options that can be used to provide protection contracts.
- Nsure — decentralized no-KYC market-traded shareholder insurance: Nsure uses a decentralized insurance model and incorporates a more classical shareholder-style structure (ref. 8).
How is the project different from its competitors?
The main features differentiating Union Finance from the competition are:
- No KYC requirements: Unlike Nexus Mutual, which requires onerous KYC requirements for all members, Union Finance has no KYC requirements.
- Bundled protection: Union Finance is not offering only smart contract protection, as is the case with Nexus Mutual and Nsure. The project’s platform features different layers of coverage and segregated underwriter exposure, covering smart contract risk and layer-1 risk, exposure risk, and transaction completion risk (ref. 2).
Union Finance is not entirely open-source. The protocol is open-source, while the models and data science employed within the protocol are subject to licensing and are proprietary (Source: Telegram). The source code for the contracts is hosted on GitHub. The GitHub account only publicly shows three repositories. There have been no commits or updates on those repositories for at least a year.
Union Finance is currently offering two products:
- C-OP (Collateral Optimization and Volatility Protection): C-OP decreases the risk of holding cryptocurrencies for extended periods. These policies can enable downside protection for the covered asset.
- U-CDS (UNION Crypto Default Swaps): U-CDS protects against event risk. The policies are priced against the odds of an adverse event, including rug-pulls, smart contract hacks, and oracle attacks (ref. 4).
Union Finance runs on Ethereum, Avalanche, Polygon, and IoTeX.
A security assessment has been done by CertiK (available here). This assessment provides an in-depth analysis of pieces of source code submitted by Union Finance. Certik found 21 issues, of which two were “Major.” The team has resolved the issues. There is also a $20k bug bounty available via Immunefi (ref. 9).
Audit Findings summary. Source: CertiK
The website lists no roadmap. A blog post lists aspirational targets since Q3 2021 and beyond Q1 2022.
Below are the profiles of the team involved in the Union Finance project. According to Telegram conversations, the total staff strength of Union Finance is between 11 and 15 people.
Michael Beck (ref. 10), Project Leader, is a business strategist and technologist with over 20 years of experience in finance and wealth management.
Jarrod Perry (ref. 11), Operations/Compliance/Legal, has served as a corporate attorney for ten years, gaining extensive experience with startups and early-stage ventures. We note that Union Finance does not identify Jarrod’s previous work history. Moreover, there seems to be no online activity connected to Jarrod.
Antonio Reyes (ref. 12), Head of Marketing & Business Development, has a background spanning more than 30 years of experience in executive positions and founder roles across media, technology, education, and non-profit entities. Antonio does not list his role with Union Finance on his LinkedIn profile. LinkedIn profile.
Manos Megagiannis (ref. 13), Infrastructure & Information Security Officer, has over 30 years of professional experience in information security, software development, and IT. Manos does not list his role with Union Finance on his LinkedIn profile.
Wan Li Zhu (ref. 14) is an experienced Boston-based technology VC, who holds an MBA from Harvard Business School, and a Master’s and Bachelor’s degrees in Electrical Engineering and Computer Science from MIT.
Dr. Michael Zargham (ref. 15), Technical Advisor, is a data and decision systems engineer with over a decade of experience designing and evaluating decentralized algorithms related to business processes. Michael does not list his role with Union Finance on his LinkedIn profile.
David Namdar (ref. 16) is the GP at Coral Capital and CEO of NFT.com. David does not list his role with Union Finance on his LinkedIn profile.
Toby Lewis (ref. 17) has 12 years of analyst experience in institutional finance, venture capital, blockchain, and crypto.
General Comments on the Team & Advisors
The project has only made public a four-member team. Most of the members did not identify their involvement with the project, and as discussed in this report, the team’s contributions to the project are questionable as it appears to be stagnating. From a team perspective, it is a concern whether the current resources are adequate for the team to deliver results. Moreover, at least publicly, there is no indication that the project is hiring additional team members.
During our review period, we did not find evidence that the team members or advisors have taken part in any previous or current illegal projects or controversial projects.
LEGAL AND COMPLIANCE SPECIFICS
The UNION Whitepaper stated the UNN token offering was conducted under UNION Cayman Limited, an exempted company incorporated on The Cayman Islands. Moreover, the development, operation, and maintenance of the UNION decentralized platform were to be done by the Union Protocol Foundation.
Recently, Panama wanted to introduce a bill that would regulate the use of cryptocurrencies. Besides regulating cryptocurrencies, the law would also provide a legal framework for DAOs and STOs (ref. 18). However, the president of Panama has not signed the law as it would need to take sufficient actions against money laundering to get the presidential seal of approval (ref. 19). The Cayman Islands enacted legislation in May 2020 to regulate the cryptocurrency industry. Under the Virtual Asset Service Provider (VASP) Law, digital asset businesses must be registered with the Cayman Islands Monetary Authority (CIMA). Both these jurisdictions are popularly known for being tax havens.
The UNION DAO has voted and executed several proposals. It is noted that only a smaller number of addresses take part in the voting process (ref. 20).
Union Finance has established a limited number of partnerships.
For instance, the project has partnered with Router Protocol, a platform offering single-source risk management solutions and bundled protection. Union Finance will deploy bundled insurance coverage and C-OP instruments for Router Protocol and its users (ref. 21). The homepage also lists Avalanche among the established partnerships. A blog post announcing the collaboration between the two companies can be found here.
Union Finance raised $3.9m in a funding round (ref. 22).
Financial backers of Union Finance. Source: Medium
The project has not appointed legal advisors. The team member responsible for Compliance and Legal matters is Jarrod Perry. His profile is in the Team section.
KYC & AML
The tokens were available in the public sale subject to AML and KYC procedures. The verification process included proof of identity, proof of residency, and liveness (ref. 23). The whitepaper also lists notices for particular purchasers in certain jurisdictions (available here).
The available information indicates that the UNN token (ERC-20) is a utility token. Its utilities are:
- Staking to earn extra $UNN via liquidity mining.
- Providing liquidity on different DEXs and protocols.
- Locking to participate in a decentralized governance process (ref. 24).
- Voting on protection claims and related conflict resolution (ref. 25).
- Unfavorable regulatory action in one or more jurisdictions.
- Tokens may be considered a security in some jurisdictions, or they may be considered in the future to be a security.
- Existing laws on the circulation of securities in particular countries might prohibit the sale of the tokens to the residents of those countries (ref. 26).
The total supply of UNN tokens is 1 billion (ref. 27), and the circulating supply is around 615 million (ref. 28). The project completed its public token sale in 2020.
UNN Token top 100 token holders (as of 08 June 2022). Source: etherscan.io
Currently, the top 100 token holders are in control of ~77% of the total token supply. Uniswap V2 and Balancer Vault have ~18% of the tokens.
$UNN is not listed on any major exchanges. $UNN’s trading liquidity has dwindled markedly, as witnessed by market data. Recently, AscendEX delisted $UNN from its platform.
$UNN’s price has performed very poorly over time. It has lost about 97% of its token price from the all-time-high levels. The current market capitalization of UNN is $350k. It is noteworthy that Union Finance raised more than $3 million via private and public fundraises.
UNN token price/volume chart (as of 08 June 2022). Source: CoinGecko
SOCIAL MEDIA AND VIRALITY
The project is active on Twitter with 10k followers. However, it is noticeable that the total number of followers of its Twitter page has not grown for several months (ref. 29).
The Telegram channel shows a declining trend — dropping to 4.8k from 5.7k in December 2021 — and recent discussions mainly focus on uncertainties around the project’s future (ref. 30).
Union Finance is present on LinkedIn, although no updates have been posted there (ref. 31). The project does not have a Facebook presence.
The project does not have its own YouTube channel. The most popular video featuring the founder of Union Finance has amassed 30k views.
RISKS TO THE PROJECT
The following list of risks is not an exhaustive one. Some risks may be minor or not materialize. Refer to the whitepaper for a detailed list of risks.
- Operating risks: As discussed throughout this report, it is understood that this project has entered a phase of stagnation. The eventual direction of the project is heavily reliant on many operational aspects, including retaining and acquiring human resources, managing reputational or market risks of the UNN token, retaining the excitement of the community, and gaining traction in terms of adoption.
- Risk of theft and hacking: Hackers may attempt to interfere with the digital wallets of users or the platform’s offered smart contracts. Different kinds of attacks may be unleashed, including spoofing, denial of service attacks, Sybil attacks, smurfing, consensus-based attacks, or malware attacks that could result in the theft of tokens.
- Mining attacks: Blockchains used for the tokens, such as the Ethereum blockchain, are susceptible to mining attacks, including but not limited to double-spend attacks, “selfish-mining” attacks, majority mining power attacks, and race condition attacks. Any successfully executed attacks present a risk to tokens.
- Breakthroughs in cryptography: Advances in cryptography, or technical advances like the development of quantum computers, could pose risks to tokens and result in the loss or theft of tokens.
- Regulatory/Legal Risks: The occurrence of regulatory inquiries or regulatory actions could restrict or limit the project’s progress. Moreover, evolving or new laws and regulations in the United States or elsewhere may negatively affect the project. The project’s ability to comply or not comply with these new laws or regulations could have financial or reputational risks involved. Moreover, any investor lawsuits could also be detrimental to the project’s future.
Everything you see in this report is the aggregate result of an extensive research process carried out by a distributed team of researchers and crypto enthusiasts around the world. The process consists of 60 questions divided into three phases. Researchers are called to answer these questions about a project, while providing links or screenshots as evidence to support their answers. For every answer, they also provide a rating from zero to ten. The average of their ratings is detailed below.
Our researchers gave Union Finance a final rating of D.
This Report is for informational purposes only and/or all or any of its content thereof, should not, may not and will not be taken to constitute, either as a whole or in part, any investment advice or recommendation or similar, regulated, or authorized advice, and D-Core by producing, disseminating, giving away, or making available this Report does not, should not, may not and will not be taken to advise on investments, or carry out any similar activity, or any regulated activity or any other authorized activity. D-Core is not authorized by the Financial Conduct Authority or by any other competent EU or elsewhere or otherwise competent authority to carry out any regulated activities and/or any activities within the scope of these authorities’ competence.
D-Core excludes and disclaims all liability and/or responsibility whatsoever and/or howsoever caused, arising out of any actions, or omissions taken, or made by any authorized and/or other recipient of this Report in reliance on, or arising out of, or in connection with any or all content of this Report. Any authorized and/or other recipient of this Report acknowledges, accepts and agrees that they carry out their own independent research and act in their own sole risk in reading or using any or all information contained in this Report. In any event, recipients of this Report are urged to seek professional advice before making any potential investment decision in relation to the project described herein. Any authorized and/or other recipient of this Report accepts this Disclaimer in full. For the avoidance of doubt, this Disclaimer is binding against any recipient of this Report whatsoever.
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