The Two-Token Model
Ultramarkets operates on two complementary tokens with distinct roles:| Token | Role | Purpose |
|---|---|---|
| umUSD | Yield Engine | LP capital earning fees from leveraged trading |
| ULTRA | Security Layer | Stakers backstop the protocol and participate in governance |
This separation ensures that yield generation and protocol security are independently optimized while remaining economically aligned.
Ultra Security Module (USM)
The Ultra Security Module is the protocol’s insurance mechanism. ULTRA holders can stake their tokens in the USM to:- Backstop LP deposits — Provide a safety net if liquidations fail to cover positions
- Earn protocol revenue — Receive a share of trading fees
- Participate in governance — Vote on market listings and protocol parameters
How the USM Works
USM stakers continuously earn a share of protocol fees for providing insurance coverage. This revenue accrues regardless of whether bad debt events occur. However, when traders open leveraged positions, there’s a small risk that rapid price movements could cause a position to become undercollateralized before liquidation completes. If this happens and creates bad debt:- The USM is triggered
- Staked ULTRA is slashed proportionally to cover the deficit
- LP deposits (umUSD holders) are made whole
Staking Rewards
USM stakers earn a share of protocol revenue as compensation for providing this insurance:| Revenue Source | Description |
|---|---|
| Trading Fees | Percentage of fees from position openings |
| Profit Share | Portion of trader profit fees |
| Liquidation Fees | Share of liquidation penalties |
Reward rates depend on total staked ULTRA and protocol trading volume. Higher volume means higher rewards for stakers.
ULTRA Value Mechanisms
1. Revenue Share (USM Staking)
Staking ULTRA in the USM entitles you to a share of protocol fees. This creates direct alignment between token holders and protocol success—more trading activity means higher staker yields.2. Trading Fee Discounts
ULTRA stakers receive reduced trading fees:| Status | Trading Fee |
|---|---|
| Non-staker | Standard rate |
| USM Staker | Discounted rate |
3. Buyback & Burn
A portion of protocol fees is allocated to purchasing ULTRA on the open market and permanently burning it. This creates deflationary pressure that scales with protocol usage.Governance
ULTRA token holders participate in protocol governance, with voting power proportional to their staked balance. Key governance decisions include:Market Listings
Market Listing Process
New prediction markets must pass governance approval before being listed on Ultramarkets. This ensures:
- Quality control — Only legitimate, resolvable markets are listed
- Risk assessment — Community evaluates potential risks of new markets
- Oracle verification — Confirmation of reliable resolution sources
Proposal Submission
Community member submits a market listing proposal with details on the event, resolution criteria, and oracle source.
Protocol Parameters
Governance also controls key protocol parameters:- Fee structures — Trading fees, profit share percentages
- Risk parameters — Leverage limits, liquidation thresholds
- USM configuration — Staking rewards, slashing parameters
- Treasury allocation — Protocol fund usage and distributions
Economic Security
The USM creates a robust economic security model:Aligned Incentives
Stakers earn when the protocol succeeds and lose when it fails—perfect alignment with LP interests.
Scalable Security
As ULTRA value grows with protocol adoption, the security buffer automatically scales.
Market-Driven
Staking yields adjust based on supply and demand, naturally finding equilibrium.
Transparent Risk
All USM parameters and current coverage levels are visible on-chain.
Security Flywheel
The economic model creates a reinforcing cycle:| Step | What Happens | Effect |
|---|---|---|
| 1 | Trading volume generates fees | Revenue enters the system |
| 2 | Fees reward stakers + fund buybacks | Value distributed to ULTRA holders |
| 3 | Higher yields attract more staking | More ULTRA locked in USM |
| 4 | Larger security buffer | Protocol can support more LP capital |
| 5 | More LP capital | More lending capacity for traders |
| 6 | More trading capacity | Cycle repeats with higher volume |
This flywheel ensures that protocol security scales naturally with adoption, without requiring constant parameter adjustments.