A Universal Money Address (UMA) is an open-source P2P payment standard. It uses the Bitcoin Lightning Network and Lightspark is the main company that offers it. However, it can also function without Lightspark.
UMAs allow you to send crypto and fiat around like emails. They claim that they are compliant and added a KYC procedure before you can use their service. So, let’s take a look at what UMA has to offer. We also look at some criticism of the Universal Money Address project.
How Do UMAs Work?
As already mentioned, UMAs work as email addresses. However, they send money instead of text. David Marcus, from the X post below, developed the UMAs. His company Lightspark uses them to send crypto and money around. However, other protocols can also use UMAs.
Open sourcing the Universal Money Address (UMA) standard. Money needs to move like email, so we’ve extended Lightning and LNURL to support compliance and FX. Users will be able to send/receive fiat & crypto via their UMA-enabled exchange, wallet, or bank. https://t.co/zKuydqRH7g pic.twitter.com/ye7PWsGMRI
— David Marcus (@davidmarcus) October 23, 2023
Sending fiat via a bank is expensive and most often time intensive. On the other hand, crypto payments are fast. Depending on the network, transaction fees can also be cheap. UMAs uses the Bitcoin Lightning Network. That’s like a layer 2 but built on top of Bitcoin.
So, UMAs allow for crypto and fiat payments around the world. Fast, cheap, and secure. Since it’s built on a blockchain, it’s open 24/7. Lightspark claims that you can use any of your favorite wallets, exchanges, or banks. These entities only need to integrate UMAs and they’re operable.
The UMA standard allows for human-readable addresses. See the picture below. Payments are also in real-time. So, it increases the options that the Lightning Network and LNURL offer. LNURL is part of the internet’s standard communication protocol, HTTP. We all know this from URL addresses. Well, you can find this LNURL on top of the HTTP. This makes sure that Lightning clients function and work in the Lightning Network. For example, communicating, executing, or coordinating various tasks. As long as you have a UMA-enabled wallet, you can send funds to someone.
As Lightspark’s website states, “Like email, but for money”. Furthermore, UMAs are compliant. They can also support fiat FX. The sender must pass a KYC procedure. This is the ‘Know Your Customer’ procedure. For instance, you need to show some form of government-issued ID and take a picture of your face.
Features and Benefits of a Universal Money Address
Some main features and benefits of using a Universal Money Address are that it is fast and low cost. So, you start with setting up your or claiming a personalized Universal Money Address. You can do so by choosing your preferred wallet, bank, or exchange. During setup, you can pick your preferred currency. So, whenever you receive payments, they will be in this currency.
However, UMA’s are also interoperable, so you can send P2P payments. For these, you don’t need another platform. The receiver only needs a UMA-enabled wallet. Even if they don’t have such a UMA-enabled wallet, you can send them funds. However, they need to set up their own UMA to get their hands on the received assets. This leads us to some benefits, for example:
- Low cost
- Available 24/7
- Personalized addresses
Currently, UMA appears to operate in 47 countries. On the UMA website is a list of available companies that offer a Universal Money Address in your country. It shows that the Xapo Bank operates in 42 of the 47 UMA-friendly countries. You can find it on the bottom of their webpage. See the picture below.
Source: Universal Money Address website
Criticism on UMAs
The main criticism of UMAs seems that it’s not the novel invention Universal Money Address makes of it. The BitcoinSV chain already had ‘Paymail’. That’s a similar service. You could also argue that using Ethereum and Visa services would open up a larger audience.
Furthermore, it’s not permissionless or censorship-resistant. Many X users are also adverse to the KYC procedure. It goes against what Bitcoin stands for. The UMA compliance is also questioned. Which leads to centralization as another concern related to compliance. Many Bitcoin users prefer privacy to KYC.
The Universal Money Address or UMA allows you to send crypto or fiat like an email. For this, it uses the Bitcoin Lightning Network. One of the points of criticism is the use of a KYC procedure. For many Bitcoin users, this goes against the principles of Bitcoin.
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