What Is A Universal Money Address (UMA)?

Bitcoin UMA

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The Bitcoin landscape has grown exponentially in recent years, with more and more investors, institutions, and businesses entering the space. While you can still use Bitcoin Core as your wallet today with your node, as always, new software developers and companies have taken it upon themselves to create wallets catered to different markets.

Today, we have Bitcoin wallets focused on privacy; some focused on Lightning or Liquid, and others concentrated on eCash or multi-functional wallets that offer access to different rails and assets like stablecoins.

As Bitcoin expands and wallets focus on their niche, there has been a growing issue with interoperability, making it hard for the average person to interact with the network. The need for standardisation in the industry has created challenges for the widespread adoption of Bitcoin.

The average person doesn’t want to deal with all the complexity of creating multiple addresses or dealing with different protocols; all they want to do is transfer funds from one person to another with limited friction.

One company aiming to offer up a solution is Lightspark, which introduced the Universal Money Address (UMA) standard that aims to simplify sending, receiving, and storing Bitcoin and other digital assets.

What is Universal Money Address (UMA)?

Universal Money Address (UMA) is an open-source standard that enables seamless interaction via the Bitcoin network, allowing individuals and traditional financial systems to transfer funds quickly. 

UMA is built on top of the Lightning Network (LN), a second-layer payment protocol and uses the concept of Lightning Addresses as the base for its service. 

By having a universally recognised address, UMA can be used for sending and receiving traditional currencies and Bitcoin. It eliminates the need to have IBAN or long and unfriendly Bitcoin addresses. 

How does UMA work?

UMA operates by creating a universal money address (UMA) for each digital asset, which serves as a single, consistent identifier for the asset across all blockchain networks and traditional financial systems. This means that users can send and receive digital assets using a single UMA, regardless of the network or wallet they are using.

For example, if a user wants to send Bitcoin (BTC) to a friend who uses a different wallet or blockchain network, they can use their friend’s UMA to send the BTC rather than having to worry about the technical details of the different networks or assets being sent.

If you had an UMA address that only accepts Bitcoin and someone sends you dollars, no problem, the payment will still be processed and you will receive the funds in the medium you prefer.

To use UMA, users need to create a UMA address, which is a unique identifier that can be used to send and receive any type of asset. Once a user has created a UMA address, they can share it with anyone in the world, regardless of whether they are using the same wallet or exchange.

When a user wants to send money to another user, they need to enter the recipient’s UMA address and the amount of money they want to send. The transaction will then be processed over the Lightning Network, and the recipient will receive the funds in real-time.

What are the benefits of UMA?

Benefits of UMA for centralised exchanges, software wallets, digital asset custodians, and banks:

Simplified user experience

UMA eliminates the need for users to manage multiple wallet addresses and private keys, making it easier for them to interact with the DeFi ecosystem and Bitcoin. It is ideal for novice users who want to experience Bitcoin Rails but aren’t ready for the total sovereign money experience.

Increased security

By using a single UMA for all digital assets, users can reduce the risk of losing assets due to forgotten passwords or compromised private keys.


UMA enables seamless interaction between different blockchain networks and traditional financial systems, opening up new investment opportunities. 


UMA transactions are processed over the Lightning Network, which means that they are settled instantly anywhere in the world. 


UMA transactions are very inexpensive, typically costing less than a penny as they run via the Lightning network, so users would pay the current routing fees charged by nodes in the path along with any additional fees depending on the gateway they’re using, such as a bank or custodial wallet provider.  

Global reach

UMA can be used to send and receive money to anyone in the world, regardless of their location; users can send money to any service provider that is UMA enabled or to the wider Bitcoin and Lightning Network. 


UMA can be used to send and receive any type of asset, including fiat currencies, stablecoins, Taproot assets, and even tokenised real-world assets.

Who would benefit from UMA?

  • Centralised exchanges: Centralised exchanges could use UMA to allow users to deposit and withdraw fiat currencies and cryptocurrencies using a single address. This would make it easier for users to move their money between different exchanges and wallets.
  • Software wallets: Software wallets could use UMA to allow users to send and receive money to and from other users without having to worry about the underlying blockchain technology. This would make it easier for users to send and receive money, regardless of their technical expertise.
  • Digital asset custodians: Digital asset custodians could use UMA to allow their clients to send and receive money without having to reveal their private keys. This would improve the security of their clients’ funds.
  • Banks: Banks could use UMA to offer their customers a new way to send and receive money that is faster, cheaper, and more global than traditional payment methods. This would give banks a competitive advantage in the market.

Why would institutions find the adoption of the UMA standard valuable?

The adoption of the UMA standard would be valuable to centralised exchanges, software wallets, digital asset custodians, and banks for several reasons, including:

  • Improved customer experience: UMA would make it easier for users to send and receive money, regardless of the wallet or exchange they are using. This would lead to a more seamless and efficient customer experience.
  • Reduced costs: UMA would allow exchanges and other financial institutions to reduce the costs associated with processing payments.
  • Increased revenue: UMA could help exchanges and other financial institutions to attract new customers and increase their revenue.
  • Compliance: UMA can be used to implement compliance features such as KYC/AML checks and sanctions screening. This would make it easier for financial institutions to comply with regulatory requirements.

The adoption of the UMA standard has the potential to improve the way that money is sent and received around the world, reducing costs and giving individuals access to cheaper financial transactions. UMA offers several benefits over traditional payment methods, such as speed, cost, global reach, flexibility, instant settlement and no credit risk. 

Adoption of UMA?

Xapo Bank seems to be the first to adopt the standard, while companies like Bakkt, Bitnob, Coins.ph, Foxbit Group, Ripio, and Zero Hash have all announced their plans to offer UMAs to their customers in 45+ countries worldwide.

What is the downside of UMA?

When it comes to Bitcoin, there are no solutions, only trade-offs, and when you opt for convenience, you give up certain privacies and freedoms. UMA would be no different as it will have a KYC component to it, allowing participants who support UMA to capture data on their users and match their transactions with their accounts. 

UMA could also support chain analytics firms‘ data to either feed these tracking services with information or request data to check and possibly flag certain transactions so these UMA entities remain compliant with their government. 

UMA could become a KYC-walled garden depending on how strict enforcement is by governments; for example, if a country is deemed unfriendly, UMA transactions could stop routing to UMA addresses from that region.  

Do your own research.

If you want to learn more about UMA, use this article as a jumping-off point and don’t trust what we say as the final say. Take the time to research, check out their official resources below or review other articles and videos tackling the topic.

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice. It is for educational and entertainment purposes only. As of the time posting, the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency, as all investments contain risk. All opinions expressed in these articles are my own and are in no way a reflection of the opinions of The Bitcoin Manual

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