Hey guys :) I’m back with another comprehensive Q&A piece, this time for a new DeFi protocol that allows the creation of synthetic assets (mAssets) that track the price of real-world assets – Mirror Protocol (MIR).
Mirror Protocol aims to bring the world’s assets to the blockchain with mAssets which are intended to be used as key building blocks in smart contracts in the DeFi ecosystem.
Now, before we dive in, the following piece is similar to my latest articles on Terra (LUNA), Alpha Finance (ALPHA), and Perpetual Protocol (PERP), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Mirror Protocol?
- Who and When Created Mirror Protocol?
- What is the Mirror Token $MIR Used For?
- What are Mirrored Assets?
- How does Mirror Protocol Keep Track of Asset Prices?
- How to Maximize Your Returns with Mirror Protocol?
- Where to store $MIR and mAssets?
- Where to buy and sell $MIR and mAssets
1. What is Mirror Protocol?
Mirror Protocol website homepage
Mirror Protocol, “Mirror” for short, is a decentralized derivative protocol powered by smart contracts on the Terra blockchain network and is made available on Ethereum via the Shuttle Bridge – a Terra-Ethereum bridge.
Mirror enables the creation of synthetic assets called Mirrored Assets (mAssets) which mimic the price behavior of real-world assets and grant intuitive access to global financial markets for disenfranchised users around that world.
mAssets can be any type of traditional asset including equities, commodities, crypto assets, ETF’s, indices, or others. The minting of mAssets is decentralized and is facilitated by users of the network by opening a position and depositing collateral. The protocol ensures that there is always sufficient collateral to cover mAssets (see question 5).
As for trading mAssets, they can be traded through:
- Terraswap - a decentralized protocol for automated liquidity provision on Terra that is open and accessible to all. You can swap and exchange native Terra and CW20 tokens (mAssets) directly from your wallet by connecting with the Terra Station web extension.
- Ethereum - the dominant blockchain protocol powering most DeFi protocols, DEXes, and dapps. You can trade mAssets on Ethereum powered DEXes like Uniswap, Balancer, etc.
Moreover, like mAssets, the Mirror protocol is decentralized and governed by holders of the $MIR token which is minted by the protocol and distributed as a reward to incentivize behavior that secures the ecosystem (see question 3).
As such, Mirror is sufficiently decentralized, censorship-resistant, non-custodial, and is not burdened by variable KYC/AML restrictions. Mirror enables people who have been precluded from specific international markets for various reasons to finally access assets that were inaccessible to them before.
2. Who and When Created Mirror Protocol?
Mirror Protocol founders Daniel Shin and Do Kwon
Prior to creating Mirror, Shin and Kwon founded Terraform Labs and created Terra in January 2018 with the support of the Terra Alliance, a collective of 15 major e-commerce companies in Asia with more than 45 million combined users. They also managed to raise $32 million from prominent firms in crypto like Binance, Arrington XRP, and Polychain Capital.
They worked tirelessly on Terra for two years in an effort to revamp the convoluted and expensive traditional payments value chain by building a cheaper, faster, distributed, and transparent blockchain ecosystem for payments, savings, and more.
Terra has since accomplished a lot, including the powering of payments app CHAI, which has 2 million+ users, and a successful $70 million Series B. With that under their belt, Shin and Kwon along with Terraform Labs announced the rollout of Mirror Protocol in November 2020.
Mirror was created to enable users to gain access and exposure to traditional financial assets and instruments via Terra’s blockchain. It’s a complementary protocol to Terra’s blockchain protocol for stable programmable money and payments.
With Mirror, not only is Terra revolutionizing payments, but they’re revolutionizing the global financial markets as well. As such, the Terra blockchain and Mirror Protocol are enabling disenfranchised users around that world to transact, participate in commerce, and the global financial markets.
3. What is the Mirror Token $MIR Used For?
Mirror Token (MIR) logo
The Mirror Token (MIR) is Mirror Protocol's governance token. $MIR is a Terra native token and is available as a Wrapped ERC-20 token on Ethereum as to interact with Ethereum’s expansive DeFi ecosystem.
$MIR Token Use Cases:
- Governance - voting on and submitting improvement proposals
- Staking - secure the Mirror ecosystem
- Farming - incentivize users to provide liquidity for mAssets
$MIR is primarily a governance token. $MIR token holders can stake their tokens to vote on active polls and make new governance polls. $MIR token holders stake their tokens to propose and vote on important changes to the protocol here.
$MIR is minted by the Mirror protocol and distributed to stakers to incentivize behavior that secures the system. For instance, $MIR rewards are generated from protocol fees when withdrawing collateral from CDP positions within the protocol. ]
Also, whenever a new governance poll is created, a deposit of $MIR tokens must be paid. This $MIR is rewarded to stakers if the poll does not reach the voting quorum.
$MIR is also used to incentivize users to farm yields by staking LP tokens which were minted by providing liquidity for $MIR and mAssets. The $MIR rewarded to these stakers are newly minted through annual inflation that increases the supply until the end of the 4th year.
$MIR Supply and Distribution
The total supply of $MIR is planned to be 370,575,000 $MIR tokens to be distributed over 4 years.
Genesis Token Distribution:
- Airdropped to $UNI holders - 45.1% (167.27M) tokens
- Airdropped to $LUNA stakers - 16.66% (9.15M) tokens
- Allocated to community pool - 66.66% (36.6M) tokens
Final Token Distribution:
- Genesis airdrop to $UNI holders and $LUNA stakers - 4.9% (18.3M) tokens
- Luna staking rewards - 4.9% (18.3M) tokens
- mAsset LP staking rewards - 45.1% (167.27M) tokens
- $MIR LP Staking - 10.4% (38.6M) tokens
- Community Pool - 34.6% (128.1M) tokens
4. What are Mirrored Assets?
Mirrored Assets (mAssets) are synthetic assets that track the price of real-world assets. Said another way, mAssets are blockchain tokens that “mirror” real-world assets by reflecting the exchange prices on-chain.
mAssets can mirror anything from equities to commodities, crypto assets, ETF’s, indices, and more. Currently, Mirror Protocol lists 13 mAssets including mVIXY, mTSLA, mNFLX, mMSFT, mUSO, mSLV, mIAU, mTWTR, mBABA, mAAPL, mGOOGL, mQQQ, and mAMZN.
Trade CW-20 mAssets on Terra.Mirror.Finance
Trade CW-20 mAssets on Terraswap
Trade ERC-20 mAssets on ETH.Mirror.Finance
But why trade mAssets instead of real-world assets?
I’ll tell you why.
Because mAssets give traders the price exposure to real assets in an open, decentralized, censorship-resistant, and non-custodial way. It doesn’t matter where you are or who you are, there are no KYC/AML restrictions to holding and trading these assets and you don’t have to trust a centralized third party or intermediary to get exposure. mAssets bring real-world assets to the blockchain.
mAssets enable fractional ownership so you don’t have to own a full share of TSLA priced at $900 USD. You can spend any amount you want to own a fraction of mTSLA and trade it in the open and decentralized DeFi ecosystem.
Not only that, but you can use mAssets in smart contracts across different DeFi protocols and applications.
For example, Harvest Finance, a leading automated yield farming platform has incorporated mAsset yield farming strategies that are delivering extremely high APYs between 288% to 532% to its users.
Harvest Finance mAsset Yield-Farming Strategies
All in all, Mirror’s mAssets are simply revolutionizing the way people interact, use, and trade traditional real-world assets in the global financial system.
5. How does Mirror Protocol Keep Track of Asset Prices?
Mirror Protocol partners with Band Protocol to track asset prices for mAssets (Source)
Mirror Protocol has integrated Band Protocol’s low-latency and decentralized oracles to provide Mirror with price feeds that update every 30 seconds on the Band Network to ensure the price of a mAsset is pegged to the real asset.
The prices received from Band are used for determining collateral ratios for CDPs and do not affect the mAsset’s trading price on Mirror, Terraswap, Uniswap, or any DEX directly.
The way it works is:
All mAssets are minted by creating a collateralized debt position (CDP) with either TerraUSD (UST) or other mAsset tokens as collateral. If the price of a mAsset rises, the minters of the mAsset are pressured to deposit more collateral to maintain the same collateral ratio.
If a price of a mAsset drifts significantly from the primary market, traders are incentivized to purchase/sell the asset to mint/burn to claim the collateral.
Mirror Protocol smart contracts receive underlying asset prices via Band’s decentralized price oracle and considers these prices valid for 60 seconds. If no new price data is available after the data has expired, Mirror’s CDP operations including mint, burn, deposit and withdrawal will be disabled until the price feed resumes.
Price feeds for traditional assets like stocks are halted when the real-world markets for said assets are closed, but you can still trade these mAssets on Terraswap at any time.
6. How to Maximize Your Returns with Mirror Protocol?
The great thing about Mirror Protocol is that its mAssets are intended to be used as key building blocks in smart contracts in the DeFi ecosystem.
You can maximize your returns with Mirror protocol by using mAssets as collateral in a CDP to mint more mAssets; you can lend them out to earn interest; you can put them to work in automated yield farming strategies, and there are more ways to use them in different DeFi protocols.
Thus far, however, the best way to maximize your returns with Mirror Protocol is through Harvest Finance’s high-yielding automated farm strategies and staking pools.
As seen in the screen capture below, Harvest offers high APYs ranging from ~300% to ~500% for simply staking mAssets.
Harvest Finance mAsset staking pools
How to Earn on Your mAssets with Harvest:
- Get mAssets via minting or off the market via Terraswap, Uniswap, or Mirror
- Become a liquidity provider (LP) of an mAsset pool on Uniswap (let’s say mAAPL-UST pool for this example)
- Automatically receive MIRROR-AAPL LP tokens from uniswap
- Deposit those LP tokens on harvest's homepage to receive fMIRROR-AAPL then stake it here
- Enjoy 367% APY
It’s really that simple. And Mirror’s mAssets are currently providing farmers on Harvest Finance with the highest returns available.
7. Where to store $MIR and mAssets?
Mirror Wallet website homepage
Mirror Protocol (MIR) as a Terra native asset and Mirrored Assets (mAssets) as CW-20 tokens can be stored on the official Mirror Wallet.
The Mirror Wallet allows users to store, invest, and trade cryptocurrencies and mAssets. It also has a built-in fiat on-ramp with Moonpay so you can easily get onboarded to crypto right away. The wallet has simplified security such as biometric or face scan or a 6 digit pin to login.
However, the wallet requires an email to set up and you don’t remain in control of your seed phrase or private key. Therefore, this wallet may only be good for storing smaller amounts of funds as you don’t have full custody of your crypto.
Alternatively, if you hold $MIR or $mAsset versions as ERC-20 tokens, then the best wallets for storing these tokens are non-custodial Web3 wallets that provide seamless access to the best DeFi applications like Uniswap, Harvest Finance, Balancer, etc.
That said since Ethereum has the largest DeFi ecosystem, it’s recommended to use the ERC-20 version of $MIR and $mAssets as they’re fully supported in the Ethereum-DeFi ecosystem and have the most liquidity.
Popular $MIR and $mAsset Wallets (ERC-20) :
- Trust Wallet (mobile)
- Argent (mobile)
- Coinbase Wallet (mobile)
- MyEtherWallet (MEW) (web)
- Metamask (web)
In addition to the above-listed wallets, $MIR and $mAssets can be stored on a variety of other reputable wallets supporting ERC-20 tokens as well as CW-20 tokens.
8. Where to buy and sell $MIR and mAssets
Mirror Protocol (MIR) and mAssets (mUSD, mUSO, mAAPL, etc.) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $MIR and $mAssets is through decentralized and centralized cryptocurrency exchanges.
You can buy and sell MIR and mAssets with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy MIR and mAssets with BTC, ETH, or stablecoins.
- Uniswap - WETH, UST
- Kucoin - USDT, UST
- 1inch Exchange - ETH, USDC, SNOW
- 0x Protocol - WETH
- OKEx - USDT
- Terraswap - LUNA
- Terra.Mirror.Finance - UST, LUNA, mAssets
- Balancer - WETH, USDC, MTA
- 1inch Exchange - ETH
- Uniswap - DAI
In addition to the exchanges listed above, $MIR and $mAssets are also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.