Hi fellow #Lunatics, in this text I give a step-by-step overview on how Yield Foundry is going to supercharge DeFi collaborations on Terra by connecting the creative financial architects and the coders of the community to automate the most intricate TeFi strategies, tailored to #Lunatics who believe in the long-term health of the ecosystem.
Since their first strategy (Hedge+) leverages Mirror Protocol, I also give an overview of its mAsset capabilities which are too often forgotten.
Terra Ecosystem
The burgeoning Terra ecosystem is now one of the largest smart contract blockchain ecosystems out there. This is thanks to its elegant decentralized stablecoin (Terra UST) architecture which cannot be censored, its unique collaborative community (#Lunatics), and its emphasis on usability. No other blockchain has a platform like Anchor that yields a stable 20% interest on savings. Transactions are very cheap (in the cents of a dollar range) and its dApps like Terra Station have extremely intuitive UIs.
Mirror Protocol: Stocks for the Masses
Mirror Protocol is one of the OG Dapps built on Terra. It gives any user with some UST (Terra’s decentralized US dollar) and an internet connection the ability to invest or trade in the stock market, without anyone’s consent or supervision (think of Apps like 'e-toro'… ). Mirror Protocol issues tokens that ‘mirror’ the price movements of selected stocks through an ‘Oracle’ (an algorithm that imports live stock market data into the blockchain in real time(ish)).
Most people around the world don’t have access to platforms like ‘e-toro’ to trade major stocks. Besides, these platforms often require your personal data and charge hidden fees. The alternative in many places is to go through private brokers or investment firms, and we all know the middle man has to take a cut. Mirror Protocol requires none of that…
Stocks, welcome to Blockchain
But most importantly, having these ‘synthetic’ stocks in the blockchain means that they can be utilized in DeFi (Decentralized Finance), a realm where the only limitation is the blockchain architecture the platform is built on. DeFi has unprecedented efficiency, offering interest rates and usability well into ‘god mode’, at the expense of being a bit of a wild west, which is why platforms like Yield Foundry are so important, but we will get back to this in a sec…
Supercharged Stocks
Besides being able to buy synthetic stock (also known as mAsset; i.e. Tesla Stock = mTSLA), Mirror also lets you deposit a list of crypto assets (which include mAssets) as collateral to borrow additional synthetic stocks (mAssets), allowing users to take on leverage (i.e. add exposure) or hedge (i.e. add protection) to their position. Examples of collateral include:
- ‘normal’ tokens such as Terra’s stablecoin $UST and $LUNA,
- ‘interest-bearing’ tokens such as $aUST and $LunaX, and
- ‘mAssets’ such as mGOOGLE and mBNB.
Supercharged Stocks
At first glance, this added usability seems an inconsequential improvement over holding some stocks on e-toro, but actually the reality is way more complex. Since these synthetic stocks have a limited supply (as much as is issued/borrowed by Mirror users), their price sometimes deviates from the real stock prices, leading to ‘arbitrage’ opportunities, which is the kind of stuff normally utilized by experienced traders (See image above, where the price of mAPPL is trading at 2.38% that of the real price of the Apple Stock!) . Yet, since blockchain lets developers build on top of Mirror’s code, it is also possible for developers to automate these strategies and make them accessible to even the ‘smoothest-brained’, but will get back to this in a sec.
‘From the Ritz to the Rubble’ (Or $Ruble, more recently)
It’s not all been smooth sailing though: at some point last year, Mirror developement stagnated. It became obvious that Mirror’s governance token $MIR was becoming just another hyperinflating ‘farming’ token, and no one was doing anything about it. To make it worse, certain mercenary users were trying to steal Mirror’s Treasury Reserves by carrying out bogus governance proposals that would ultimately give them access to a ton of money; what a mess…
To cut a long-story short, despite being a Protocol with crazy potential, Mirror’s TVL (Total Value Locked) has been on a steady downfall for the last couple of months. To quote the Arctic Monkeys, it was all going ‘from the ritz to the rubble’.
To the Rescue: The Mirror Steering Committee
You might recall I mentioned that part of Terra’s recent success is that its community is close-knit and ultra collaborative. And this might just be the saving grace of Mirror Protocol, as a number of well-known community big brains got together to form 'The Mirror Steering Committee', a community-initiative to save the protocol (which includes Dr. Cle4an, one of the founders of the Yield-Foundry). Read more about them here.
Supercharged Stocks2
With that out of the way, let’s get back to what it means to have synthetic stocks on blockchain. OG Terra dApp Spectrum Protocol has been auto-compounding synthetic stocks LP positions since mid 2021, making it possible to yield interest from stocks while receiving their own token $SPEC as rewards for doing so! This has been amazing for Terra users (including myself!), and reflects the openness of blockchain, where everyone can build on top of anyone’s open-sourced code.
Yield-Foundry: Community-built Investment Vaults
However, it is clear from listening to community discussions (check out TerraSpaces) that there is so much potential from partnerships, collaborations and just leveraging the collective smartness of the Terra Community (yeah, we do have our local geniuses!).
This is the founders' vision for Yield Foundry: to build a community-run DAO or Decentralized Autonomous Organization (essentially a cooperative built on top of blockchain), that lets these big brainz test, iterate, automate, and monetize the best sustainable strategies possible in Terra as long as they contribute to the long-term success of the ecosystem.
For this, strategies built on Yield Foundry must stray away from price speculation and token dumping to generate yield. The vision is to allow community talent to successfully leverage unique Terra protocols like Mirror and build tailored investments ‘vaults’ that automate complex strategies that are ultimately beneficial to the ecosystem.
Yield-Foundry: Connecting Brainz
So why does this not happen organically? Well, the main issue is that many financially-savvy community members lack the coding skills to build their vaults. By connecting the architects with the builders, the DAO makes these collaborations easy by rewarding the efforts of both the creators and builders with a percentage of the strategy's income. And the more successful the strategy, the more value it will accrue for both makers and users.
In a nutshell, Yield Foundry is building the foundation platform for collaboration on Terra.
The Inaugural ‘Hedge+’ Vault
Before giving full reign to the DAO, the founding team decided to inaugurate Yield-Foundry with its first automated strategy vault that sets the example in terms of quality and vision.
Hedge+ is the first of these vaults and uses a combination of Mirror’s aforementioned capabilities to create a strategy that yields ‘modest’ (30-50% Compounded Interest or APY) while protecting investors from the infamous crypto downsides everyone hears about on the news. As an example, if the held stock loses 99% of its value, the depositor loses only 7% of its deposit. (For detailed explanation, read here).
God is in the details
I am going to stop short of describing the rest of the vaults or touch on any technicalities, including details on the platform’s $YFD token, which you can read about here. After all, the purpose of this text is to describe the narrative from a utility perspective. As the saying goes, “god is in the details”, so if you made it this far I'd suggest you refer to Yield Foundry’s Medium Articles here, its website here and Mirror Protocol’s documents here.
After all, Yield Foundry epitomizes the robust, community-driven ecosystem that Terra is becoming and which all #Lunatics believe in, and using Mirror is only the beginning.
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Also, for an excellent summary of Yield Foundry on Podcast form, I suggest you check out this Terra Spaces recording.
Disclaimer:
None of this content is or should be considered financial or investment advice. I am no financial advisor; I am merely a content writer using freely available information to produce the best OC I can come up with for informative and entertainment purposes.
