What is Mirror Protocol?
Mirror is the first synthetic assets protocol to watch the price of options, futures, ETFs, and other conventional financial assets, bridging the gap between crypto and traditional markets.
Globally, US equities are a rather enticing asset class, but entry to the $36.3 trillion industry is limited. Mirror addresses this issue by allowing the creation of synthetic assets known as Mirrored Assets (mAssets), which “mirror” the market action of real-world assets by reflecting exchange rates on-chain. Traders will use this decentralized representation to gain price exposure to real-world assets that they would not otherwise have access to.
How does Mirror Protocol work?
The Mirror Protocol guarantees that everyone, everywhere in the world, would be able to exchange equities (currently US equities) 24 hours a day, 7 days a week. The project accomplishes this by producing synthetic properties, called Mirror Assets (mAssets).
It was developed on the Terra Network and uses smart contracts to control it. Any mAsset developed, by design, is intended to mimic the price behavior of the underlying represented real-world commodity.
Anyone in the world might, for example, trade in synthetic replicated shares of Tesla 24 hours a day, 7 days a week from anywhere in the world, at the same price as the real Tesla stock. In a permissionless environment, the blockchain secures all trade.
This is a rather powerful creation, particularly in light of what happened at the Robinhood exchange in early 2021.
The Mirror procedure generates mAssets that are virtual copies of their real-life equivalents. They have the same price as the underlying assets and may be exchanged on secondary markets in the same way.
Terra’s Terraswap AMM and Ethereum’s Uniswap are two instances. The mAssets produced at this time are similar to big U.S. equities and ETFs, although further assets are expected in the future. The website, as well as a complete list of publicly accessible properties, can be found here.
mAssets may be stored in fractional quantities and quickly exchanged as blockchain tokens while ensuring free access and censorship resistance. Unlike US equities, which have market hours that conform to New York City’s time zone, mAssets have unlimited trading hours.
Existing securities, such as yield-bearing stocks, may also be combined to create new derivatives (imagine if your Apple stock could beget more Apple stock). ETFs with complex, real-time balance against variables like prestige, as well as local environment futures for betting or hedging, are examples of tokens that could be minted using Mirror.
To mint mAssets, an issuer must put up more than 150 percent of the current asset valuation as leverage in Terra stablecoins or more than 200 percent in other mAssets. Mirror is far more capital-efficient than other protocols that need a 700 percent collateral ratio.
mAssets use a decentralized market oracle to monitor the price of the underlying commodity (for example, Apple stock or gold).
The oracle updates every 6 seconds, which is far quicker than the Ethereum-based protocols’ sluggish execution. Traders are incentivized to buy / sell the commodity to mint / burn in order to demand the collateral as the price of the mAsset deviates greatly from the primary market.
Uniswap and Terraswap, both decentralized markets, have mAssets listed and can be exchanged. MIR investors will gain 0.25 percent from trading commissions by applying the Mirror governance token—MIR—to liquidity pools.
The issuer would burn the same volume of mAssets provided to burn mAssets, which results in the recovery of the previously locked Terra stablecoin collateral.
What is the History of Mirror Protocol?
Terraform Labs developed Mirror Finance, which operates on the Terra Network.
Terraform Labs, located in South Korea, was founded by Do Kwon and Daniel Shin in January 2018. They quickly launched the stablecoin LUNA after receiving $32 million in funding from major venture capital companies such as Polychain Capital, Pantera Capital, and Coinbase Ventures.
Terra Money, which was the inspiration for Mirror, was developed by Terraform Labs.
They also established the Terra Network, which was meant to be a global open payment framework.
It has low transaction costs and can complete a transaction in as little as 6 seconds. Although it has yet to gain momentum in Europe and the Americas, it now has over 2 million monthly unique users and $2 billion in monthly transaction amounts.
The majority of these are made via CHAI, a South Korean payment network, and MemePay, a Mongolian payment platform. Among stablecoins, the LUNA token is unusual in that it distributes yield to its investors.
The processing costs, which are returned in full to LUNA holders, provide the yield. The Terra Money whitepaper contains more details.
How do I hold Mirror Protocol?
Mirror Protocol can be held on Terra Station, the Terra Network wallet.