Blockchain technology has revolutionized the idea of decentralization by introducing numerous products that can literally replace mainstream services. One of those products is Decentralized Finance which allows the trading of crypto tokens assisted by AMM (Automated Market Maker), eliminating the need for third-party interference.
DeFi is promising, however, it is limited to trading crypto tokens only. One cannot trade real-world assets like stocks using DeFi platforms until Mirror Protocol showed up. Build on Terra, mirror finance broadens the asset exposure for the users by allowing them to invest and trade global stocks, sitting at the comfort of their homes.
It calls for a borderless economy that allows anyone to trade assets without worrying about stringent laws. Having said that, it’s time to dive into the Mirror Protocol and find out, what all it has to offer along with the potential of its native token MIR.
What is Mirror Protocol?
Mirror Protocol is an interchain DeFi platform built on Terra blockchain that allows users, issue and trade synthetic assets (mAssets) that track the price of real-world assets (Assets). It gives traders exposure and access to the top equities from anywhere, including stocks like Tesla, Microsoft, Google etc. can be traded as synthetic assets on the platform.
The minting (creation) of mAssets is done by the users by opening a position and depositing Terra (UST) or mAssets as collateral. The collateral should be 1.5 times the current value of the real-world asset.
Mirror uses Band Protocol Oracles that provides real-time price feeds every 30 seconds to match the price of mAssets with real-world Assets. Chainlink crypto project is another famous oracle that brings off-chain data to on-chain.
Important Update –
1/ Band Protocol will permanently cease price feed support for Terra Classic, including Mirror Protocol, at 5AM UTC on August 26th, 2022. Without price feed support, the protocol will no longer function. https://t.co/S7d0TVCpIn
— Mirror Protocol (@mirror_protocol) August 15, 2022
Unlike stocks, synthetic assets can be traded 24X7
What is Mirror Protocol MIR Coin?
MIR Coin is the native token of the Mirror Protocol. Just like Uniswap exchange UNI token, MIR is used for governance, staking and rewarding the liquidity providers. Users must stake MIR tokens to participate in the active and governance polls.
MIR Staking Rewards:
Staking rewards come from trading fees used to buy back MIR tokens from the market. Staking LP and sLP tokens also generate rewards paid in MIR.
LP tokens are obtained through staking mAssets and sLP tokens are obtained through shorting mAssets and their staking rewards come from new MIR tokens created per block. The sources of rewards include – protocol fees, poll creation fees and voting rewards.
The total supply of MIR token is 370.575 million
Token Distribution:
The total supply of MIR tokens will surge for 4 years until it hit the cap of 370.575 million and following will be the distribution structure, post the completion of 4 years (from November 2020) –
Airdrop:
The airdrop that took place in the month of November 2020 will account for 4.9% (18.3 million) of the total token supply. It will be discussed later in the post.
LUNA Staking Reward:
LUNA stakers will receive 4.9% (18.3 million) of MIR tokens as reward in the first year since the launch of Mirror Protocol. MIR is distributed every 100,000 blocks (every week) to the LUNA stakers in the first year who meets the criteria shared in our section on MIR airdrop.
mAsset LP Staking:
45.1% (167.37 million) tokens will be distributed to all mAsset and mAsset (mETH) staking pools by the end of year 4. Tokens are daily distributed based on the weight of the mAsset compared to other assets in the staking pool.
MIR LP Staking:
10.4% (38.6 million) tokens will be distributed to MIR-UST and MIR-UST (mETH) staking pools by the end of year 4. The weight of MIR-UST is more than the weight of mAssets in the Mirror Protocol.
Community Pool:
34.6% (128.1 million) tokens will be distributed to the community pool by the end of year 4.
It is important to note that the inflation rate will fall every year till the distribution hit the maximum supply cap of 370.575 million.
How does Mirror Protocol work?
The concept of mirror protocol is quite straightforward, it mirrors real-world assets by creating synthetic assets which are crypto tokens that can be traded in a decentralized manner on the platform. Following is the basic procedure, required for the functioning of the protocol –
Mint:
Only users can mint or create mAssets on the platform by locking up collateral in UST or a different mAsset. The CDP (collateralized debt position) should meet the minimum criteria i.e 150% of the value of minted mAsset in UST or 200% for mAsset deposited).
A simple example would be minting mAsset against a stock worth $100 will require a collateral deposit of $150 in UST or $200 in a different mAsset.
Burn:
To burn mAsset, the issuer must burn the amount of mAsset issued initially to receive the locked stablecoin collateral. Also, the locked collateral will be automatically liquidated if the real asset price shoots above the value of the deposited stablecoin.
Trade:
mAssets are tradable like normal stocks on AMM, currently on public blockchains like Terra (Terraswap), Ethereum (Uniswap) and Binance Smart Chain (Pancakeswap).
Mirror Protocol Participants:
Minters:
As explained earlier, Minters are those who mint mAssets.
Traders:
Traders are the market movers who buy and sell mAssets on the supported DeFi exchanges for profit. Since the system is permissionless and borderless, anyone can trade from anywhere.
Liquidity Providers:
Liquidity Providers provides liquidity to the AMM liquidity pools. It works similar to Uniswap or Sushiswap liquidity pools. The equivalent value of UST and mAsset should be provided in order to receive the LP tokens which can be staked further to earn reward in MIR.
Stakers:
There are two types of stakers in the Mirror protocol. One who stake LP or sLP tokens and other who stake MIR tokens. Both earn MIR tokens as reward.
Oracle:
Band Protocol Oracle provides the live price feed to the protocol which helps match the price of synthetic assets with real-world asset, making the system legitimate when it comes to trading.
The Oracle price and exchange price also create arbitrage opportunities for high volume traders, which again helps in minimizing the price gap.
MIR Airdrop:
Mirror Protocol airdropped 18.3 million MIR tokens in November 2020 to the UNI holders and LUNA stakers.
UNI token holders who held a minimum of 100 UNI tokens, received 220 MIR tokens and LUNA stakers will receive MIR in year 1 of the distribution schedule as explained earlier in the post.
The distribution share is shared below –
- UNI Airdrop: 9.15 million airdropped to UNI holders.
- LUNA Staker Airdrop: 9.15 million airdropped to LUNA stakers.
Mirror WebAPP:
The mirror web app is the official front end for interacting with Mirror on the Terra network. The Webapp requires the installation of Google Chrome and Terra Station Extension. Terra Station Extension is a chrome-based extension that let users interact with smart contracts with a wallet embedded in the browser. The complete installation process is shared on this page.
Mirror Protocol on Ethereum:
Mirror protocol is an interchain DeFi platform that also exists on Ethereum based Uniswap exchange. Assets on the protocol can be transferred to the Ethereum blockchain through a bridge called Shuttle. Thereby enabling Terra based assets like mAssets, MIR and UST tradable on Uniswap.
Everything will be the same except tokens, which will follow ERC20 standard backed by CW20 standard of Terra Assets i.e MIR and mAssets in a 1:1 ratio. This help users provide the necessary liquidity for trading in both the blockchains.
It has mETH which is a web interface that supports staking of LP tokens on the Ethereum blockchain. Users must hold ETH tokens to pay for the transaction fee on the Ethereum blockchain. $1 or 0.1% fee (whichever is higher) is charged on cross-chain transfer using the Shuttle bridge.
Here’re the key differences between Terra Web App and Ethereum based Mirror Protocol –
MetaMask Wallet is required to interact with mETH interface
Mirror V2:
Mirror V2 bring new features in addition to the current features as follows –
Pre-IPO Assets:
Mirror will allow the minting and trading of Pre-IPO assets that are yet to be made public on the exchanges. The Pre-IPO synthetic asset has to go through the whitelisting process and depending on the governance vote, it will be made live with a fixed price as decided externally by the community.
In order to allow for the natural price discovery, the synthetic Pre-IPO asset can be minted for a limited period of time. Once it goes live on the exchange, the Pre-IPO synthetic asset will follow the standard migration process.
FTX has already mastered this step when they allowed the trading of Pre-IPO Coinbase derivative before the listing of Coinbase stock on the exchange, generating volume of over $2.2 million within the span of few hours.
Governance Participation Incentives:
Active voters will be eligible for rewards in addition to the existing staking rewards. Also, ABSTAIN voting option will be provided to the voters who want to participate in the poll but do not have much clarity on the proposal.
Collateral Diversification:
Mirror V1 allowed users to deposit UST as collateral. V2 came up with more options and has allowed users to utilize MIR, LUNA, ANC, bLUNA, and aUST as collateral for minting mAssets (in addition to UST and mAsset).
Short Minting:
Mirror V2 has introduced a new minting and inflationary reward distribution structure. When a user opens a short position, an amount of collateral is provided in order to mint the mAsset. During this process sLP (short LP token) is minted which can be staked to receive a portion of MIR that is allocated to the respective mAsset-UST liquidity pool.
Like mAssets we have nAssets which mirrors underlying digital assets, the project belongs to Nova Finance.
Mirror Protocol Benefits:
Borderless Access:
Anyone from anywhere can access and trade the top stocks on the mirror platform without worrying about regulations and the state’s approval. Stocks like Netflix, Google, Amazon, Tesla etc can be bought and sold hassle-free using the synthetic asset.
No KYC required:
DeFi means privacy. There’s no KYC requirement and no verification needed. All you need to do is connect your wallet and place a trade or mint an mAsset. It’s that simple.
Pre-IPO Access:
Retail investors will get direct exposure to the stock (mPre-IPO Asset) which is about to get listed on the exchange. It will give early access to the potential stocks that are reserved for private equity firms and VC before listing on the exchange.
Expanded Investor Base:
From the company’s point of view. It will help them get global exposure by allowing their stock to be traded as mAssets on the platform. Hence, more capital inflow to the system which was earlier restricted by regulators.
No Middlemen:
The platform is governed by the community and operates without third party interference. This makes the whole system transparent and predictable, reducing cost and increasing transactional efficiency.
Interchain:
Mirror is an interchain protocol. Apart from Terra blockchain, it is available on the top public blockchains like Ethereum (Uniswap) and Binance Smart Chain (Pancakeswap crypto exchange), giving it a wider exposure and reach at the same time.
Mirror Protocol Drawbacks:
Regulatory Pressure:
The whole crypto industry is under government pressure. The debate of banning cryptocurrencies is not yet settled. This decision paralysis can delay the growth of Mirror Protocol.
Under Development:
The project came up with V1 & V2 versions. However, the ecosystem is still under development. There’re changes to be made and the system requires continuous improvements before making it completely autonomous.
Challenging Environment:
Though the idea is new and unique in the crypto industry. It may face some serious threat from traditional competitors with deep pockets that can extend the offering of stocks at the same capacity as offered by Mirror Protocol.
Also, traditional players like NYSE, BSE can put legal pressure if they see a major shift of traders to the platform, compared to theirs. It is not imminent but a possibility.
Mirror Protocol MIR Coin Price:
Please check the latest MIR coin price, shared below –
The MIR token is virtually dead. It is suggested not to invest in the project’s token.
MIR Coin Price Prediction:
MIR never had an ICO, the coin was initially airdropped to the UNI holders and LUNA stakers. It made an impressive debut on the exchange with the price hitting beyond the $1 mark followed by bull run of 2021 that further helped scale the price point beyond $11 per token.
The euphoria did not last long, like every other coin, MIR fell from grace during the market crash and hit a level below $3 per token. At the time of writing, it is trading in the range $0.05
The coin had so much potential that can push the price back to recent highs in the upcoming bull run. But it won’t happen since the project is shut down.
Checkout Linear Finance, a similar protocol to Mirror
Where to buy MIR Coin?
The coin can be purchased from both centralized and decentralized exchanges. Centralized exchanges include Crypto.com (CRO), Coinbase, KuCoin & WazirX. Decentralized exchanges include Uniswap, Terraswap & Pancakeswap. Of Course, the best place to purchase MIR tokens is from mirror.finance (now dead)
Is Mirror Protocol MIR worth Investing?
Let me help you decide on this one. Do you believe in DeFi and its potential? Do you think it can be used as a regular trading exchange by the masses? If the answer is Yes, then Mirror protocol was the project worth considering.
Unfortunately, the project has been shut down and its native Oracle Band Protocols have pulled the plug. There will be no returning back of Mirror.
The ability to tokenize real assets and make them available for everyone helps create a borderless economy that can drive huge capital inflow from retail investors across the globe. The easy to access and complete user privacy features are the cherries on the cake.
Imagine buying stocks like Amazon, Tesla, Netflix without going through the cumbersome registration process and regulatory laws. Backed by Terraform Labs, Mirror is a reflection of the future, it can shape into a wonderful protocol that can become a massive hit in the long run. As always, remember to invest after due diligence and your own research.
Watch the video review of Mirror Protocol:
This completes my review of Mirror Protocol. In the next post, I will cover Thorchain (RUNE crypto) and ECOMI Coin. If you’re a fan of blockchain technology then please do share it on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.
DISCLAIMER:
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.
