*Paid Advertisement. Not financial advice. RugDoc is not responsible for the projects showcased here. DYOR and ape safu.
Even though synthetic assets aren’t talked about that much in the DeFi space, they play a crucial role in its development. Synthetics assets or “synths” allow cryptocurrency users to trade real world assets without leaving DeFi or needing to open a trading account. Mirror Protocol is one of the first projects that introduced such assets into crypto and that is why we need to have a closer look at it.
Mirror.Finance is a DeFi protocol that allows cryptocurrency users to invest in real-world assets but also to mint and trade them.These assets are referred to mAssets and they can represent stocks, tokens, derivatives or anything else that can exist in the DeFi world.
To determine which assets can and can not exist on the Mirror protocol we need to look into the key roles that make this whole operation possible.
Traders move capital in, out and around the protocol by executing trades.
A Minter is a user that enters a collateralized debt position (CDP) in order to obtain newly minted mAssets. CDPs can be entered with UST, mAssets or any other form of whitelisted collateral on the Mirror protocol.
Shorters enter the same CDP as minters but with an intention to sell the newly minted asset immediately. This is compensated with sLP tokens that are essentially a receipt for opening a short position on a decentralized protocol.
Stakers use mAssets and sLP or LP tokens to earn passive income paid out in MIR tokens which are the native token of the Mirror protocol.
Oracle feeders are essentially dedicated Terra accounts that provide accurate real-world prices to the protocol and users.
Mirror is deployed on the Terra network so users that want to interact with it will need to have the Terra Station extension installed. Once the wallet is installed it will require some Luna tokens before becoming usable.
Users can either acquire some Luna on centralized exchanges that support direct withdrawals to the Terra network or bridge them from other chains using the Terra Bridge.
After that, visit the Mirror protocol app and connect your wallet by clicking on the button in the top right corner of your screen.
To buy or sell synthetic assets go to the trading tab and which one you want to buy or sell.
The process is exactly the same as trading tokens on a decentralized exchange like Uniswap.
Borrowing will allow you to take out loans based on your deposited collateral. Depending on the asset you want to borrow, rates and available amounts can vary.
For example, mBTC loans will require 200% of loan value to be deposited as collateral while stocks lille mAAPL or mAMZN will only require 150%.
Farming rewards those that have opened CDP positions and provided liquidity to the protocol. The sLP and LP tokens can be deposited in farms and earn rewards in MIR tokens. Reward rates can fluctuate depending on the number of allocated tokens for a specific pool, price ranges and other factors.
Governance is where MIR token holders can vote on proposals that have been submitted by either the development team or the community. These proposals are voted on and vote value is determined by the number of MIR tokens a wallet holds. Wallets with 1000 MIR tokens will have 10x the impact than those that have 100.
If you want to invest in stocks but don’t want to sell your crypto holdings to do so, Mirror Protocol may be the perfect solution for you. Synthetic assets and price oracles have enabled the crypto industry to introduce real-world asset trading without the need to interact with brokers or exchanges.
On the other hand, if you want to short a stock but don’t have a way to do that, Mirror will give you an option that is as close to the real thing as it can get, considering that the protocol is decentralized.
As always, it is highly recommended that you read through the docs before interaction with the protocol because synthetic assets can be a bit confusing if you never interacted with them before.ReferencesMirror.Finance Docs. (n.d.). Mirror Finance. Retrieved December 22, 2021, from https://docs.mirror.finance/
Save my name, email, and website in this browser for the next time I comment.