Mirror Protocol is a decentralized trading protocol that allows you to create and trade synthetic assets, allowing you to unite the world of traditional assets and blockchain in one place.
UOne of the fastest growing DeFi protocols on Terra is Mirror Protocol, which is focused on creating synthetic assets, just as it does Synthetix (SNX). These synthetic assets are called mAssets or Mirror Assets and can be used to reference any type of asset from gold, oil or any other cryptocurrency. The idea is to integrate everything into a large market, which allows trading with these assets in one place, without KYC and completely decentralized.
If you have not understood the scope of this idea, we will say it another way: imagine a decentralized exchange where you can trade with the assets of the largest exchanges in the world (Nasdaq and NYSE), add the entire crypto world to the equation and we get Mirror Protocol. The possibilities of this platform are immense and many take advantage of these properties to operate freely between the traditional financial world and crypto, without friction, delay and with total security.
How does Mirror Protocol work?
As we have discussed, Mirror Protocol is a decentralized finance application that works on the Terra blockchain, and therefore has a strong connection with the LUNA token and the UST stablecoin. Its operation in general terms is identical to what we can see in Synthetix, where we have the ability to operate with assets that synthesize and reflect the value of another asset (hence the name Mirror Protocol or Mirror Protocol).
For example, let's say we want to buy Amazon shares, but we want to do it on a decentralized platform and outside of Nasdaq's power. In this case, this protocol gives us an option and all we have to do is go to its website, create a new mAsset with the name mAMZN (AMZN is the Amazon market name).
At this point, we must inject the necessary liquidity for the creation of the mAMZN to be successful. This is because the creation of this mAsset responds to a staking Overcollateralized within Mirror Protocol, which upon completion generates a certain amount of mAssets. The fact that the mAsset is overcollateralized helps to avoid its sudden fall due to the high volatility of the cryptocurrencies used in its creation. In this way, when creating mAMZN, the smart contracts necessary for our new mAsset to always reflect one thing: the real AMZN value on Nasdaq, all in a decentralized way.
If you are a crypto investor looking for new markets to diversify your portfolio, looking towards assets like AMZN or other companies is a good idea. Although, they do not have incredible growths like many cryptos, their growths are usually very stable, with very good returns and less risk. In any case, it is a unique opportunity that brings the crypto world closer to the world of real-world stock market investments.
As you can see the possibilities are spectacular. Think for a moment that you can do the above with any company or asset within a real exchange. This opens the doors to new investment markets and, therefore, new ways of obtaining benefits or protecting them. Be that as it may, this protocol has that potential and makes it available to anyone on the planet.
Roles within Mirror Protocol
Of course, the previous example shows that in Mirror Protocol there are a series of well-defined roles, among which we find:
Minter
Minters are the creators of synthetic assets (mAssets). Its main job is to inject the necessary and overcollateralized liquidity to generate new mAssets.
Thus, for example, to create our mAMZN token (with a value of about US $ 3.500 per token / share), a minter must enter about US $ 4.025 in UST stablecoin (15% overcollateralization), or use US $ 5.250 in LUNA ( 50% overcollateralization) to create that new token. As you can see, it is the same mechanism that is used to generate coins as DAI in MakerDAO, and that overcollateralization helps to stabilize the price of the asset against the price fluctuations of the cryptocurrencies.
With the creation of the mAssets (mAMZN, in our example) it can be traded in Mirror Protocol, and at all times it will follow the price of Amazon's share in the market.
Traders
Traders are all those interested in buying or selling the mAssets according to their need and strategy. Being Mirror Protocol, they can buy mAMZN tokens freely, without registration and in real time, exposing their money to a token that is a true reflection of the action they want to buy.
Liquidity Providers
Because Mirror Protocol is an AMM-type DEX, it needs liquidity providers to generate the liquidity pools necessary to create the exchanges made by traders. In the same way as in other DEX AMMs, liquidity providers receive commissions for each change made within the pool where they participate.
stakers
Finally we have the stakers that can be defined in two types:
- Stakers of the LP tokens, which receive Mirror tokens (MIR tokens) in exchange for their participation in the LPs.
- MIR Stakers, which earn commissions from CDP withdrawals. The CDPs are in charge of allowing the minters to generate the mAssets within the platform.
Farmers
Farmers in this case are those users who use Mirror to apply yield farming strategies. To do this, farmers must enter in a 1: 1 ratio both the chosen mAsset token and its value in UST.
For example, a farmer in Mirror can take 1 mAMZN (worth 3.500 US $, at the time) and put it together with 3.500 UST to participate in the yield farming option within Mirror. Through this strategy, farmers can earn rewards for the positions held, being an option to generate passive profits on this platform.
MIR Token, the Mirror Protocol token
The Mirror (MIR) token is the platform's native token and its main function is to serve as a reward system for stakers and to be the token that measures the voting strength of its holders within the decentralized governance of the protocol.
The MIR token is vital within the protocol and therefore the developers have decided to limit the existence of the token to a maximum of 370.575.000 tokens, in order to achieve its revaluation.
Conclusion
Mirror Protocol is an interesting project with many possibilities. The intention to unite the real world financial and asset world with the blockchain universe is something that can bring new opportunities and attract more investors. In any case, the power of DeFi unfolds once again, making clear all its possibilities in a world increasingly doomed to it.
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