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Thread on $MIR. I won't be diving in technical details about how the @mirror_protocol works but how to use it. For more technical information I advise visiting https://mirror.finance/ explore the docs and for any further information join the discord and telegram groups.
1) What is DeFi? A financial system cleansed of middlemen. Through smart contracts, users can transact, lend, borrow, earn yield... between each other without ever giving up control of their assets, having to ask for permission to do A or B and without paying unnnecessary fees.
2) @mirror_protocol is a DeFi protocol built on @terra_money that allows the creation (minting), buying or selling of synthetic assets, namely mAssets. mAssets reflect the value of their underlying assets. It also allows yield earning, more on that later.
3) Example: you want to buy Google stock, instead of going to your usual centralized broker, accepting the risks and constraints that come with it, you can go on https://terra.mirror.finance/ and buy whatever amount of mGOOGL that you wish. Whether it be 10$ or 2500$, it's up to you.
4) To get started you need three things:
- A Terra wallet, visit https://terra.money/#1 to download Terra Station from which you can either create a wallet or simply connect your ledger if you have one.
- A Terra wallet, visit https://terra.money/#1 to download Terra Station from which you can either create a wallet or simply connect your ledger if you have one.
- Terra's dollar stablecoin, UST. To get some simply buy some on exchanges that have UST pairs https://www.coingecko.com/fr/pi%C3%A8ces/terra-usd#markets or buy $LUNA, send it to your wallet and swap it for UST.
Note: You have a choice between Default and Terraswap, the best option will be chosen automatically.
Note: You have a choice between Default and Terraswap, the best option will be chosen automatically.
- Download the terra extension for chrome to connect your Terra wallet to Mirror: https://chrome.google.com/webstore/detail/terra-station/aiifbnbfobpmeekipheeijimdpnlpgpp
Make sure that you download the right one, from Terra and not a fake one who's goal is to steal your private keys and so your money.
Make sure that you download the right one, from Terra and not a fake one who's goal is to steal your private keys and so your money.
5) Like other DeFi protocols, mirror has what are called liquidity pools. Basically, these are smart contracts in which two assets are deposited allowing other actors to buy or sell into them allowing so to reduce drastically slippage.
Example: You have 100 $MIR (worth 1$ each) and want to become a liquidity provider in the MIR-UST pool. You would sell half of your $MIR holdings and get 50 $UST. You could then deposit the two assets in the pool and start earning on a hourly basis.
The benefit of depositing your assets into these pools is that you are compensated for providing liquidity. Each liquidity pool has an associated Annual Percentage Rate (APR) and Annual Percentage Yield (APY).
The difference between APR and APY is that APY takes compouding into account. Hence the great difference in returns between these two calculations. Be mindful that the returns are not fixed and so will vary all the time depending on the volatility of the assets.
To be able to earn the APY's returns, you would need to compound your rewards. This simply means that you would claim and reinject your rewards in the liquidity pool on a daily basis, or as often as you'd like.
For instance let's say the liquidity you provide is worth 100$ with a 365% APR. You earn 1% per day. On the first day, your rewards amount to 1$ If you reinject it the liquidity you provide is now worth 101$ and the next day your 1% reward will be 10.1$
At first it may not seem like a lot but take at these pics of an excel sheet I've made. Earning 1% per day starting with 100$ will lead you to a capital of 3740,93$ 365 days later. The power of compounding.
Again, remember that the APR/APY returns are not fixed. For simplicity's sake I did not take into account the variation of returns but it's not because you provide assets in a liquidity pool that has 500% APR that it will stay that way until you exit.
The more the assets in the pool are volatile, the higher the generated returns are and conversely. This is to compensate for what is called impermanent loss which is the value you could have captured had you held the asset instead of providing it as liquidity.
Example: You are a LP (Liqudity Provider) for the MIR-UST pool. If $MIR starts to rise it's because people are buying, likely from the pool so from you. Which means the amount of $MIR you placed in the pool diminishes and the amount of $UST rises.
So if you had 100 $MIR bought at 1$ to start with and $MIR goes to 10$, your holdings would be worth 1000$. By providing liquidity, you would own less $MIR and may not benefit fully from the upwards price change.
For the sake of simplicity let's assume APR remains constant at 300%. So your initial 100$ would become 400$ netting a 300$ profit. Much less than if you had held your 100 $MIR.
Though at first it may not seem appealing, let's dig a bit deeper here.
Though at first it may not seem appealing, let's dig a bit deeper here.
The rewards for being a LP are paid every hour. So if you collect your rewards inject them in the pool, you increase your liquidity and get more rewards. Rince and repeat and instead of earning 300% APR, you could end up with say 1300% APY making hodling less profitable.
Knowing that markets don't spend most of their time trending, providing liquidity will often be the better option, even without compounding. For instance GOOGL in 2018 had a return of about 7%. In other words, holding wasn't the best play.
For who isn't aware of liquidity pools, it can seem a bit complicated but keep trying to understand and you will see that it's much easier than it looks.
6) Now let's take a look at the different steps of becoming a liquidity provider:
a. Get UST and the other asset of the pool that interests you, make sure the ratio is 1:1. Example: 50 $UST and 50 $UST worth of mAAPL.
b. Under "pool" select the asset and quantity you wish and click on "provide." You will get LP token in return. LP tokens are a unit of measure that represent your share of the entire liquidity pool.
If there 1000 LPs in a pool and you deposit 10 LPs, you own 1% of the pool.
If there 1000 LPs in a pool and you deposit 10 LPs, you own 1% of the pool.
Note: You can see beforehand how much LP you will get and what your total amount of LP will be after the transaction. Each pool has its own LP tokens. So you can't deposit MIR-UST LP tokens in mTSLA-UST pools.
c. Under "stake" click on the pool that corresponds to the LP tokens you have insert the amount of LPs you wish to stake and proceed. That's it! Now all you have to do is claim your rewards (distributed on an hourly basis).
Stake at 5:17 PM your first reward will be at 6:17 PM.
Stake at 5:17 PM your first reward will be at 6:17 PM.
d. To claim the rewards, go under "my page", scroll to the bottom and either click on "claim all rewards" if you're in several pools and want to claim it all at once or click on "..." and claim the rewards for each pool individually.
7) When you want to stop providing liquidity, you basically have to the steps in 6) backwards.
a. Under "stake" select unstake and proceed.
b. Under "pool" select withdraw and proceed.
a. Under "stake" select unstake and proceed.
b. Under "pool" select withdraw and proceed.
8)Minting: mAssets aren't created out of thin air otherwise they'd be worthless. So to make sure these have actual value they are backed by USTs or other mAssets. To mint a new mAsset, one must deposit UST or mAssets as collateral.
The minimum collateral ratio or C-ratio is 150%.
The minimum collateral ratio or C-ratio is 150%.
Should the C-ratio drop under 150%, the minted mAsset would be subject to liquidation. In that case, anybody could liquidate you by buying your mAsset at a discount. This is done to make sure that all mAssets are backed at all times.
An advantage of minting over buying is that you aren't subject to any form of slippage. You can mint as much as you want as long as you have what it takes to back the mAssets. This is essentially done for liquidity providing, it's not suited for speculation.
This for a simple reason. Say you mint an mAsset that is worth 100$. You would deposit 150 $UST (or an mAsset worth 150 $UST). If the mAsset goes to 110$, your C-ratio is now worth (150/110)*100 = 136.36% and you are now subject to liquidation.
Note that the opposite is true, if the value of your minted mAsset drops, your C-ratio goes up.
Minting is a bit more complicated so take your time to understand it and the strategies that go with it.
Minting is a bit more complicated so take your time to understand it and the strategies that go with it.
9) Last but not least, the $MIR token. $MIR is the governance token of the @mirror_protocol. Mirror being a decentralized protocol, it is governed by the community. No single entity has control over the protocol and can change the rules as they please. Very important.
This means that by owning and staking $MIR, you can vote on community proposals or make one yourself. It also allows you to earn fees from the protocol.
If you'd like to trade a certain asset that isn't present on Mirror, all you have to do is create a proposal under "governance." The community would then vote and if the majority approves the asset will go through the process of being added. This will take some time.
But that's not all, you can propose many other things than just mAssets. Click on "create poll" in the top right hand corner and see for yourself all the possiblities.
Note that to have access to governance and fee rewards, your $MIR must be staked. The number of $MIR staked impacts your weight in decision making. Still under "governance" you will see how much APR staking $MIR generates.
All the rewards you will recieve for providing liquidity will be paid out in $MIR. It's up to you to decide whether you want to keep the $MIR tokens or sell them for UST or other mAssets.
10) So to wrap it up, the key advantages of using Mirror are:
- Complete control over your assets
- Acess to the markets 24/7
- Fast and very cheap transactions (cough...Ethereum...cough
- Taking part in governance and earning fees
- Unique opportunities to earn yield.
- Complete control over your assets
- Acess to the markets 24/7
- Fast and very cheap transactions (cough...Ethereum...cough
- Taking part in governance and earning fees
- Unique opportunities to earn yield.
Congratulations if you made it hear. It was a long and not always easy read. If you have any questions or remarks, be my guest.
Obviously had to end with a typo
meant here obviously
meant here obviously
