What is Mirror Protocol (MIR)?
Mirror Protocol is a platform that gives crypto traders access to traditional financial assets. Through Mirror’s smart contracts, users can mint tokenized, “synthetic” versions of assets—like shares of Tesla or Apple—that can be traded over its decentralized network.
As with other decentralized finance (DeFi) projects, Mirror Protocol aims to replace centralized intermediary institutions, remove barriers and increase accessibility to the market. Stock exchanges and brokerages have strict restrictions on who can use their services. Mirror, on the other hand, gives anyone the ability to trade in these assets, no matter where they live or whether they have a bank account.
Furthermore, since Mirror Protocol’s synthetic Mirrored assets (mAssets) are tokens on a blockchain, they can be subdivided into smaller, more affordable parts. If a user wants to trade only $10 worth of a much more expensive asset (like a $100 share), they can. This is called fractional ownership, and although it’s becoming more common among established brokerages, it requires more resources than tokenized stocks.
Assets that have been tokenized on Mirror include stocks like Microsoft (mMSFT), exchange traded funds (ETFs) like Invesco QQQ Trust (mQQQ), and other cryptocurrencies like bitcoin (mBTC) and Ether (mETH). These mAssets can be actively traded on Mirror Protocol, and can also be staked or deposited into liquidity pools to generate additional returns for users in the form of MIR tokens.
Who created Mirror Protocol?
Mirror was launched in December 2020 by Terraform Labs (TFL), the creators of the Terra blockchain. TFL is a South Korean company focused on blockchain technology and DeFi, and it is one of the most well-funded projects in the crypto space with big-name backers such as Arrington Capital and Pantera Capital. Its initial focus included stablecoins and crypto-powered payment methods, but it has since joined the DeFi movement.
Terra was founded in 2018 by Daniel Shin and Do Kwon, and the network’s mainnet rolled out in April 2019. Before Terra, Shin founded and was CEO of TicketMonster, an e-commerce platform in Korea. He is now the CEO of payment start-up Chai, based out of Seoul. Kwon worked for both Microsoft and Apple prior to becoming the CEO at Terra.
How does Mirror Protocol work?
Mirror Protocol operates through four main functions: minting, trading, liquidity providing, and staking.
Minting: Synthetic mAssets must be minted before being used elsewhere on Mirror’s platform. Minting requires a user to create a collateralized debt position (CDP) with a minimum collateral ratio. CDPs were first popularized by MakerDAO and protect the Mirror Protocol from issuing or maintaining uncollateralized assets, which would destabilize the system. For instance, if a user wants to mint one share of mTSLA worth $100, they might need to provide 150% of TSLA’s value (or $150) of collateral in the form of the TerraUSD stablecoin (UST).
Trading: Once an mAsset is minted, it can be bought or sold against UST. Mirror claims their protocol offers lower network transaction fees than many other leading decentralized trading platforms.
Liquidity providing: Mirror users who hold mAssets can deposit them—and Terra’s stablecoin UST—into Terraswap’s liquidity pools. The assets held in liquidity pools accumulate rewards in the form of LP tokens, which are generated from the pool’s trading fees. LP tokens can then be burned to reclaim mAssets and UST from the pool.
Staking: Users earn MIR tokens by staking in one of two ways. MIR can be staked in the governance smart contract to both allow for voting and earn rewards. LP tokens can also be staked to help secure the network, for which users receive additional MIR tokens in return.
Although Mirror is built on the Terra blockchain, swaps between the Terra and Ethereum networks have been made possible by the Terra Bridge.
Why does MIR have value?
The MIR token serves two main functions in the Mirror ecosystem: reward distribution and governance.
Users who hold MIR can stake it in the protocol, which generates a passive reward yield in the form of MIR. Staking MIR also gives holders the right to guide governance of the protocol by voting on proposals, which in turn is rewarded in MIR tokens. This system was built to encourage behavior that secures the Mirror ecosystem.
There were 54.9 million MIR created when Mirror was launched, and the supply is planned to increase over the course of four years to a total of 375,575,000 tokens. The final token distribution will designate approximately 60% to staking rewards, 35% to the community pool, and 5% to airdrops.
Notably, unlike many DeFi projects, no tokens are allocated to the developers, who have put a strong emphasis on decentralization within the Mirror Protocol ecosystem. Inflation of MIR is tightly controlled by its tokenomics and is expected to decrease to ~15% over the course of the four-year plan.
MIR’s value is derived from its parent protocol Terra, which supports the token’s use in a variety of ways.
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Why buy Mirror Protocol?
Users may find Mirror an impressive addition to the DeFi space, as it combines the innovative world of synthetic assets with the benefits of multiple yield-earning strategies.
Those who want to partake actively in Mirror’s rich ecosystem will need MIR to reap the rewards of both staking and voting in Mirror’s governance.
Additionally, crypto traders may wish to hold MIR in order to benefit from the increasing use of the Mirror Protocol. If Mirror is able to garner widespread adoption, its MIR tokens will potentially gain in value.