Topics

Beginner’s Guide to the Mirror Protocol

Mirror Protocol’s mAssets are taking the DeFi forums by storm. Join us as we take a look at how you can trade them on the platform!

The Mirror Protocol has become synonymous with mAssets which are mirrored assets pegged to real-world counterparts (more on that later). But that’s not all there is to the protocol and its web app.

Of course, you can trade mAssets on the protocol’s web app, but did you know that you can actually do two types of farming out there as well? And that isn’t all. There’s more to it.

And in this article, we’re going to talk about it in depth. Get ready to learn why there’s a hype around the platform and maybe even jump on the bandwagon (in a learned way, of course) while you’re at it!

So without wasting a breath, let’s begin!

What is the Mirror Protocol?

Amongst some of the most successful products that the Terra ecosystem has provided us is the Mirror protocol. It is a DeFi protocol that is powered by the smart contracts of the Terra network. The thing that the protocol is best known for is perhaps the creation of synthetic assets. 

These assets popularly go with the name Mirrored Assets (mAssets). The mAssets are synthetic assets that serve one single purpose—to mimic how the real-world counterpart assets behave in the market. Traders across the globe can use it to gain open access to the prices of the real-world assets these mAssets mimic. And they don’t have to own or transact with a single real-world asset to do that.

The platform is a heavily decentralized one with the minting process taken care of by the users on the network whenever they open a position or deposit collateral. 

Not only is it decentralized but it is also well-connected with the other products in the Terra ecosystem. Terraswap, the decentralized exchange from the Terra ecosystem, lists all of these mAssets and allows for users to trade them against UST. This has two benefits, both being very important. Firstly, it enables the platform to ensure that there’s always enough collateral to cover the mAssets at all times. And secondly, it allows for Mirror to manage the markets of the various mAssets. 

Let us now talk about the Mirror Token.

What is the Mirror Token (MIR)?

Every decentralized platform needs a governance token. As far as the Mirror protocol is concerned, we have the Mirror Token (MIR), which is minted and distributed by Mirror to promote activities that contribute toward the ecosystem’s security. 

MIR is awarded to people who stake their LP tokens and sLP tokens (the kind of tokens you get when you short your mAssets to ensure their price behavior is in sync with their real-world counterparts). 

Holding some MIR with you is always a good idea when you’re using the Mirror web app. As a governance token, it grants you the privilege to vote (much like all other governance tokens do). But you also earn a share of the Collateralized Debt Position (CDP) withdrawal fees.

As an active member of the community, you would have the opportunity to decide the direction the project would take. And much like the other people without MIR, you would have the ability to maintain the markets in the Mirror web app.

While the protocol itself remains the same, there’s a split for the user in the form of the two web apps Mirror has. One for ETH users and one for UST users. Let’s discuss each of them, starting with the one UST users should go for.

How to Use the Mirror Web App if you’re a UST Holder?

If you’re a UST holder, you need to hit this link. By default, you would be led to the Trade page. Out here, you would be able to see all the mAssets that you can trade on the platform.

Before doing anything else, you would want to connect your Terra Station wallet by clicking on the top “Connect” button in the top-right corner. If you don’t know how to create one, don’t worry, we’ve got you covered. We’ve written an article about how you can create one. Check that out to create your own wallet and connect it to this platform.

Once you’re done with that, it’s time for you to decide what you want to do on the platform. You can trade, borrow, farm, and govern. Let’s take a look at each:

How to Trade on the Mirror Web App?

By default, the Mirror web app would land you on this page. But if, for some reason, you find yourself on some other page on the web app, just click on “Trade” on the menu to your left and you’ll reach this page.

Once you’re here, click on the mAsset you’re interested in trading and you’ll be taken to a screen similar to the screenshot below.

There are a couple of things you can see on this screen. To start with, on the right side, you would be able to see the price of the mAsset, its premium, volume, and liquidity.

You would also be able to see the change in the value (price) of the mAsset in the last 24 hours. This value is shown in blue with a percentage sign right next to the price of the mAsset shown below its name.

On the left hand side, you would see two tabs—“Buy” and “Sell”. By default, you would find yourself on the Buy tab. Right below it, you would be able to see a couple of inputs. Based on whether you want to buy a certain number of tokens or you wish to spend a certain number of tokens, you can choose to enter a number in either of these inputs.

You would now notice that the “Buy” button at the bottom has turned blue. This means that you’re ready for the purchase. But you need to keep in mind that the numbers showing up in the two input sections don’t show the full picture. Looking below these two inputs, you would see 3 numbers, each with their own significance.

The first of these numbers shows you the expected price which is calculated depending on the pool ratio and changes dynamically based on the trade size.

The second number tells you the minimum number of tokens that you would receive in this transaction. Now, this is calculated based on the current price of the token, the commission, and the maximum spread. Spread is the amount of fee that you would need to pay because of the difference between the prices in the market and the estimated price that the system shows you. Commission, on the other hand, is a fee that the protocol charges which is automatically deducted from the assets that you would receive.

Finally, the third number tells you about the fee that you can expect to pay for the transaction to go through on the platform.

Once you understand all of this and are fine with the estimated number of tokens that you would receive, hit the buy button and get yourself some mAssets.

Now, you might be wondering what the “Limit Order” toggle button was there for. Well, it exists to help you buy the mAssets at the price you want to pay for them (provided it is within the realm of reason). It’s a tool that many traders use to limit their losses and maximize their profits.

You can choose the number of tokens you wish to buy from the mAsset and then tell the system the price at which you wish to buy these tokens. When you do that, the system shows you exactly how many UST tokens you would be spending for making this purchase.

If you’re happy with that, you can hit the “Buy” button and wait for the price of the asset to reach the amount you decided. Generally, it is a good practice to follow the price trends of the mAssets for a while. This gives a realistic range for you to set here.

For selling, most of the things remain the same except for the fact that you need to switch the tab now.

Next up, let’s talk about how you can borrow mAssets on the Mirror web app.

How to Borrow mAssets on the Mirror Web App?

To borrow mAssets on the Mirror web app, you need to head over to the Borrow section by clicking on “Borrow” in the left menu. This would take you to a screen similar to the screenshot below.

You would be able to see a list of mAssets that you can borrow against your collateral. In addition to that, you would also be able to see the oracle price of those mAssets, the minimum collateral ratio, the collateral value, and their market cap. Let’s talk about what each of those values means.

The oracle price is the latest price of the mAsset that has been synced with the market price of its real-world counterpart. 

Moving on to the minimum collateral ratio, it refers to the amount of collateral that you would need to give in order to borrow the mAsset. So, if you’re borrowing mTSLA, you need to give 150% of its value in UST to borrow it.

Collateral value refers to the total amount of collateral locked into the mAsset in question.

Finally, we have the market cap. I think everybody knows what that is.

And now, let’s discuss how you can borrow the mAssets you want. Let’s say you want to borrow mAAPL tokens. To do that, you would first need to enter the number of tokens of the collateral you’re willing to put in. You would then need to decide what the collateral ratio should be.

This is something you need to do carefully. While the platform gives you a minimum ratio and a safe ratio, it’s all up to you. When the position drops below this value, it would be liquidated. So you should consider a ratio that gives you enough wiggle room without going through much of your budget.

Based on the amount of collateral and the collateral ratio, the platform would let you know exactly how many tokens of the mAsset you would be able to borrow. If that’s good to go from your end, hit the “Buy” button and you’ve got yourself some mAssets.

How to Farm on the Mirror Web App?

Farming on the Mirror web app is a bit different from how you’ve seen it on other platforms. Out here, we have two types of farms: long-term and short-term. While long-term farming is similar to adding liquidity to liquidity pools, short-term farming is more on the lines of borrowing/minting.

If you look at the screenshot below, you would notice that some mAssets have the option for both short and long-term farming while some only have one of the two options.

Let’s discuss long-term farming first. The major distinguishing factor here is the APY which is a lot higher than the short-term farms. This is mainly because there are fewer liquidity providers for such pools owing to the risk of impermanent loss. You would see this as common practice across most platforms. The liquidity pools with fewer liquidity providers incentivize traders by providing higher rewards.

Whether you invest in these pools or not is up to you. But I’m going to tell you how you can do it regardless.

What you need to do is click on the text that shows the APY or says “Long Farm” against the mAsset you want to trade. This would take you to a screen such as the one shown in the image below.

Out here, you need to enter the number of mTSLA tokens you want to provide liquidity with. You then need to provide UST worth the same amount which is something the platform does for you automatically. So you don’t have to calculate anything. You just need to make sure that you have enough UST tokens in your TerraStation wallet.

Now, if you’re ready, click on the Farm button and that’s it.

For short farming, you simply need to switch to the Short tab and you’ll see something like the following on your screen.

You’ll notice how similar this looks to the screen you were met with while borrowing? That’s because these two functions are virtually the same. The only difference is that when you stop short farming, the UST tokens you receive are locked in for two weeks. But apart from that, the process is pretty much the same.

So, enter the amount of collateral you want to deposit and click on the Farm button at the bottom. That’s all there is to it.

Finally, we can stake MIR tokens to take in governance on the platform. Let’s talk about it.

How to Partake in Governance on the Mirror Web App?

To start with, you need to head over to the Governance section using the menu on the left. Once you’re there, you would be able to see a screen similar to the one in the image below.

Out here, you would be able to see the number of MIR tokens you have staked as well as the various polls that are active on the platform. You can even see the passed and rejected polls if you scroll down further.

What we’re interested in though, is the button that says “Manage Stake”. This is where your journey to partaking in governance on the Mirror web app begins. You need to click on this button to go to the page where you can stake or unstake your MIR tokens. When you do that, you will see a screen similar to the image below.

Now, all you need to do is enter the number of MIR tokens you wish to stake and hit the “Stake” button. If you’ve already staked some MIR tokens and wish to unstake them, all you need to do is head over to the other tab, enter the number of MIR tokens you wish to unstake, and hit the “Unstake” button.

It doesn’t get much simpler than that. What isn’t simple, however, is deciding what you want to do. When you have so many things to do on a platform, you often get overwhelmed by all the choices you can make.

For this reason, I strongly recommend doing your own research and most importantly, assessing your appetite for risk. Once you know what you want to do and how far you want to take things, it gets easier. Then it’s all about tracking your investments and making necessary changes every now and then.

Mirror Protocol FAQs

What are mAssets?

The Mirror protocol has a list of mirrored assets called mAssets that you can trade on the platform. You can even mine them if you want. While the platform started with a bunch of mirrored assets, you can always start a poll to recommend a mirrored asset to be added. These assets are basically virtual assets that mirror the market behavior of the assets they are based on. So, an mTSLA would always rise and fall in value when the Tesla stocks do. And that’s cool. But it also makes you wonder, “why do we need them in the first place?”. Let’s look at the next answer to find that out!

Why are mAssets needed?

This is the first question that comes into the mind of anyone who hears about mAssets. And it’s a natural one. When we have regular assets, why do we need mAssets? The answer to that lies at the very heart of Decentralized Finance (DeFi). And the answer is *drumroll* because the traditional finance system is broken. 

While things are better now, in the earlier days, the hassles of all the preliminary steps to getting into trading were, to say the very least, repulsive. 

Firstly, following the stock market wasn’t exactly easy. You either had to rely on the news and business channels or you had to get one of those business newspapers (yeah that was, and still is, a thing).

Even if you had all of the information you needed to make sound trading moves, there was a lengthy process of getting a trading account. Lots of paperwork, and generally not a very inviting process. This barrier to entry forced a lot of people to forget that they ever wanted to trade.

And did I mention that a lot of places have socio-political norms that to this very day prevent a lot of people from even opening up a bank account? It is as bad as it sounds.

DeFi is changing that, and mAssets are helping bring that change. With mAssets, you don’t even need to have a bank account. All you need is a TerraStation wallet, some UST in it, and a knowledge of where you should put your money. If you’re reading this, you probably already have everything you need on the first point and third point. 

Maybe even the second point. But if you don’t have UST, you can always freelance for blockchain firms. Many of them pay in crypto. Or if you have your money in cash, give it to a friend of yours who can send some UST your way against it. It sounds like a lot but all it takes is a start.

Is it safe to invest in mAssets?

Is it safe to invest in stocks? If your answer is yes, then it is safe to invest in mAssets. They’re basically just stocks that you can buy through crypto. Market crashes are happening more frequently now than ever, so you could end up losing a lot of money. But if you compare that with the heavily volatile crypto market, you’re placing a safer bet here. Your call.

Before You Go…

The Mirror Protocol is enabling a lot of people to invest, in a way, in their favorite stocks. And that is just the beginning of what the platform has to offer.

As more and more mAssets get added to the platform, you would soon be seeing a DeFi NASDAQ brewing here.

But whether that happens or not, is something only time will tell. For now, I think it’s safe to say that things are looking good and on an upward slope.

Arian P

    Toolkit

    ROI Calculator

    % APR
    % APY
    $ USD
    PERIODAPRROI*
    1d0%0%
    7d0%0%
    30d0%0%
    365d0%0%
      *Calculated by compounding once daily