Terraform Labs (TFL), the group behind Terra—a stable, programmable cryptocurrency—launches Mirror, the first synthetic assets protocol that tracks the price of stocks, futures, exchange-traded funds, and other traditional financial assets, bridging crypto with traditional markets.
US equities are a very attractive asset class globally, but access to the $36.3 trillion-dollar market is limited. Mirror solves this problem by enabling the minting of synthetic assets—Mirrored Assets (mAssets)—that “mirror” the price behavior of real-world assets by reflecting the exchange prices on-chain. This decentralized representation grants traders price exposure to real-world assets that may not otherwise be accessible to them.
Do Kwon, Co-Founder, and CEO of Terraform Labs (TFL), the group behind Terra, expressed, “We were motivated to create a way for retail investors around the globe to more easily participate in the US equities market. Mirror enables the minting of synthetics that trace equities and other traditional financial assets demanded by everyday retail investors, further integrating cryptocurrencies into the global economy.”
Joey Krug, Co-Chief Investment Officer at Pantera Capital and Core Dev on Augur, said, “The Mirror protocol provides a foundation for people around the world to have greater access to attractive financial assets. It’s important that foundation is built equitably, allowing the broader community to play an active role in shaping Mirror’s future.
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I’ve seen how important that’s been with Augur – also an open-source protocol – where people are now building new markets and tools on top of Augur everyday. I’m excited to see how the Mirror community develops through this fair launch approach and how they’ll build out the full potential of Mirror’s synthetic assets.”
Calvin Shen, Head of Sales and Business Development, at Hex Trust, said, “We have built an institutional-grade custody platform to enable the safekeeping of digital assets with the vision that all assets will eventually be digitized. The Mirror protocol is a great step towards that vision, and we are excited to be the only licensed custodian supporting the launch.”
As blockchain tokens, mAssets can be held in fractional amounts and easily traded while maintaining open access and censorship resistance. Unlike US equities whose trading hours align with New York City’s time zone, there are unrestricted trading hours for mAssets. Existing assets can also be composed into new derivatives, such as yield-bearing stocks (imagine if your Apple stock could beget more Apple stock). Other tokens that could be minted using Mirror include ETFs with dynamic, real-time balancing against factors like reputation as well as local climate futures for betting or hedging.
To mint mAssets, an issuer must lock up greater than 150% of the current asset value in Terra stablecoins or greater than 200% in other mAssets as collateral. Compared to other protocols that require as much as 700% collateral ratio, Mirror is much more capital-efficient.
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mAssets track the price of the underlying asset (ex: Apple shares or gold) via a decentralized price oracle. The oracle updates every 6 seconds, which is much faster than the slow execution of Ethereum-based protocols. When the price of the mAsset drifts significantly from the primary market, traders are incentivized to purchase/sell the asset to mint/burn in order to claim the collateral.
mAssets are listed and can be traded on Uniswap and Terraswap, both decentralized exchanges. By adding the Mirror governance token—MIR—to liquidity pools, MIR holders can earn 0.25% from trading fees. To burn mAssets, the issuer must burn the equal amount of mAssets issued, which prompts the return of the previously locked Terra stablecoin collateral.
While the team behind Terra contributed most of the core development work behind the Mirror, the protocol is decentralized from day 1, with the on-chain treasury and code changes governed by holders of the native token, MIR, of which Terraform Labs holds none. There are also no admin keys or special access privileges granted.
“A core part of working in open-source decentralized protocols is altruistic contribution. While we do not capture direct upside from this launch, we believe Mirror’s vision of bringing real-world assets on-chain is a game changer for DeFi. Mirror’s community-driven success will bring millions without adequate access to asset exposure within the blockchain industry, which will benefit the firm in the long run,” said Kwon.
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