Mirror Protocol is a DeFi solution allowing users to create and buy collateralized debt obligations (CDO) on the Terra blockchain. The platform started a new era in CDO trading thanks to Mirrored Assets (mAssets) and the platform’s native token MIR.
Collateralized debt obligations are among the most sought-after financial products in traditional finance. However, blockchain technology, in the case of Mirror Protocol, the rising star Terra, has allowed for a more decentralized take on CDOs.
What are mAssets?
mAssets mimic the price behavior of real-world assets and give traders anywhere in the world open access to price exposure without the burdens of owning or transacting real assets.
Minting mAssets is decentralized. Users can do that throughout the network by opening a position and depositing collateral. Mirror Protocol ensures that there is always sufficient collateral within the network’s contracts to cover mAssets. Additionally, the platform manages markets for mAssets by listing them on Terraswap with a TerraUSD (UST) backing.
Mirror Protocol accepts several forms of collateral. Most prominently, the protocol favors UST. However, users can also collateralize LUNA, MIR, ANC, and aUST. Alternatively, the platform allows users to submit proposals for including other assets to the whitelist for collateralization.
Once you create an mAsset,the protocol mints mAsset tokens, which is where the earning opportunity comes into play. Users can either stake their mAsset tokens and receive staking rewards in MIR or sell their mAsset tokens for sLP tokens. You can also stake sLP to earn MIR rewards.
What is MIR?
The native MIR token lies at the foundation of the whole Mirror Protocol ecosystem. It’s the main governance and rewards token on the platform. MIR holders can utilize their tokens in several important scenarios.
MIR allows holders to participate in governance votes and governance proposals. This is an important aspect, which enables Mirror Protocol to be fully decentralized and community-governed. What’s more, creating new governance polls and actively engaging in the governance of MIrror Protocol also rewards users with additional MIR tokens.
Additionally, MIR Token stakers receive MIR token rewards for every block generating protocol fees from CDP withdrawals. The protocol fees come from CDP collateral. They are then sold for TerraUSD, which Mirror Protocol uses to purchase MIR through Terraswap. Importantly, this process balances the generation of new MIR by creating buying pressure.
Significantly, Mirror Protocol operates on several blockchains aside from Terra, including BINANCE Smart Chain, and Ethereum. This means that you can use wrapped MIR tokens on a whole plethora of different protocols.
Mirror Protocol, though its mAssets and native MIR token, is a new-age DeFi solution that aims to present a new take on one of the most popular financial tools. Collateralization of assets has become the go-to trading mechanism in traditional finance. Importantly, CDOs are now entering the crypto world, thanks to innovative solutions like Mirror Protocol.
DappRadar will continue to monitor the DeFi space as more revolutionary financial products come to light. If you want to learn more about DeFi, collateralized stablecoins, and Mirror Protocol, check out the links below.
