The Mirror Protocol (MIR) is a decentralized finance (DeFi) protocol powered by smart contracts. Mirror operates on the Terra (LUNA) blockchain.
They describe the Mirror Protocol as an interchain defi protocol. An interchain protocol can connect with decentralized applications (DAPPs) across many blockchains. Hence, the Mirror Protocol acts as a shortcut between blockchains.
For example, Mirror Protocol uses the Shuttle bridge to make interchain transfers between the Ethereum, Terra, and Binance Smart Chain blockchains. Hence, the Mirror Protocol could help a game or a decentralized exchange accept payments in Ethereum (ETH), Terra Luna, Binance (BNB), USDC (USDC), TerraUSD (UST), and Binance USD (BUSD).
Is the Mirror Protocol a DAPP for Derivatives?
The Mirror Protocol (MIR) allows users to create synthetic assets they call Mirrored Assets (mAssets).
They claim mAssets can mimic the price behavior of real-world assets without having to own those assets. Hence, owning mAssets reduces trading and speculating on those assets.
Therefore, I consider mAssets, derivatives. A derivative is a tradeable contract based on an underlying asset or collection of assets. For example, you can view an Exchange Trade Fund (EFT) is a derivative based on an index of stocks. Similarly, they base an FX derivatives on currency exchanges.
Individuals can trade, sell, or speculate against derivatives. Additionally, you can use derivatives as collateral for loans and lines of credit. For example, many speculators and traders buy derivatives on the margin (loans guaranteed by future trading or speculating proceeds).
Derivatives are big business. The Bank of International Settlements (BIS) estimates the value of the gross market value of global derivatives at $12.6 trillion in the first half of 2021. In addition, the notional value of outstanding derivatives was $610 trillion at the end of June 2021.
How Does the Mirror Protocol Work?
The Mirror Protocol (MIR) builds smart contracts on the Terra blockchain. A smart contract is a digital robot that performs a particular task.
For example, the Mirror Protocol creates derivative smart contracts that create mAssets. I consider the mAssets smart derivatives that monitor the market and match the prices Mr. Market pays for assets. For example, an oil mAsset will monitor oil prices and match the price of a barrel of oil in global or national markets.
Meet the mAssets
Notably, Mirror offers mAssets for popular stocks, including Apple (AAPL), Amazon (AMZN), and Alibaba (BABA). In addition, they offer mAssets for the Bitcoin (BTC) and Ethereum (ETH) cryptocurrencies. Those assets are mAAPPL, mAMZN, mBABA, mBTC, and mETH. Therefore, the mAssets are real and available for trading now.
The Mirror Token (MIR) is a cryptocurrency, the Mirror Protocol mints. They claim the Mirror Token ensures liquidity for mAssets markets by rewarding users who stake Mirror’s liquidity protocol (LP) with MIR.
Theoretically, people who buy MIR create liquidity. In detail, the Mirror Protocol converts the money people spend on Mirror Tokens into mAsset Market liquidity.
Mirror Token holders will receive voting privileges in the Mirror DAO (decentralized autonomous organization) and share of mAsset withdrawal fees.
How TerraSwapp and Mirror guarantee Liquidity
Mirror Token (MIR) holders can swap MIR for TerraUSD (UST)stablecoins and establish UST trading pairs for Mirror Assets on Terrasawp. Terraswap is an automated market maker (AMM) protocol. In other words, Terraswap is a protocol that builds markets on the Terra blockchain.
Thus, users can build markets for mAssets with Terraswap. The hope is to create a decentralized on-chain exchange for mAssets.
Additionally, Terraswap builds liquidity pools which provide liquidity through TerraUSD. TerraUSD is a stablecoin, a cryptocurrency that contains a smart contract. To elaborate, the TerraUSD smart contract makes payment in US Dollars from a bank account.
What Value Does TerraUSD offer?
On 8 March 2022, CoinMarketCap gave TerraUSD a Coin Price of $1, a Market Capitalization of $14.015 billion, a Fully Diluted Market Cap of $14.013 billion, and a 24-Hour Market Volume of $533.851 million. They based those numbers on a Circulating Supply of 13.95 billion UST. Hence, I consider TerraUSD a major stablecoin with real value.
Hence, Terraswap guarantees liquidity in US Dollars. Theoretically, Terraswap offers $14.015 billion in liquidity through TerraUSD.
US Dollars are the world’s reserve currency. To explain, a reserve currency is the fiat currency banks conduct international transactions in. For example, Goldman Sachs (GS) extends loans to Chinese or South African customers in dollars.
Consequently, the US Dollar serves as the standard currency for traders and speculators. They value most cross border trades in dollars and many speculators only conduct business in USD.
What Value Does the Mirror Protocol Have?
There is interest in the Mirror Protocol. For example, CoinMarketCap named the Mirror Protocol (MIR) as the fifth-most trending cryptocurrency on 6 March 2022. In contrast, the Mirror Protocol was CoinMarketCap’s 326th largest cryptocurrency on 8 March 2022.
In contrast, CoinMarketCap gave the Mirror Protocol a Coin Price of $1.51, a Market Capitalization of $117.044 million, a Fully Diluted Market Cap of $561.064 million, and a 24-Hour Market Volume of $124.975 million on 8 March 2022. They based those numbers on a circulating supply of $77.743 million MIR and a Total Supply of 370.575 million MIR.
In comparison, CoinBase gave the Mirror Protocol a Coin Price of $1.51, a Market Cap of $117.6 million, and a 24-Hour Market Volume of $125.3 million on 8 March 2022. They base those numbers on a Circulating Supply of 77.7 million MIR. I think the Mirror Protocol is unstable because CoinBase gave it an all-time high Coin Price of $12.86.
In the final analysis, I consider the Mirror Protocol (MIR) because its creators have a product real people (derivatives) are paying real money for in the real world. Additionally, Mirror is offering a DeFi product that could be backed by $14.015 billion in liquidity. Therefore, I consider the Mirror Protocol a cryptocurrency that could make money in the real world.