DeFi is fast evolving to suit the increased demand for economic independence. As a result, several projects have emerged with a wide range of financial services to match this need. The concept of synthetic assets is a recent innovation.
Synthetic assets are assets that closely resemble real-world financial assets. In addition, they can draw their value from stocks, commodities, and other underlying assets. Furthermore, they do not require physical possession of the items.
In late 2020, Terraform Labs launched Mirror Protocol. For many reasons, Mirror Protocol is a groundbreaking platform. The project is the first synthetic assets protocol built on the Terra blockchain. Mirror Protocol bridges the gap between crypto and mainstream markets. It does this by tracking the price of stocks, futures, exchange-traded funds (ETFs), and other conventional financial assets.
By allowing users to create and use their own synthetic assets, Mirror Protocol satisfies the growing need for tools and services. Mirror Protocol runs on the Terra blockchain; this enables it to perform cross-chain and multi-chain transactions. Furthermore, users can utilize Mirror Protocol to connect to Binance Smart Chain and Ethereum’s network. In addition, the Mirror platform rides on the wings of smart contracts.
Mirror’s synthetic assets are popularly known as mAssets or Mirror Assets. Their function strictly reflects any form of assets, such as crypto or gold. The goal is to combine it all into one active market. This would allow traders to trade various assets in one spot. As a result, they do not have to go through KYC and take place in a completely decentralized manner.
Speaking about the project, Do Kwon, CEO of Terraform Labs, remarked in a press release, “We were motivated to create a way for retail investors around the globe to more easily participate in the U.S. equities market.”
How It Works
The platform’s purpose is to allow traders to exchange U.S. stocks all day long and throughout the week. Mirror Protocol allows anyone to trade from wherever there are. Taking off the barriers makes it easy for anyone to enter the market. Furthermore, individuals do not have to own actual stocks by leveraging Mirror Protocol’s technology.
Terra Network is a decentralized blockchain-based technology. It allows developers to build DeFi software, applications, and protocols. Terra runs on Tendermint and uses a Delegated Proof-of-Stake consensus method, which makes it ideal for projects like Mirror Protocol.
Terra combines DPoS and the Cosmos SDK to create tools for mAssets or synthetic assets. By creating a position on the protocol, users can build synthetic assets that mimic the value of real-world assets. The user must then submit collateral while the system manages the supply of collateral, ensuring that there is always enough money to cover the value of mAssets.
Other Technical Details
Minters and traders are two types of players who help to keep the network running. Minters are network members who create mAssets, which are then traded on the synthetic asset market. Traders then buy and sell mAssets on protocol-compliant exchanges.
The prices of mAssets are always the same as the prices of the stocks and other assets they represent in the real world. As of 2021, Mirror Protocol employs a Band Protocol oracle feeder to do this.
What It Means for Non-Americans
The possibilities with Mirror Protocol are endless; especially for non-Americans. The platform grants access to investors looking to diversify their portfolios. Outsiders who, for example, want to buy Amazon stock outside of Nasdaq and on decentralized networks have full options on Mirror Protocol. This opens up new investment platforms and, as a result, new ways of obtaining or preserving profits.
This system of tokenization of real-world assets lowers the entrance hurdle. Anyone from anywhere in the globe can trade tokenized assets 24 hours a day, 7 days a week, through Mirror Protocol.
In a press release, Joey Krug of Pantera Capital spoke on the importance of Mirror Protocol. He said, “The Mirror protocol provides a foundation for people around the world to have greater access to attractive financial assets.”
Let’s take a look at Mirror Protocol’s price compared with the actual stock price. At the time of writing, the price of Apple’s stock, signified as mAAPL (on Mirror Protocol), is 170.20 UST (UST is a stable cryptocurrency pegged to the U.S. dollar). While on Nasdaq, it is trading at $170.02. Here are other examples:
- mAMZN: 3,235.24 UST – Amazon $3171.78
- mTSLA: 1,041.86 UST – Tesla $1023.35
The MIR Token
Mirror Protocol works with its native token, MIR, which serves a wide range of purposes. First, it works as a reward system for stakeholders. Secondly, it is a token that reflects the voting power of its holders inside the protocol’s decentralized governance.
As of writing, the Mirror Protocol (MIR) price is $1.74. Furthermore, it has a 24-hour trading volume of $17,842,569. Mirror Protocol (MIR) is down 6.30% in the last 24 hours.
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