Synthetic Stocks and Farming on Mirror (TERRA), and how to reach it from HIVE.
A couple of week ago, I introduced the Anchor protocol from the TERRA blockchain. You can find this post here. Today, I am going to introduce the MIRROR protocol, which is quite usefull to add synthetic stocks to your portfolio. You may wonder, what's the point of buying stocks, even though synthetics, in the first place? There is no answer to this question, since it mostly depends on you and your strategy for your portfolio. For example, a lot of people are farming stablecoins or go into PAXGOLD in order to minimize the impact of the next bear market over their assets. From this perspective, that's how I see synthetic stocks, a.k.a a way to diversify my portfolio, while remaining in the crypto space. But first thing first, in order to interact with the TERRA blockchain, you need Terra Station (Terra Station for chrome), the official non-custodian wallet of the TERRA blockchain.
1 - Moving from HIVE to TERRA
This first section is the same than in my post about ANCHOR. So, if you already read my first post, or you already know how to reach TERRA from HIVE, you can directly jump to the second section.
Important : you do not need LUNA on TERRA, since you can pay the TERRA transaction fees in UST. So UST, the official stablecoin of the TERRA blockchain is enough to pay the gas fees
1.1 - Through a Centralized exchange (CEX) that has both HIVE and LUNA listed
The only example that comes to mind is of course Binance. You can withdraw native HIVE to this CEX, trade it for LUNA and withdraw the LUNA on the TERRA blockchain. In the future, UST shall be listed in several exchanges (it already is on KuCoin and Coinbase), thus removing one trade from the process. Once you got LUNA on TERRA, you can head to Terraswap, connect Terra Station and swap your LUNA for UST.
1.2 - Through DEFI using the Binance Smart Chain (BSC)
As I said before, you do not need LUNA on TERRA. Since UST is available on different blockchains, you can directly send UST to TERRA using the Terra Bridge. The Terra Bridge actually works with Ethereum, BSC and Harmony. Due to high gas fees, I only use Ethereum when I have no other choices, and I have yet to discover Harmony. So, for this example I will use BSC.
As a Splinterlands player, when I need to reach the BSC, I swap HIVE for DEC and then I withdraw the DEC to the BSC using the in-game withdrawal options. It is a lazy but fast way to reach BSC. I did some reseaches, and found a trusted HIVE to BNB Bridge(@deathwing) for BSC.
Whether you use Splinterlands or this bridge is up to you. The next step is to swap what you got on the BSC (DEC or BNB) for UST on pancakeswap. Then, you can bridge the UST to TERRA for the price of a BSC transaction using the Terra Bridge.
2 - The MIRROR Protocol
2.1 - Overview
Synthethic are derivatives, backed by collaterals, that follow the price of other assets, such as stocks or other cryptocurrencies. Within the MIRROR protocol, the collateral are the Terra stablecoin (UST) or other Mirror derivatives that are locked for at least 150% of the derivative asset during the mint of mirrored assets. The price of the real assets are tracked through an oracle; the BAND protocol.
2.2 - Go long on Mirrored Assets
As I said in the introduction, I use synthetic stocks to diversify my portfolio and to anticipate the next bear market. From this perspective, I only go long on synthethic stocks, which means I own and hold them. Taking long positions on the MIRROR protocol is really easy. On the main page, you click on trade, and then you can buy any mirrored asset you want using UST. Those mirrored assets have already been minted by others. You can sell them in the same way. A lot of famous assets are available, such as Google, Amazon, Netflix, AirBbB, etc. New assets are constantly added, provided they are accepted by MIR holders (govern section in the main page).
Example of mirrored assets available on the MIRROR platform
2.3 - Go short on Mirrored Assets
The second possibility is to take short positions on the mirrored assets. Short positions are owed rather than owned. In order to do that, you need to go in the borrow section of the protocol. Once you reach this section, you can mint any mirrored assets provided you lock collaterals for a value of at least 150% of the asset you are minting. 150% is the minimum threshold before liquidation, so you should always lock more than than, such as at least 2 times the value of the mirrored assets you are going to mint.
Let's take a simple example about how to make money with short positions. Let's say you think the price of the Netflix stock is going to crash. Then, you can lock 1.000$ of collaterals, mint (borrow) 500$ of mirrored Netflix and then trade your mirrored Netflix stocks for 500$ worth of stablecoins. If the price of Netflix fall by 50%, then you can buy back the same amount of Netflix stocks for 250$ worth of stables, and refound (burn) the minted mirored assets. In such a case, you would have made a nice benefice of 250$.
2.4 - Farm Mirrored Assets and the MIR token
Since mirrored assets are traded on decentralized finance against UST, you can become a liquidity provider for any mirrored assets-UST pairs. This is really interesting. As you probably know, liquidity providers are exposed the impermanent loss. Since the crypto space is quite volatile, liquidity providers often suffers from the latter. Traditionnal stocks are however less volatile than the crypto markets, thus making LP pools really attractives, and also a good way to diversity your portfolio for the next bear market. In addition, liquidy provider receive rewards in the form of the governance token of the MIRROR protocol: the MIR token. The MIR rewards can then be additionally staked into the MIR staking pool, which, at the time of writing, has an APR of 22%.
Thank you for reading. You can see an overview of my crypto ecosystem HERE. Don't hesitate to follow me, I regularly post about a lot of topics, such as DEFI, splinterlands, travel, etc.
