Mirror Protocol (MIR)

Mirror Protocol

Type	Synthetics
Total supply	370,575,000 MIR
Website	https://mirror.finance/

Basics

• Announced on: 3-12-2020
• Mainnet release: Mirror Finance Mainnet v1 was launched in December 20201 Mirror Finance Mainnet v2 was launched on June 25th 2021.
• Based in: Korea

• From CoinDesk (8-12-2020):

"Mirror will be "A way to mint crypto assets that mimic the value of shares in publicly traded companies like Apple or Tesla. Known as mAssets, these tokens will track the price of U.S.-based equities in the real stock market, using an oracle system that’s able to check prices every six seconds. Much like MakerDAO, if a stock price were to go up against its underlying collateral, that could trigger a slashing event for a given crypto asset (unless the collateral depositor increases their stake). But U.S. equities also don’t tend to move as quickly as crypto."

• From their docs (1-2021):

"Mirror is a DeFi protocol powered by smart contracts on the Terra network that enables the creation of synthetic assets called Mirrored Assets (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."

History

• Seemed to have shut down development in 2021 after the SEC issues started.
• Created by the people behind Terra (8-12-2020).

Audits & Exploits

• Bug bounty program can be found here up to $150.000 (19-1-2022).
• Mirror Smart Contract Audit by Cyber Unit
• Scored 86% on DeFi Safety (14-1-2022):

"Activity is over 10 transactions a day on contract Staking.rs. Full deployed code examples are in the Appendix. As per the SLOC, there is 9% commenting to code (CtC). Full test suite code examples are in the Appendix. As per the SLOC, there is 1009% testing to code (TtC). No Mirror Finance test report was found in their documentation or in their various GitHub repositories.

CyberUnit published a Mirror Finance audit report in October 2020.​ Cryptonics published a Mirror Finance audit report on June 22nd 2021. Mirror Finance Mainnet v1 was launched in December 20201 Mirror Finance Mainnet v2 was launched on June 25th 2021. Note: All results are public and most fix recommendations were successfully implemented by the Terra Team."

Bugs/Exploits

• After the UST depeg, stories began to emerge of a large exploit within Mirror (28-5-2022):

"The total amount drained in this one TX from the Mirror bug was 89,706,133 UST !!! In October 2021. After 89M were drained from the contract, the UST balance never got "too large". Fully draining would have immediately alerted users.

Hacker was probably waiting for the contract's UST balance to grow again. We can actually see the hacker re-prepared multiple short positions for a repeat exploit. But the opportunity never presented itself."

Governance

Admin Keys

• From DeFi Safety (14-1-2022):

"a) The contracts are clearly labelled as upgradeable within Mirror Finance's voting process documentation. b) Governance Contract is OnlyOwner of itself and there are defined community roles when it comes to the communal voting process. c) Capabilities for change in contracts through proposal voting is described in "Proposal Types". There is no evidence of Pause Control or a similar function in the Mirror Finance documentation or GitHub repositories."

• From their docs (1-2021):

"There are no admin keys with privileged access. After the initial bootstrapping of contracts, the Gov contract is set to be the owner of the Mirror Protocol contracts and all changes must be made through the governance with the procedure defined in this section."

• From their docs (3-2021):

"There are six different categories of proposals that can be made: Whitelist a New mAsset, Register Whitelist Parameters, Modify Mint Parameters, Modify Governance Parameters, Spend Community Pool, and Submit Text Proposal."

DAO

• From Our Network (13-2-2021):

"Mirror’s community is heavily active in the governance of the protocol via the Mirror Forum, where proposals to change parameters of the protocol, whitelist new assets, and configure incentives are active. Active participation is reflected by more than 70 formal proposals undergoing voting in 2 months, 34.94 % of the total quantity of MIR staked for governance."

Treasury

• From CoinDesk (8-12-2020):

"There will also be an ongoing staking reward to LUNA holders, as well as a set aside for a development fund for MIR governance to spend as it sees fit."

• From their forum (11-1-2021):

"The Mirror Protocol holds a store of MIR token in the community pool as a reserve to be used for the enhancement and empowerment of the Mirror Protocol ecosystem and community."

Token

Token allocation

• From CoinDesk (8-12-2020):

"MIR will be distributed at a constant rate over a four-year period to users who contribute liquidity to automated market makers (AMMs) trading mAssets or trading MIR itself on Terra’s Terraswap or on Ethereum’s Uniswap. Mirror has specific interfaces for providing liquidity to pools either on Ethereum or Terra’s own chain. Only pools that pair the assets with TerraUSD will be eligible for MIR. Of that 9.15 million will be distributed to UNI holders in an initial airdrop, with the same amount to LUNA holders. There will also be an ongoing staking reward to LUNA holders, as well as a set aside for a development fund for MIR governance to spend as it sees fit." 

• From their docs (1-2021):

"The distribution structure at the end of year 4 will look like the below:

1. Airdrop: The airdrop amount which was originally distributed to UNI holders and LUNA stakers will now account for 4.9% (18.3M) of the total token supply.
2. LUNA staking reward: 4.9% (18.3M) will be distributed to LUNA stakers throughout the first year since the launching of Mirror Protocol. MIR will be distributed every 100,000 blocks (approximately once every week) to Luna stakers only on the first year, starting from block height 920,000. Snapshot will be taken every 100,000 blocks to determine who is eligible for the staking reward distribution.
3. mAsset LP Staking: 45.1% (167.27M) tokens are distributed to all mAsset and mAsset (mETH) staking pools by the end of year 4. Tokens are distributed daily to each staking pool (initially 13 pairs for each Mirror and mETH) based on their weight compared to other assets.
4. MIR LP Staking: 10.4% (38.6M) tokens are evenly distributed to MIR-UST and MIR-UST (mETH) staking pools by the end of year 4. MIR-UST pair has an initial weight of 300, which is greater than weight of mAssets (First batch of mAssets have 100, and whitelisted mAssets have 30 weight).
5. Community Pool: 34.6% (128.1M) of total MIR supply will be distributed to Community Pool by the end of year 4."

Utility

• MIR is a governance token (8-12-2020).
• From CoinDesk (8-12-2020):

"MIR holders will earn a fee when users retire mAssets to reclaim underlying collateral; 1% of the collateral will be redistributed to MIR. Holders of tokens with airdrop rights will need to visit the Mirror site to claim rewards. Institutional investors that want to farm MIR can do so through FalconX." 

• From Terra's Twitter (6-2-2021):

"On Mirror, the primary value accrual mechanism (besides demand for governance) is the 1.5 percent fee charged to minters when they close their CDP, concurrently burning the minted mAssets. The collected fees are converted to UST to buy MIR, then dispersed to MIR stakers."

• From their docs (1-2021):

"There is a fixed fee called the LP commission is 0.30% which serves as a reward for liquidity providers for Mirror-related pools on Terraswap."

Technology

• Whitepaper can be found here (23-10-2020). And the v2 paper here.
• Code can be viewed here. From DeFi Safety (14-1-2022):

"With 317 commits and 5 branches, this is a very healthy repository."

Implementations

• Built on: Terra and Terraswap (by Terraform Labs) and Ethereum and BSC; "Mirror on Ethereum is available via a bridge called Shuttle, which facilitates cross-chain transfers of assets between Terra and Ethereum networks (mainnets and testnets supported)."

How it works

• From CoinDesk (8-12-2020):

"Minting a synthetic equity on Mirror, only requires users staking 150% [compared with 750% on Synthetix] of its value in one of Terra’s various stablecoins, thanks to the low-volatility of these assets. (These assets can also be minted using other mAssets as a stake, but they then require a 200% stake.)"

• From their docs (1-2021):

"The minting of mAssets is decentralized and is undertaken by users throughout the network by opening a position and depositing collateral. Mirror ensures that there is always sufficient collateral within the protocol to cover mAssets, and also manages markets for mAssets by listing them on Terraswap against UST."

"mAssets are traded through interacting with liquidity pools on Terraswap."

Upgrades

• From their blog (25-6-2021):

1. "Pre-IPO Assets: Mirror now unlocks a decentralized method of minting, trading, and LP’ing mAssets before they are officially exchange-listed. See the step-by-step process here.
2. Incentives for Governance Participation: to reward governance participation, 50% of MIR rewards will be distributed to voters on active polls, while the remainder will be distributed to all stakers. Users who want to vote but do not have enough information to vote “Yes” or “No” can also vote to “Abstain”.
3. Governance Poll Quorum: to alleviate the problem of proposals unexpectedly failing to pass after reaching quorum (10% → 9.99%) due to additional MIR being staked to governance, a snapshot will be taken of the total amount of staked MIR during the poll timeframe. This snapshot will be used to calculate quorum fulfillment.
4. New Collateral Options: MIR, LUNA, ANC, bLUNA (to be added soon), and aUST are now collateral options to mint new mAssets. Volatile collateral options will have an additional collateral premium whereby they will be multiplied by 133%, such that a borrow ratio of 150% → 200%.
5. ‘Mint/Short’ LP Token: to remedy the mAsset premium, Mirror V2 introduces “short minting” to lower premiums and reconfigure dynamics between buying -> LP and mint -> LP via the generation of short LP (sLP) tokens."

Staking

• From their docs (1-2021):

"MIR is valuable as it is can be staked to receive voting privileges and to earn a share of the protocol's CDP withdrawal fees."

Liquidity Mining

• From CoinDesk (8-12-2020):

"MIR will be distributed at a constant rate over a four-year period to users who contribute liquidity to automated market makers (AMMs) trading mAssets or trading MIR itself on Terra’s Terraswap or on Ethereum’s Uniswap. Mirror has specific interfaces for providing liquidity to pools either on Ethereum or Terra’s own chain. Only pools that pair the assets with TerraUSD will be eligible for MIR. Over the next four years, interested users can farm MIR by contributing to liquidity pools for MIR and mAssets on Uniswap and Terraswap."

Interoperability

• From CoinDesk (8-12-2020):

"Since Mirror runs on Terra’s blockchain, users will need to bridge with Ethereum to earn rewards there. “Initially we are using a centralized bridge of our creation to bridge (called Shuttle) but we should be migrating to a more decentralized bridge called Wormhole early next year,” Kwon told CoinDesk in an email."

Oracle Method

• "Integrates Band Protocol Oracles to Secure Over $50M in Synthetic Stocks and ETFs" (16-12-2020).

• From their docs (12-2020):

"An oracle feeder is a designated Terra account responsible for providing an accurate and up-to-date price feed for a specific mAsset and is the sole party that is permitted to update the registered reported price of the reflected asset. Because of its crucial role in the operational stability of mAssets, the oracle feeder is elected through governance and will be swiftly replaced by the community if ever it underperforms in its duties."

• From their docs (1-2021):

"mAssets are soft pegged to the oracle price, which means that the Mirror protocol does not directly rely on price oracles to determine the trading prices of mAssets. Instead, Mirror relies on a combination of the minting liquidation process, arbitrageurs, and governance changes to keep mAsset prices close to oracle prices."

Privacy Method

• From their docs (1-2021):

"Mirror aims to be decentralized in all aspects including whitelisting, governance, minting, and trading. As a result, as long as you have UST balance, you are able to perform all functions available on both the Mirror protocol as well as Mirror protocol-owned Terraswap pools without any need to go through a KYC process."

Compliance

• Seemed to have shut down development in 2021 after the SEC issues started.

Roadmap

• Can be found [Insert link here].
• Is working on V2 (15-6-2021 with their testnet live:

"New Features on Mirror V2: - Improved incentives for gov participation - New collateral options: LUNA, MIR, ANC, aUST - Shorting incentives (generating sLP tokens) - Pre-IPO assets"

Usage

• MIR, >340M in TVL (1-2021).
• From Our Network (13-2-2021):

"Within 2 months, the total value of all UST and mAssets in liquidity pools (on the TerraSwap and Ethereum Uniswap pairs total) surpassed $213 million. Daily trading volumes of mAssets have also been steadily increasing, peaking at $44.42 million on 02/07. Total value locked (TVL), the total value of collateral, liquidity, and staked MIR currently sits at $419.79 million, which would place Mirror among the top 17 DeFi protocols by TVL."

• Has locked in over 800M UST in liquidity, collateral, and staked MIR (3-3-2021).
• From Our Network #67 (17-4-2021):

"Mirror Protocol's TVL recently surpassed $2.0 billion (currently ~$2.1 billion) and $1 billion in total liquidity, representing the total value of all mAssets and UST in liquidity pools. Including Terra, Ethereum, and Binance Smart Chain TVL (plus Pool2 MIR pairs), Mirror has become a top 15 cross-chain DeFi protocol (by TVL) within 5 months of launch."

• From Our Network (31-7-2021):

"Mirror began to see large spikes in new accounts created in Q1 as new users rushed into the crypto space. Registration numbers returned to lower levels following these initial peaks in mid-March, but the number of new accounts has risen quickly following the recent launch of Mirror v2 on June 24."

Projects that use or built on it

• mAssets are being used by Set Protocol, Injective Protocol, and Nebula (25-6-2021).
• Nexus Protocol; risk-minimized vaults for Anchor borrowers and Mirror delta-neutral strategies to maximize yield (28-8-2021).

Competition

• Synthetic protocols

• Synthetix

Team, Funding, Partners

Team

• Full team can be found [here].
• Created by the team of Terra.

Funding

• From CoinDesk (8-12-2020):

"Arrington XRP Capital has invested in Terra and all its related projects. The firm shared an advance draft of a report on the opportunity Terra has entered with Mirror called “The Standard For Synthetic Assets: Mirror, DeFi’s 1-To-N Opportunity.”"

Partners 

• Partnered with Injective Protocol, Terra, and Band Protocol to access the $90 trillion stock market in a permissionless manner.

• From the EasyFi blog (6-4-2021):

"Mirror Protocol & EasyFi are entering into a partnership to bring tokenized stocks and other real world assets such as commodities (oil) as collateral markets on EasyFi lending protocol This will mark the launch of the Tokenized Stocks and Commodities Money Markets on EasyFi."

• From their blog (25-6-2021):

"Mirror has partnered with PancakeSwap, UniLend, Mask Network, Band Protocol, Beefy, Wing, Pickle, MathWallet, Set Protocol, ApeBoard, Kash, Ramp DeFi, and Nerve Finance, amongst others, to widen the usage of mAssets."

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