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Why Mirror Protocol Should be On Every Crypto Investors’ Watchlist

Why Mirror Protocol Should be On Every Crypto Investors' Watchlist
Why Mirror Protocol Should be On Every Crypto Investors’ Watchlist

Belgium (CoinChapter.com) — There are many decentralized finance projects and protocols to take a closer look at today. Mirror Protocol positions itself as an intriguing option, as it brings more assets to the blockchain. But does that make it a worthwhile investment?

Under The Mirror Protocol Hood

The concept behind Mirror Protocol is relatively simple: creating more fungible assets on the blockchain. They are often referred to as synthetic assets, which are digital tokens on the blockchain representing the value of real-world assets. By bringing these new assets to smart contracts, teams can explore different opportunities in the decentralized finance world.  

Every time a real-world asset is minted via Mirror Protocol, it is created as a mAsset. The minting process requires locking up over 150% of the asset value in stablecoins or mAssets as collateral. In this process, it is essential to ensure underlying asset prices are accurate. Mirror Protocol relies on decentralized price oracles for this concept, updating values every 30 seconds. All created mAssets can be burned again by the issuer.

Since its inception, Mirror Protocol has brought its assets to Terra and Ethereum. The latter functionality is made possible thanks to the Shuttle, creating a bridge to the existing infrastructure. Currently valued at a market cap of $452.19 million and $2.19bn in total value locked, traders have started showing an incredible interest in these synthetic assets.

Some Potential Advantages

The main selling point of Mirror Protocol is how it brings tokenized US equities to a global audience. For example,  one would be able to trade Tesla or Netflix stocks over the blockchain without directly owning the underlying asset. An interesting approach for those looking to diversify their existing cryptocurrency portfolio.

According to the team, the introduction of fractional orders will also prove beneficial. Under normal circumstances, one can’t execute fractional orders on their own. Instead, multiple orders need to be bundled together, creating a delay in execution. However, through blockchain technology, that appears no longer an issue, allowing for better, faster, and more transparent execution.

As anyone can create mAssets – as long as they have sufficient UST or other mAssets as collateral – there are many opportunities to explore. Pegging the mAsset to the real asset is done through the price oracle, even if there is no direct link with the real-world asset besides its value. This latter aspect may prove to prove a bit unusual, yet it seems to work out, for now.

What To Look Out For

The concept of tokenizing real-world assets on the blockchain is still relatively new. Anything can and will happen in this space, as there are still some potential regulatory issues that can rear their ugly head in the future. Regulators have shown a keen interest in cracking down on new products involving blockchain technology recently. 

Second, there are only selected US equities to be tokenized through Mirror Protocol today. That is normal, as the platform only launched a few months ago. Expanding the list of mAssets will prove essential to ensure this project can remain viable. Even so, no one can gauge future interest in this protocol or its products.

Mirror Protocol prices have surged 185 percent since launch.
Mirror Protocol prices have surged 185 percent since launch. Source: MIRUSDT on TradingView.com

On the same topic, liquidity will be a crucial aspect of the Mirror Protocol. It is one thing to let users tokenize real-world assets for mAssets, but there needs to be substantial trading volume. For now, there is sufficient liquidity, but that situation can change at any moment. Users can provide liquidity for additional rewards, ensuring there will always be some degree of smooth capital flow. 

Closing Thoughts on Mirror Protocol

The concept of synthetic assets on a blockchain has tremendous appeal and potential. Particularly if that means one can create any existing asset or equity on the blockchain and receive exposure to its price fluctuations. This is a very different approach from traditional cryptocurrencies. Catering to the needs of institutional users is essential, but that can only work if Mirror Protocol can sustain itself.

Whether the protocol will be capable of doing so is a different matter. The liquidity aspect is only a part of the equation but an essential one. Support for additional equities – outside of Tesla, Netflix, Google, Twitter, and others – may be difficult to achieve. Although the current collection represents some of the most popular equities, there are still potential regulatory concerns to consider.

A Messari Research calls Mirror Protocol the Robinhood 2.0.

Featured image from Pixabay

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JP Buntinx_CoinChapter
Jean-Pierre Buntinx

JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.

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