How I explain Mirror Protocol to my friend who Hates Day-Trading
“Mirror protocol. Why “mirror”? And what is a protocol?”
My friend asked me this when I first told him what I was doing, which was investing in Terra.
He is what you might call a passive investor. He’s good with things that earn interest over time, but he hates anything to do with day-trading and “techy talk”.
But I’m trying to get him to understand that he can still invest without having to know a single thing about day-trading or technical jargon.
“What the blazes is mirrored stock? You crypto people never explain anything properly before going on and on…”, He says. And I nod, because it’s true.
Well, let’s try to change that.
“What is a ‘mirrored’ stock?”
Mirrored stocks are, basically, assets that live on the blockchain. It is a token designed to closely follow the price of a real stock. You can own this token, transfer it to someone, buy it, or sell it. But it’s not the same as owning stock.
The Mirror Protocol has this to say about mirrored assets (mAssets):
mAssets are blockchain tokens that behave like “mirror” versions of real-world assets by reflecting the exchange prices on-chain. They give traders the price exposure to real assets while enabling fractional ownership, open access and censorship resistance as any other cryptocurrency
Simply put, it’s different from owning stock in that:
- You won’t own any share of the company.
- You won’t get any dividends.
- You won’t have any voting power or say over what the company does.
With all these cons, you might think, then what’s the bloody point of mirrored assets? You might as well buy the real deal.
And you’re hardly wrong: it is far more advantageous to get the real stock of the company — that is, if you can buy it in the first place.
Not everyone has the same access to financial tools.
Now, what do I mean by this? For example, depending on where you stay in the world, your ability to buy US stocks may depend on the relationship of your country of origin and the US.
Taxes, fees, and withdrawal methods all depend on this one way or another. If you are unlucky, there might only be one brokerage accessible to you, and therefore they can charge high withdrawal and deposit fees to route your funds through their approved partners.
People from low-income groups can hardly dream of participating in financial markets. Many of them rely on trusted proxies such as family and friends to invest their money, into small businesses that may or may not make it. Some get roped into get-rich-quick schemes and multi-level marketing programs, unknowingly putting their life savings in the hands of thieves and swindlers.
In addition to this, trading stocks as a beginner is a difficult and often lonely experience:
- Experienced traders rarely share knowledge without expecting some form of upfront payment for ebooks/programs that end up being expensive and ineffective.
- There’s no sense of belonging to a community in Wall-street-style stock trading. You either know how to swim or you don’t. Everyone’s out to profit, and if you don’t figure it out yourself, you’ll get eaten by the sharks.
How many people on a stock forum will teach you how to short? Or explain to you in detail what it means? How many anonymous stock traders are willing to help you understand fundamentals, without filling their own pocket first?
More than just a place to trade stocks, Mirror is a community-based solution to financial inaccessibility.
Without prior financial prowess, anyone can start reading Mirror’s documentation and create a Terra wallet to begin participating in financial markets and buying US stocks and indices. No documents required/no minimum capital.
And if you need a little more guidance? Heck, there’s a telegram, and a discord group where active mods and existing users are more than happy to bring you up to speed on learning how to profit.
Why the stark difference from traditional trading communities?
This is because crypto has created a kind of no-loss mindset where, the more people use an ecosystem, the more profitable it is for everyone else.
The more people who use Mirror, the higher the transaction volume, the more trading fees can be earned by the platform’s liquidity providers (which are also regular users), and the more valuable it becomes.
Anyone can create an account, regardless of where they live.
- You don’t need any documents or give up any personal information to sign up.
- You are the only custodian of your funds, and as long as nobody else knows your private key, they’re safe.
This means that anybody with an internet connection can have access to open markets, and keep their own funds without any third party in the way! No bank or institution, not even Mirror has control over your funds.
You choose what level of approval you give, as well as when and where that approval starts or stops. That is the power of having a decentralized wallet, and unlike centralized apps like Robinhood, no government or corporate entity can interfere with your funds or trading activity.
“Okay,” my friend says. “I’m starting to get it. So this allows people who can’t buy stocks to do it, but on the blockchain, which is decentralized cos nobody controls it, right?”
“Exactly right.” I said.
My friend looks deep in thought for a moment. “Alright, but answer me this…”
Are mAssets legal to own? Is it problematic to trade them because they’re not real stocks?
As Matt Levine writes, high profile investors and institutions already use mechanics like “cash-settled swaps” to own stock without really owning it.
So, although owning stock on Mirror Protocol is not equal to owning a real life 1-for-1 Tesla or Apple stock, it’s not something that hasn’t been done before by institutional or high profile investors.
Owning an mAsset is like making a bet with your friend that says “If the stock price goes up by 1$, you’ll pay me 1$”. The inverse happens if the stock price goes down.
But instead of betting with just 1 friend, through Mirror, you can now bet with thousands of other people. Most importantly, because it’s decentralized, you can do this without any middlemen taking a cut or cooking the books.
In this way, people can speculate on the price of stock without having to jump through all the regulatory hoops, or trusting any third party, and without needing any of the capital and status that “cash-settled swaps” investors have.
As far as legality goes, trading on Mirror uses UST, which is a digital asset and not a government-regulated currency. Since Mirror does not accept any FIAT money from you to begin with, as long as you use a digital asset exchange that is operating with license in your country to convert FIAT into crypto, and vice versa, there shouldn’t be any major problems.
Depending on your country’s jurisdiction, there might be other caveats, such as taxes, but mostly simply using Mirror should not be quite as restrictive as compared to standard stock trading apps or fiat-to-crypto exchanges.
However, this should not be construed as legal or financial advice, and it is best to check with a legal professional or licensed financial advisor in your area for clarification.
He laughs. But he also nods. He kinda gets it. His body language is open and I can sense that he is making a real connection with the concepts.
“So hey, wanna give it a try?” I said.
“Sure,” he shrugs. “Show me what to do.”
Now that we know what Mirror is all about, How do I get started?
You’ll need a browser and an internet connection to get set up. Let’s go!
- First you need a Terra wallet. You can download the Terra Station app here by clicking “download station wallet”. After you’ve done that, install, and then create a wallet. Remember to store your recovery phrase somewhere safe and physically secure (not in your phone!).
- Next, you’ll want to get the Terra station browser extension. This allows your browser (Chrome, Edge, or Brave) to interact with Terra apps, and let’s you sign for transactions on the Terra blockchain.
- Third, head on over to the Mirror Protocol Website. Click ‘web app’ and then ‘Terra’. Or you can click this link to go directly there.
- When you see a ‘connect wallet’ button, click on it and sign with your password on your browser’s Terra Station extension. That’s it! You now have access to all that Mirror and #TeFi has to offer.
Wasn’t that easy? You didn’t need to input any email or phone number, and you didn’t need to do get any 6 digit code via SMS. This is because blockchain wallets are inherently secure as long as you keep your recovery phrase safe. Do not give your recovery phrase to anyone, even if they say they are Terra or Mirror employees.
If you have any problems, feel free to ask them in the Discord or Telegram channels. Experienced users are generally open to help newbies and there’s no cost! All they ask is that you be a considerate community member and keep spreading the good word of Mirror and decentralized Terra Finance (#TeFi)!
What Mirror V2 has to offer: the simple strategies
Let me start this section by saying that, you don’t follow all the tech news, or understand any of the technical analysis mumbo-jumbo in order to make a profit on Mirror. In fact, you don’t even have to make more than 1 trade, to start earning money for the rest of the year.
“How’s that” you ask?
Mirror allows farming, which is simply allowing your capital to work by providing a way for other traders to make trades more easily, and with better prices. This is called liquidity.
You can earn by providing liquidity with an ‘LP’, and it can be done in a few simple steps.
First, let’s tap on ‘Farm’. Let’s focus on the “Long” column of numbers for now. You can see that there’s a % number, as well as the word “Long Farm”.
This “long” doesn’t refer to a time scale. It is just a trading word that means you want to hold an asset instead of selling it. If I’m “long” Ethereum, I would like to hold Ethereum, preferably because I think that the price will go up!
By providing assets to a Long Farm, you will get paid daily rewards in the form of MIR tokens. MIR tokens can be exchanged for UST, which can be exchanged into fiat money, like US dollars, which you can then spend on your food/rent/anything at all!
Now in order to farm “long”, we need to form an “LP”. Just think of it as a drink recipe:
Recipe: ‘Mirror Protocol LP’ — Long Farm Edition
Serves: 1
Ingredients:
- 1 Part mAsset (mTSLA, mTWTR, mBTC, mGLXY, mIAU, etc.)
- 1 Part UST, finely chopped
Directions:
- Prepare your mAsset. If you don’t have it yet, go to the Trading Page and make your selection. Enter the amount you wish to buy and press ‘buy’.
2. Go to the Farm page of Mirror Protocol and click on the long farm for the mAsset you’ve selected. Remember that you must leave some UST in your wallet in order to make an LP!
3. Proceed until you see that the transaction has completed.
Voila! You are now earning passively from the long farm strategy.
What we just did was basically provide liquidity into the pool for mTSLA and UST. From now on, whoever makes a trade by buying or selling mTSLA, will be paying us part of their transaction as a fee.
What’s more, we will be getting MIR rewards that can be claimed every day via our dashboard! Let’s check out how to do that.
Claiming your MIR rewards
Click on ‘My Page’ on the left side.
From this page, you can see the Total Value of your account, including any assets you are holding, farming, borrowing, or just UST. Below, there are four tabs that you can click to see the detailed break down of each position.
But let us focus on the box on the right for now, titled “Total Claimable Rewards”:
Wow! We already have so many rewards to claim. Actually these are from my other farms that I deposited earlier.
So how do we put all these rewards into our wallet?
Click on “claim all rewards”. You can see that there is a transaction fee (about 15 cents here) that needs to be paid in UST. Always keep some UST in your wallet for this reason.
Once you have claimed, it will look like this:
Now let’s go back to ‘My Page’. You can see that our claimable rewards are now 0, but our holdings have increased:
The MIR is now in your wallet to do as you please. You can collect your rewards once a day, once a week, once a month, or even longer depending on your schedule! Your investment should cater to your timetable, not the other way around.
However, it is good to keep in mind that the more often you collect your rewards, the more often you can compound. Compounding means adding your rewards into your “farm”, so that you can make even more rewards!
Basically, this is the principle of “take less now, get more later”.
You can compound by selling your MIR tokens for UST (also done on the trading page) and then repeating the steps in the recipe above again to create more LP for your farm!
What are some other strategies available?
Aside from farming long, you can also farm short. This is slightly more complicated.
Recipe: ‘Mirror Protocol sLP’ — Short Farm Edition
Serves: 1
Ingredients:
- 1 Part UST, as much as you like
- notes: This recipe does not require you to trade. Instead, the trading will be done on your behalf as soon as you complete the following steps.
Directions:
- Go to the Farm page of Mirror V2 again. Click on the ‘short farm’ of your choice. In this example, we will be using mAAPL. Select the amount of collateral you wish to deposit, any amount will do.
2. Leave the Collateral Ratio at the default value of 200%, unless you know what you are doing. Confirm the short amount — this is the amount of mAsset that will be borrowed and sold on your behalf.
The proceeds of the sale (in UST) is shown below the short amount as “returned UST”. This will be made available to you 2 weeks later.
3. Do note that you will need to buy back the same amount of mAsset that was shorted, in order to close your position and get back your collateral. But we should be able to make enough from MIR rewards to do this in good time.
4. You will also need to pay a 1.5% closing fee when you close the position. Once you’ve reviewed all the amounts, go ahead and click farm!
5. You will see a completion screen just like above.
Now, you will start earning MIR rewards just like in the long farm! The difference is, you are guaranteed to get back half of your initial investment in 2 weeks time, and still earn MIR rewards after that!
However, when you are done farming and wish to retrieve your full capital amount, you must buy back the same amount of mAsset that you had shorted earlier, and pay it back to close the debt. Doing this will also incur a 1.5% fee on your shorted asset.
Pro Tip: You can choose to buy back the mAsset at a time when the price is low, to gain maximum profit! This is why the strategy is called ‘short’, because it is opposite to the ‘long strategy’; you don’t want to hold the asset because you think it’s price will go down!
Now that you know two of the strategies that can be used, how do we get started?
Adding funds to your Terra Wallet
Whenever you’re ready to start farming, add funds to your Terra wallet by going to Kucoin and getting some LUNA, or UST. Or if you’re already an experienced DeFi user, you can get started from Uniswap!
But if you’re new and don’t mind a few extra seconds of waiting, Kucoin offers the smoothest experience for entering Terra. After you’ve created your Kucoin account, all you need to do is to add funds to your account!
There are a few ways to do this:
- You can do this via the direct payment method, from credit card/SEPA/Apple Pay to buy LUNA. Click on “Buy Crypto” in Kucoin:
2. Or you can also buy USDT/ETH/BTC first, and then convert that to UST! Convert USDT to UST by trading on Kucoin.
3. Use your preferred digital asset exchange to buy Ethereum, Ethereum Classic, Bitcoin, or Bitcoin Cash, depending on what is available to you. Any other asset can be used as well, as long as they can be brought over to Kucoin, and then converted into USDT, and consequently UST.
Bonus Strategy: aUST Short
You can get even more yield on your Short strategy, by starting with depositing your UST in Anchor in order to earn an additional 20% per year, on top of what you earn with Yield.
When selecting collateral select aUST instead of UST, and follow the same steps for the rest!
Feel free to explore other strategies on your own. Here are some helpful video guides to help you get strated:
Danku_r’s strategy: https://www.youtube.com/watch?v=mmyML7gQsVI&t=989s
Cle4ncut’s strategy: https://www.youtube.com/watch?v=Dlt9wUQutuE&feature=youtu.be
And that’s how I got my friend, who hates day-trading, to try Mirror!
Happy Farming! And once you get used to Mirror, why not check out LUNA also?
