In two months, trading volume increased tenfold. How great is the potential of Mirror's synthetic assets in the US stock market?
The trading volume of Mirror Protocol's synthetic assets in the US stock market increased by 1051.5% within two months, and liquidity improved by 777.26%.This article is from BlockBeats, with the original title "How Big is the Demand for US Stocks in the Crypto Space?"
Globally, the US stock market remains the most liquid and talked-about investment market.
On January 28, Robinhood, a brokerage platform favored by young Americans, along with several other US-based brokerages, announced restrictions on opening positions for stocks like GME and AMC. At this point, the advantages of decentralized trading platforms became evident.
Currently, the DeFi protocol Mirror Protocol, which has the largest synthetic asset market for US stocks, initiated a vote to launch synthetic asset trading for GME and AMC stocks. As of the time of publication, both GME and AMC passed the vote, with GME receiving approximately 1.51 million votes in favor and 106,000 votes against, while AMC received about 1.51 million votes in favor and 69,900 votes against.
So now, how significant is the demand for US stock trading within the cryptocurrency industry?
Analyzing Mirror Protocol's Minting of US Stocks
Mirror mints synthetic asset tokens for US stocks through over-collateralization with the Terra stablecoin "UST" or mAsset, with a minimum collateralization ratio of 150% for UST and 200% for mAsset. The synthetic asset tokens minted through staking can be traded on Uniswap and Terraswap.
Currently, the price of mAsset is fed every 15 seconds by Band Protocol's oracle to ensure that the price of mAsset remains consistent with the traditional market.
Of course, while the design concept of Mirror Protocol is ideal, in practice, mAssets tend to trade at a premium compared to traditional US stocks, with mTSLA (Tesla synthetic asset) having the highest premium at approximately 25.72%.
Currently, some users have proposed rewarding users of synthetic US stock assets with more mAsset when the premium exceeds 10%, aiming to stabilize prices by increasing supply. However, this proposal has only garnered 1,255 votes in favor, while opposing votes reached 35,369.
The main reason for this is that Mirror Protocol has not provided sufficient incentives for users to mint mAsset, nor has it offered better methods for arbitraging between the two markets.
Many users in the Mirror forum are paying attention to this issue and have proposed various solutions. BlockBeats has summarized several reasonable proposals:
- Lower the protocol fee. The current protocol fee is 1.5%, and reducing it to 0% or 0.1% would benefit arbitrageurs by lowering the cost of synthetic assets.
- Lower the minimum over-collateralization ratio. The current minimum ratio is 150%, and most users believe the reduced ratio should be between 105% and 110%.
- Stabilize the price of UST or issue more UST. UST is an algorithmic stablecoin issued by Terra, but its price is not fixed at $1 or 1 USDT; it is determined by the Terra system token LUNA. Due to the limited supply of UST, its price fluctuations are relatively uncontrollable. Forum users have indicated that when the supply of UST increases, the premium will decrease. Some users have also suggested that if UST could be minted using ETH or BTC, it would stabilize both the liquidity and price of UST.
After 2 months of development, how significant is the trading volume of US stocks on decentralized platforms?
Two months ago (December 9, 2020), BlockBeats reported that the daily trading volume of the top 13 synthetic US stocks on Mirror Protocol was 1.716 million UST, with liquidity at 15.1 million UST. Meanwhile, the daily trading volume of these 13 stocks in the traditional securities market was $78.6 billion.
Two months later, BlockBeats once again gathered the same data:
Compared to two months ago, the trading volume of synthetic US stocks on Mirror has increased by 1,051.5%, and liquidity has risen by 777.26%. However, compared to US stocks, Mirror's trading volume is only 0.022% of the overall market, indicating that it is still in the development stage.
According to official disclosures, Mirror is collaborating with Mask Network to bring synthetic US stocks to Twitter, allowing users to directly purchase UST with fiat currency through channels provided by Transak and exchange it for mAsset.
At the same time, Mirror will also bring synthetic assets to the Binance Smart Chain.
The restrictions on GME trading by brokerages have made more people aware of the importance of decentralized synthetic asset trading. Of course, there are still many issues with decentralized synthetic asset trading, but as The Difiant columnist Owen Fernau stated, providing on-chain settlement for US stocks will be the next holy grail in DeFi.
