Proposal: Add support for mAssets from Mirror Protocol on CREAM Ethereum

Hello, I’m a community member from the Mirror Protocol ecosystem. I’m posting today regarding support for the following synthetic assets from Mirror (mAssets):

  1. mTSLA: https://etherscan.io/token/0x21ca39943e91d704678f5d00b6616650f066fd63
  2. mTWTR: https://etherscan.io/token/0xedb0414627e6f1e3f082de65cd4f9c693d78cca9
  3. mVIXY: https://etherscan.io/token/0xf72fcd9dcf0190923fadd44811e240ef4533fc86
  4. mIAU: https://etherscan.io/token/0x1d350417d9787e000cc1b95d70e9536dcd91f373
  5. mMSFT: https://etherscan.io/token/0x41bbedd7286daab5910a1f15d12cbda839852bd7

I chose these specific mAssets to start with because these are the top 5 mAssets by liquidity on Ethereum (Source: https://info.uniswap.org/token/0xa47c8bf37f92abed4a126bda807a7b7498661acd). They also represent a mix of different asset types: US equities (TSLA, TWTR, MSFT), commodities (IAU), and ETF (VIXY).

Each of these assets have UST pairs on Uniswap with ~17M of liquidity, which I believe is more than sufficient.

Motivation

  1. I believe creating borrow/lend markets for these equity synthetic assets would be extremely interesting; it would allow CREAM to “look outward” and provide a use case outside of pure crypto assets
  2. These assets are the most liquid of all mAssets, and I believe sufficient time has passed for Mirror Protocol to prove its resilience (5 months)
  3. Support of these assets will expand the TVL of CREAM
  4. If this proves to be successful, it will open up the floodgates for borrowing/lending of synthetics, and would position CREAM as the leading protocol in this arena

Background

mAssets are synthetic assets from Mirror Protocol (https://mirror.finance/). 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.

At the time of this writing, Mirror has $2B in value locked within the protocol, and does ~$40M in daily volume. Mirror Assets are live on the Terra blockchain, Ethereum, and Binance Smart Chain.

Specification

Docs: https://docs.mirror.finance/
Github: Mirror Protocol · GitHub
Contract Audit: DocSend
How Price oracle works: Mirrored Assets (mAssets) - mirror

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Disclaimer: Before I begin, I must state that I am new to Cream Finance governance- I am an avid Mirror user and hold a lot of stocks on Mirror platform. So my views may be biased!

I believe that this partnership is a no-brainer, in-fact it’s a match made in heaven for variety of reasons:

Future of financial markets: I believe that addition of mAssets to a lending-borrowing protocol like Cream Finance is a natural progression of evolution of stock markets. Enabling lending and borrowing of stocks like Twitter and Tesla has potential to unlock value for global investors in a way that traditional finance has not seen till date.

Yield for holding stocks: Imagine holding Twitter stock (mTWTR) on Cream and lending it on Cream for 3% lending yield (getting yields higher than dividends on a fast growing stock would be mind-boggling for major investors)- that’s what blockchain can do.

Leverage trading on stocks: Imagine if someone had power to long TSLA (mTSLA) stocks with leverage at such a cheap cost - I know several retail and marquee investors who wanted to take a leveraged bet on Tesla in 2019/2020 but could never do it because of lack of avenues to do so. This low cost, low-barrier possibility could only happen when stocks come on blockchain. If you are not an Elon Musk, no bank today will accept your Tesla stock as collateral and give you capital on behalf of it (think about how huge this is!!)

New capital inflow and user base for Cream: Mirror has a TVL of over $2bn and its users are not just retail audience but also several funds in crypto and non-crypto space. Being the first protocol to enable lending and borrowing on mAssets (mirrored stocks), Cream would naturally attract a new unique user base and fresh capital resulting in a solid potential boost-up of TVL for Cream Finance.

First to market: I believe Cream Finance has a golden opportunity by being first in adopting Mirror Protocol and emerging as the pioneer in driving the frontier of modern finance before Aave or Compound does so.

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Why not try to support the mSTONK LPs instead of the straight TKns

Im not sure how liquid and supported they are on Ethereum.

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Hm yeah I thought about this too. I think the benefit of supporting the straight tokens is that they theoretically will be used for both borrowing / lending. It’s probably interesting for some users to take both sides for price exposure.

For LP tokens, there is clearly a borrowing use case, but why would someone lend this out? A holder of an LP token would be forgoing the MIR yield they could receive by staking, so the opportunity cost is quite high. What do you think?

I agree with concept.
How would liquidations be affected if UST fails or goes off peg or MIR price collapses? Would CREAM have to take custody of assets on Terra chain in order to completely gain control of liquidated mTokens and keep CREAM solvent?

Mirror uses Band Protocol as price oracles which is known to have outages, delayed updates, and unreliable data sources. I’d prefer using Synthetix assets sTSLA and sXAU which use ChainLink oracles like Cream platform itself. I’d add sBTC and sETH to the proposal which gives us >80% coverage of all their synths and we already have support for their sUSD. sNIKKEI and sKRW would be good to attract asian markets, maybe sDEFI too for another ETF produt.

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1/ Our stablecoins have been around for ~2.5 years (KRT) without breaking peg, so our tech has a long history of stability
2/ MIR price doesn’t affect liquidations. If a minter utilizes UST for collateral and the price drops in half a day later, the amount of collateral in the position also halves
3/ if User A buys a minted mAsset from a minter, User A does not have to worry about liquidation/solvency issues. When a minter gets liquidated, ANOTHER user is burning his mAsset to in order to claim the collateral from the minter’s position (this is equivalent to the Maker liquidations). Thus CREAM is never in a position where it will need to take custody of these assets. The mAssets (regardless of chain) is always over-collateralized by UST