Addition of LunaX (synthetic staking derivate by Stader) as a Collateral asset

1. Proposal Summary

Stader proposes the addition of LunaX as a collateral asset on Mirror. Following are the benefits of this for Mirror protocol and Luna stakers:

a. Providing opportunity to Luna stakers to receive Staking rewards + Air drops while leveraging it as a collateral on Mirror to further mint mAssets
b. We strongly believe this will increase additional demand for mAssets among LunaX stakers as well as other Luna holders (who can amplify their yields via LunaX and leveraging it on Mirror to mint mAssets)

LunaX is a aUST type liquid staking derivative by Stader.

a. LunaX holders are eligible to receive staking rewards and air drops.
b. Staking rewards are claimed and auto-compounded daily increasing the price of LunaX daily.

Over ~2500 unique wallets have minted LunaX on Stader’s liquid staking contract.

  • Total staked Luna: 930k Luna (as of 27th Dec’21)
  • Size of LP on Terra swap: ~1.06 Mn Luna (as of 27th Dec’21)

2. About Stader platform

Stader smart contracts (Stake pools) launched on Terra on Nov 23rd. Liquid staking (LunaX) launched on 9th Dec’21

a. Total 5.5 M+ Luna staked on Stader
b. 12k+ users (unique wallets) staking with Stader with 2300 users staking with LunaX

Looking forward to receiving feedback from Community members.

27 Likes

I like the idea. I believe everyone is thinking… when is winter coming? We need a robust secure protocol that offers an easy, aka 1 click, solution to compounding and leveraging LUNA and UST.

I like Stader and think LunaX is a nice product, but given how difficult it seems to be to get dev resources to maintain MIR, this seems like something that should be low priority (unless Stader is also volunteering to contribute the resources to make this happen).

MIR and ANC were just delisted as collateral because they still require resources to maintain but were rarely used as collateral. (See thread [Proposal] Delist MIR, ANC from collateral list).

LUNA was kept as a collateral asset despite the fact that only 1.5% of all open CDPs use LUNA as collateral (282 out of 18,900), but I suspect that is in part because LUNA is well, LUNA.

From the usage patters, it seems pretty clear that the vast majority don’t care to use volatile assets as collateral for minting mAssets. I don’t see adding LunaX as changing that, and to the extent that LunaX is added, it seems like the main benefit would be for Stader/LunaX, not your average Mirror user.

None of this is to say that adding LunaX would be a bad idea, but rather just that if it is an unfunded proposal that is going to consume already limited resources, we have other things that should be addressed first.

4 Likes

Thanks a lot for your suggestions. A few points below:

  1. Stader team will happily volunteer any development efforts that are required for the integration.
  2. If there is more usage of LunaX as collateral on Mirr, then it should ideally benefit Mirror as well right. Am I missing anything here?
4 Likes

Is it also possible that Luna holders were preferring to stake to get staking rewards and air drops instead of using it as collateral on Mirr? With LunaX, users can get best of both worlds I assume.

3 Likes

Isn’t this going to be a problem for Anchor?

You are giving users the possibility to borrow on LunaX, sell the mAsset, deposit UST on Anchor, bypassing bLuna and bEth, and Anchor is then deprived of the emissions it needs from bLuna in order to provide yield for Earn.

This is good for Stader because you get the fees from people buying LunaX, but is a threat to Anchor.

Yes, users get the cake and eat it… For a time, until we destroy the most attractive protocol on Terra. And if aUST stops yielding a lot of people using aUST on Mirror will be affected.

Not a good idea imo.

1 Like

We have also submitted a proposal to Anchor to integrate stader pools with them. I think it is more important to give an option to users to choose what they want to borrow. If a set of users are interested in using their assets as collateral to mint mAssets, that should be fine right? As a community, we should encourage choices to users and grow the overall pie than being protectionist.
Should we discourage other lending protocols to be built on Terra if they compete for share from Anchor?

2 Likes

Just because you submitted on Anchor, it does not mean it’s good for Anchor.

The problem with this particular proposal is that the type of collateral, I am not saying that we shouldn’t promote diversity. LunaX risks being a threat to diversity by breaking a mechanism a lot of people on this ecosystem really like.

However, I am prepared to yield on Mirror as it takes extra steps and extra risk to do what I described above, but I don’t think it should be listed as collateral on Anchor, but at that point this stops being a discussion that is relevant for Mirror.

I think we should think of the longevity of the ecosystem we love and we should make sure we are smart when building on it, rather than just cater to the short term profits.

2 Likes

@Trinity Your point has merit. However, the problem seems to be “shorting” on Mirror than with $MIM or Stader (assuming you would make a similar argument with $MIM).

Shorting using aUST as collateral has the same pitfall you mentioned. Infact, any lending protocol lending UST & not diverting the yield to Anchor is not good for Anchor. I do believe your point is well-suited for Anchor forum than here.

Also, Anchor will only continue to be the most valuable protocol on Terra only if we keep shooting down every other proposal/protocol that harms Anchor :slight_smile:

1 Like

If Stader is willing to help with the development/implementation, then I think this is a fine proposal.

I’m still a bit skeptical that there will be that many users who will want to use volatile collateral for minting mAssets, but I’m happy to be wrong on that point and to the extent that someone wants to do so giving them the option is helpful for Mirror. And agree that LunaX would be a preferable collateral asset to LUNA since you wouldn’t forgo the staking rewards and airdrops, so maybe there will be higher interest in doing this. :+1:

2 Likes

This is not a problem for Anchor at all.

Mirror currently allows UST, aUST, LUNA, and mAssets to be used as collateral (and formerly ANC and MIR). LunaX would just be an alternative to using LUNA and makes for a better collateral asset since it accrues yield.

Anyone currently using LUNA as collateral would be “depriv[ing Anchor] of the emissions it needs from bLuna in order to provide yield for Earn” as you describe it. I’m not sure I understand why you think Anchor is somehow entitled to the yield off of some person’s LUNA (or LunaX).

The user still owns the collateral. Mirror is just holding the user’s collateral to make sure that the CDP has sufficient backing in case the minted mAsset increases in price. Ideally, Mirror would be happy to take most anything as collateral (BTC, USDC, etc.) but the infrastructure doesn’t exist currently.

If you are worried about Anchor, the thing to worry about is using aUST as collateral, not LUNA or LunaX. The vast majority of CDPs are opened with aUST and aUST is purely on the deposit side (“Earn”) of Anchor, but Anchor seems to be fine with aUST being a liquid asset and useable for collateralization (see Degenbox), but that is another debate entirely.

1 Like

The statistics show that not many people use Luna as collateral, probably because they would rather stake it or put it in borrow.

aUST can be generated by borrowing UST in Anchor > put borrowed amount in aUST > use it in Mirror, so I have to disagree with you on that one.

I have looked at Stader’s other proposal in Anchor and I think that’s a good way of using LunaX when eventually they’ll have bLunaX. I think it’s better than using it in Mirror, because Anchor gets the emissions.

But from other discussions I saw, the opinion is split between those who care about it and those who don’t.

So I am not even going to try to “win” this argument.

People like UST because of aUST, and when aUST stops yielding anything the interest in UST will decline. It still has decentralisation in its favour so it won’t be all doom and gloom obviously.

I have also seen the case of people saying that you shouldn’t have a go at the people using Earn in any way they want, whether it’s looping aUST through Mirror or other degen tactics – instead you should make borrow more enticing. And I happen to agree with that, so I am not going to mount an assault on Stader for wanting to use LunaX as collateral in Mirror.

Although not fully, I have changed my mind to a certain degree since my original post.

1 Like

I agree with the above. The slightest risk to Anchor should be avoided, that is, if there is even a speck of doubt, don’t do it. But also, wouldn’t then this move motivate people to buy less Luna and more Luna X just for the rewards? Am I missing something? Thanks

wouldn’t really matter even if ppl start buying LunaX over plain luna. If ppl buying lunaX, this’ll put lunaX in premium. Arb traders will step in and mint more lunaX and swap to luna, increasing the total amount of luna staked.

Sorry, bit of a newcomer here, but can someone explain why anyone would choose lunaX over aUST as collateral? Yields on aUST are (currently) better and it is non-volatile? Why choose lunaX if I’d have 1000 UST available?

mir just giving users an additional option. Someone with lunaX could prefer using lunax as collateral

Here is the proposal for the actual update to add LunaX as collateral on Mirror

Yes. Let’s goooo for it.