When a mAsset is delisted, the last oracle price becomes the value for which the now-delisted mAsset can be burned so collateral could be retrieved.
When a delisting happens, and assuming protocol’s solvability, it offers an arbitrage opportunity that is, in this case, really “risk-free” and instant.
While some people are working on the game theory elements of the protocol, I think that as a community we could work on the “human factor” by sending a clear message to users that everyone should used the protocol in a way that is consistent with its intended used or expect to potentially incur a lost.
By that I mean that if someone considers that it is an EV+ play to buy mAssets at high premium (because of looping, long-farming, delta neutral strategy, etc.) although not consistent with Mirror’s goal to have the price of mAssets aligned with the “real” assets, then if that same user has to factor in the fact that the community could vote for a delist/relist in case of high and sustained premiums, this user could review his first assessment that buying at high premium is indeed a good decision.
Simply put, if a delisting/relisting were to happen, the big losers would be everyone who bought at high premium.
This is indeed not a long term solution, but if users know that the community will not tolerate behaviours not aligned with the primary goal of the protocol, this is a factor they will take into account before buying at high premium.
I am curious to have other people’s view on this.
If such proposal could have some traction, I would propose to consider testing it with a high premium mAsset not currently listed on the Ethereum version of Mirror to not have another pool giving out rewards for a delisted mAsset.
Harmful to have random delistings for no good reason, but…
Delisting pushes assets back to peg, relisting lets them freely float again. (Maybe a scheduled cycle (i.e. delisting pool after market close friday, relisting asset before market monday), everyone that wants to maintain a position rolls from one to the next and if the asset was at a high premium there is contango. This is a way of closing the arbitrage window (similar to futures/options which both have specific exercise dates) while still having listing continuity. In fact all ‘orderly’ derivatives have settlement windows where they are forced to align with spot prices. Mirror doesn’t (except for liquidations) and that’s the biggest reason tracking error is so terrible. (perps use funding rates which effectively are regular mark-to-market settlement windows that keeps prices orderly)
It might be better if each mAssetv2 goes up before mAssetv1 ends (so they trade concurrently and positions can be rolled before the static price makes it go crazy) but I’m not sure whether Mirror can handle multiple smart contracts with the same identifier code
And I’d think that if the community do this one time, then it changes the game theory for anyone wanting to push the price and increase premium on all other mAssets because one will know that any premium it pays may be loss to arbitrage if the community acts in the future to relist/delist in order to realign price.
It is still hard for me to see how it is harmful when we speak about delist/relist (in such case positions are just rolled from mAsset1 to mAsset2 and price is automatically realigned, although it needs to be done by each users manually). To me, high and sustained premiums are more harmful.
This would also be a big incentive for people to short knowing that they can short at pool price and if premium remains high then a delist/relist could potentially take place and they will have just “paid” the oracle price (when upon delisting MCR goes to 100% and they can take out any collateral left over oracle price).
Is that actually how delistings currently work?
I.e. open a CDP at 200% MCR, sell all borrowed mAssets for a Premium
If mAsset then gets delisted you can just take out all Collateral up to 100% without having to burn any mAsset?
Isn’t that a free lunch before any event that causes a delisting? Why are there people paying so much premium before these events?
How do these delistings happen in the first place, who takes the action to set end prices and removes it from the front end?
Who takes the action to list replacement mAssets in case of stock splits?
How can one find out how that is going to work? I got a huge Borrow Position in both GOOGL and AMZN, so it would be kind of important to know how things will play out…
1.) Is it possible that noone does anything, and the oracle price just feeds the new Price, so that all Borrows (net shorts) will make a homerun (200% Collateralisation → 4000%), Premium like 2000% at 20:1 Split
2.) Is it possible that the oracle just stops and there will be no possibility to mint/burn until
a)forever (until dev team helps)
b)governance proposes and passes needed Delisting/Listing of new mAsset
I mean in the worst case a delisting should do the job, there is no risk that Collateral will be locked up forever, right?
Would be easier to drop the collateral ratio to 110% for example on assets with over 20% premiums?
The way the collateral ratio is at the moment makes no sense from mirror team . For example you have 130% on assets with negative premiums
Wouldn’t the delisting need to happen prior to the actual split (June 3rd). If I read correctly the protocol docs, when an mAsset is delisted, you can only burn it at last oracle price which in the case of AMZN could theoretically be 95% down (20:1 Split) if we wait until after the split to delist … leaving a juicy return to all shorts and a massive loss to all long? I am not even talking about LP implications …
What if mAMZN was used as collateral to mint an mAsset … Then bad debt would enter the protocol … as the collateral would lose 95% value at stock split … if not delisted prior to that … and no chance to liquidate the position …
the high premiums are a sign of protocol illiquidity if the trend continues it might be the protocol becomes illiquid all together. Maybe you are right that they should be manipulated on the discretionary basis , a better idea will be to lower them across the board.
Also the mint fees should be lower, we are no longer in roaring 21’
I suppose you mean about the illiquidity ? Why do you think you have those premiums ??? Its because the overall market its in free fall (the oracle price) and there is not enough short/selling pressure to correct the premiums. Also a lot of people are exiting mirror protocol aka more assets are burn than minted, these is putting upward pressure on the price(basic economics supply is shirking so price should go up if demand is constant),if supply is constantly going down they become more and more illiquid . EX since I’m am in profit I don’t care if I am buying at a premium to cover my shorts and take my money out.
Believe me those premiums are very unhealthy signs and quite surprising the developers are not doing anything about it. Lowering the collateral ratio and fees are no brainer to me cuz they are high anyway, especially during these market conditions