The most important driver of growth and success to Mirror is the value of the MIR token and the biggest impediment to it’s success is a declining MIR value.
Let’s consider the different reasons that someone might find use in Mirror:
- Yield farming
- Investing in MIR token
- Investing in mAssets
Most of us who are on Mirror have probably done all 3 of these and they each, either directly or indirectly, benefit from a more valuable MIR. The biggest complaint that I have been seeing is the declining price of the MIR token. This is understandable because the value of that token is the primary tool that we have to driving growth of the protocol. The lower the value that it has, the less ammo we have to grow.
The reason that the MIR token consistently declines in price is because there is more supply than demand. New tokens are consistently being minted to fund growth and there isn’t enough demand to meet the supply. People do not perceive the MIR token as valuable. Instead they dump it as soon as they get it and trade it in for something that they do perceive has value such as UST or BTC or ETH. But why don’t they perceive the MIR token as valuable? Well, the answer is simply that they are easy to get and they don’t do much. They are highly inflationary. If you are staked in governance, you might feel like you are earning yield, but all you are doing is getting diluted at a lower level than if you are not in governance. You end up with more tokens that are each worth less. This is not a very compelling proposition.
So what could we do to make the token more valuable? I believe if we took a small portion of the trading fees that currently go to the LPs and used that to buy and burn MIR, it would offer that value capture. The amount should be discussed but I believe .1% of the .3% trading fee would be optimal. This is a way to increase the demand for MIR as well as reducing the circulating supply. This would make MIR less inflationary and eventually (after MIR tokens are no longer being issued) this would lead to MIR becoming deflationary. This would lead to a higher MIR price which would also lead to higher yields for the LPs. It would also make the token a better long term investment and thus more appealing to hold since as the supply decreases, the value capture of each token will increase over time. Consider the effect stock buybacks have on stock prices. If MIR continues to falter, LP yields will continue to fall and liquidity will decrease, effecting the experience of the user. Conversely, an appreciating MIR will cause yields to appreciate and would likely lead to increased liquidity and a better user experience. The MIR token is the essence of Mirror and a healthy MIR price is essential to ensuring it’s success. I believe that the proposal I have outlined would help to achieve this and would benefit all of the participants.