Increasing the value of MIR and why it is imperative to the growth of Mirror

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:

  1. Yield farming
  2. Investing in MIR token
  3. 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.

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The 0.30% trading fees are set by Terraswap, which is a separate protocol external to Mirror. There is likely to be an internal trading engine released as part of v3, and this could potentially be implemented as part of that.
I would like to see lower swap fees (or see LP’s able to set their own level from a menu of choices, like in uniswap v3’s model) to attract more active traders. If part of the fee accrues to treasury (or is burned), it should be set as a percentage of the total trading fees, not as a percentage of the trade.

Incidentally, if there is interest in burning tokens, I would generally favor a proposal to burn part of the treasury, rather than an ongoing burn. There is value in flexibility.

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Are you talking about burning mAssets or MIR? mAssets cannot be burned as someone minted them and is thus is short those mAssets. To be able to close their position there has to be equal supply minted as circulating.

There are no mAssets in the treasury! The entire discussion has been about burning MIR. I’m sorry if saying ‘tokens’ instead of MIR confused you.

The ability for each user to be able to set their own fees in v3 sounds very interesting. I think this would do wonders for increasing liquidity and lowering trading fees which is great for Mirror. My concern is that this would disproportionately benefit the LPs, which is fine but it does not meaningfully increase the value capture of MIR.

I am of the opinion that an ongoing burn is ideal though this could be in addition to a treasury burn. The reason that I favor an ongoing burn is it has the effect that stock buybacks have. It is ongoing and consistent buy pressure on the token that would help mitigate the consistent sell pressure from farmers currently. Our goal should be to make MIR something that people desire and that is decreasing in supply. I do not believe a treasury burn would completely solve the problem, as the treasury MIR is not being sold. I would be very interested in discussing the pros and cons of a treasury burn in addition to understanding if there is support for an ongoing burn and the best way to achieve this.

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To throw an idea out there.

LP rewards are the biggest drag on mir’s value. LPs are just expensive because we have to print so many Mir tokens to keep them engaged.

Is it possible we are “overpaying”? If Mir emissions were, for instance, half what they currently are, would that kill our LPs? Or would they grumble but ultimately keep doing it?

Maybe we solve two problems at once. Have a smaller, but fixed, rate of Mir emissions per pool. That would A) reduce Mir supply in the near term and B) remove the disincentive LPs have to add more mAssets in governance.

At this stage, it seems like the MIR rewards are just about the only way LP’ers get any value from their position. The TerraSwap Dashboard lists the APR from trading fees, and most of the mAssets are low single-digits. Until those numbers go up, I suspect it will be difficult to maintain much TVL without the additional MIR.