- Recently, given the meteoric rise of MIR, it has become more significantly more valuable to stake mAssets than it is to trade them. As such, the Terra price has deviated significantly from the Oracle price. Some assets, like mMSFT have prices that are 1.25x higher than the Oracle price.
- The spread between the Terra price and the Oracle price harms the long-term viability of the Mirror platform. The goal of Mirror shouldn’t be to create a secondary market of equities with their own prices; rather, the goal of Mirror should be to have prices that actually mirror their real-world securities.
- This proposal suggests reducing lower bound of minimum collateral ratio (MCR) to 105% to cap the Terra price to 105% of the Oracle price
By reducing the MCR to 105%, we create an upper bound of divergence between Oracle & Terra prices to 5%. This is achieved by the following process:
- Minter opens up position with collateral 105% * Oracle price (which is less than Terra price)
- Minter sells position in the market for Terra price
- Minter foregoes collateral and never closes the minted position
The 105% MCR was selected to simply keep the price bounding relatively tight, but theoretically, we could change this ratio to be higher if needed (e.g., 110%).