[Proposal] Delist aUST as collateral

Hi all,

I’ve read all the posts about looping and premiums being out of control.

I think it might be appropriate to consider delisting aUST as a collateral option.

If aUST can’t be used as collateral, it completely changes to game theory of the “looping strategy”.

Correct me if i am wrong, but my understanding is that looping is done on the basis that the expected return on the looped aUST will be greater than any loss made because I borrowed/sold a mAsset at discount.

Delisting aUST would impact the protocol’s TVL but should help realign incentives when using it. I think a lower TVL with a working protocol is better than a bigger TVL with a broken protocol.


This is an innovative potential solution that I think our whales will kill in its tricks.

I like the idea, though.

I’m against it. aUST is shorting mAsset assets of participants, in the current mAsset assets has reached 30% of the high premium your proposal is a disaster.


There seems to be a lot of worry that premiums are ‘out of control’. Are they really?

As per my other post, there is a natural arbitrage which limits how far premiums/discounts can widen before there is free profit in closing them, and we are near that point currently. Yes the tracking error is greater than before but this is no reason to panic.

The primary value of Mirror is in allowing aUST as collateral otherwise users would just use tradfi to trade shares instead for better liquidity.

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Delisting aUST would make minting mAssets even more difficult and will drive up premium sky-high. Not a good idea.


I think they will repeat similar “mFB” malicious events, they will make the short user passive liquidation. Under such a high premium settlement estimation will be disastrous.

Hi! Could you please link to your post regarding the tracking error. Thanks!

I thought the FB liquidation event that happened was due to the oracle reporting a (real) after hours price?


You are correct.

BTW I don’t support your proposal. But it is a unique idea.

The “looping strategy” was mostly an issue with mKO and mSPY when they had 110% MCR. And it caused a negative premium.

The main problem on Mirror right now is positive premiums. Removing aUST as a collateral will only make this worse by making minting less attractive.


+1 exactly premiums would take off faster than elons model s into space

10000000% Agree to remove it ASAP! Someone should make a vote and watch the whales kill it like they’ve killed the project.

Please explain how less shorting will lead to flatter premiums. This proposal does not make sense to me and will probably kill mirror IMO. Premium are high because minting < longs.

Yield aggregators like Spec ONLY offer longs. This is why we have issues. We should make a proposal on SPEC to offer short farming options/rewards too.


Thanks everyone for the replies.

So yeah, it appears that delisting aUST as collateral would help only for mAssets privileged for looping such as mKO while potentially increasing the risk of higher/sustained high premiums or other mAssets.

In theory what could have been done is to have a “dynamic” list of accepted collateral that depends on premium at the time a short/borrow position is opened. For example, if premium is <0%, then aUST is not available as collateral to open a new short/borrow position and if premium is >0% then it is available. That would have been a good solution to resolve negative premiums while not increasing the problematic of already high premium mAssets.

That being said, my understanding is that collateral options cannot be managers on a dynamic basis atm nor could we just deactivate aUST for specific mAssets (such as mKO) in a non-dynamic manner.

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I think the proposal for increasing short farming rewards and decreasing long rewards can go a long way. This would incentivize yield aggregators to also offer short farming opportunities.


Agreed that this has to pass.

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I’m generally in favor of taking strong steps to improve the Mirror protocol but I vote NO.

This is however a relatively bad idea in my opinion, and this for the following reasons:
Your idea here would help bring premiums on mKO and mSPY back towards 0%. While this outcome is desirable, it can be achieved in other/better ways.

aUST as collateral is a unique value proposition of the Mirror protocol and in my opinion one of the reasons why it’s a cornerstone of the Terra ecosystem. Removing it would make it LESS APPEALING to short farm tokens as it will mean foregoing the 20% interest rate from Anchor.

The major issue currently is that premiums on most mAssets (except the 2 with 130% MCR and mVIXY) are too high, not too low.


aUST is not the problem. Strong incentives for delta neutral and long buy, with no incentives for shorting is the problem. The balance is out of whack.


Strongly agree with the two before me. The aUST short looping strategy works well with these high premium assets, why would we want to liquidate literally last few who’s shorting.