Earlier, I had submitted a proposal to potentially help fix the imbalance in synthetic asset prices with their real world counterparts.
Having observed the responses and community tolerance levels for the imbalance, I would like to suggest another approach.
Proposal 1: 90% of all MIR rewards emitted should be subject to a lock up. 30% vests after 6 months, 30% vests after 12 months and the 30% balance vests after 18 months.
Under this scenario, no change would be required to the MCR or fees relating to minting, thereby preserving value to MIR token holders (reduction in MCR reduces the total collateralisation base which reduces value to MIR token holders at the first order level, since fees are dependent on the size of that base).
I surmise that the following will occur: If we introduce sharp, heavy vesting for MIR rewards - at the 90% level - there should be a reduction in the level that people are willing to overpay for an mAsset (the premium). At the end of the day, the objective should be to reduce this premium to negligible levels. That reduction will stem from the fact that the “over-payers” will therefore need to navigate the twin risks of impermanent loss and excessive premium [without the ability to immediately sell MIR to compensate for IL or high premiums (which also helps minimize MIR selling pressure)].
I believe this will be a sharp, direct fix to the system.
This is inspired by the Sushiswap vesting mechanism (2/3 vesting), but I have taken it to the 90% extreme as I hypothesize it will help correct the imbalance quickly and decisively.
I believe this approach is superior over the earlier suggestion of reducing the MCR ratio and reducing the protocol fees relating to minting of mAssets. That earlier suggestion of mine compromises system security and value accrual to MIR tokenholders.
I believe this approach is superior in terms of attracting long-term participants to the Mirror ecosystem. This type of approach will result in short-term yield chasers self-excluding themselves from the ecosystem.
Proposal 2: Introduce a lock-up period for all liquidity providers (including governance staking). Minimum of 21 days. Again, this helps provide long-term stability, and minimizes destabilizing short-term capital flows.
The combination of these 2 proposals has the advantage that it does not change system parameters e.g. MCR ratios, protocol fees, but in theory, it should result in short-term yield chasers self-excluding themselves out of the ecosystem, leaving only long-term participants with a sophisticated understanding & management of the illiquidity levels, market risks & offsetting returns.
There is one drawback on the above proposals. There will be a short-term outflow of liquidity from Mirror as short-term participants exit. This will be a small price to pay for genuine, long-term organic growth.