[Proposal] mUSD - a mirrored stablecoin backed by leveraged aUST

Proposal: Add mUSD (USD) to mirror. mUSD would allow for a mirror CDP backed stablecoin backed by yield bearing assets such as aUST. This would allow for leveraged aUST exposure if you looped the following trade: Mint mUSD using aUST , sell minted mUSD for UST, mint more aUST , mint more mUSD using the aUST, repeat process until you cant mint any more.


In order to loop such a transaction we need somewhat deep UST/mUSD liquidity so we should consider incentivizing liquidity either through mirror or astroport or consider other avenues of bootstrapping liquidity for this pool.

Liquidations: As mirror pegs 1 UST at 1 USD these positions wont be liquidatable if UST depegs . This is the same for other mAssets as well.

I think we should limit the collateral for this pool at 120%, while because mirror pegs once UST to one USD you could in theory have 99% LTV, i dont think we actually want that.

Note im still on the fence as to wether or not this is a good idea so i encourage you to speak up about any concerns /scenarios you forsee as a result of this.


This seems like a pretty fantastic idea but I’d be curious to hear from someone with a bigger brain than me what implications this might have on the sustainability of Anchor yield rate.

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Can you explain who would be buying mUSD as this strategy would create significant sell pressure on mUSD who is the person buying it and why would they?


My main concern is the additional stress on anchor to sustain the 20% yield. This (+ Spell) may help deplete the reserves faster if this is widely extended


I understand your concern but I would be opposed to not doing something solely because of another protocol that is not even part of the Terra ecosystem.This ecosystem comes first over strategies on other ecosystems.

One reason to buy mUSD would be to unlock your collateral when the price of mUSD goes down.

You could have the asset that is minted be mUSD / UST LP, and have that be locked up for a while?

Could also look into how Alchemix Fi does it, they do a great job of transmuting the alUSD into DAI.

If you need to buy mUSD to unlock your collateral, then you must have minted mUSD to begin with. So who would have bought that mUSD?

Unlike mAssets for stocks or cryptos, I’m not seeing a clear reason why anyone would want to be long mUSD. What is the point?

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Hey mister Papi :slight_smile: Thanks for elaborating on this idea.

I am personally not supporting this idea, as I am lacking the use case for mUSD. I think the Terra ecosystem is an upgrade from the legacy fiat system as it has a true use case that is dominated by market forces via the seignorage process.

All mAsset serve to my understanding the idea to enable a more effective way of how to interact with real-world assets like stocks. I am missing this use case for mUSD yet.

One of the issues of fiat is generating fiat via credit, thus itself. To my understanding, crypto was developed in the first place to solve this issue. I see a problem in recreating fiatnomics on-chain if they fulfill no use case.

The seignorage system between LUNA and stablecoins has the premise of true use cases for the created stablecoins. As self leveraging system is breaking that to my understanding. I am aware of the true value creation of aUST, which helps to support this structure. Still, I am asking the question of the why, if not to only create more yield for the sake of yield.

Thanks :slight_smile:


On paper I love the idea, but there’s a missing piece, with the degenbox strat from Abracadabra, there’s a use case for MIM, whether you like MIM as a stable is a different story, but MIM is largely used on several chains and on several DEXs.

In order for this to work, we need to create demand for mUSD so that anyone would be willing to swap their UST for mUSD, you’d create a swap pool and then use that pool to allow looping of any kind. Won’t this just cannibalize the spread of UST as a first class stable? Will this be anything more than a distraction?

This is the important part for buying pressure to stabilize mUSD we need to create demand.Iwould like to hear the OP ideas.

Could we provide incentive rewards to help create demand at first?

What about if 1 mUST could be burnt for 1 UST? Possible? Then you’d have arb bid to protect mUST value

I like the ideas. I really hope Papi can provide more details on how this could all fit together.

a mUSD/UST LP pool could provide some incentive. People do like LP pairs with the same asset on both sides of the pool, look at the bLuna-Luna pool. Averaging 13-25% APR. If this pool could generate a similar APR, that could provide some demand.

There’s still the problem people seeing mUSD as the lower class stable coin.

bLuna / Luna has inherent demand, people want bLuna to provide as collateral/liquid stake and people want Luna to do everything you can do with it, those swaps come from natural demand for both assets. There is no natural demand for an mUSD when you have UST, besides the loop mechanism.

I don’'t mind being wrong on this but I don’t see where the demand will come from.

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UST/mUSD pool on astroport’s stable invariant pools would work for making less slippage in its liquidity pool. We might have to incentive UST/mUSD pool quite heavily tho.

I’m always in for money printing strategy but this strategy does not seem to add any value to Mir token.
What if we make interest (rate decided by Mir governance), and stack that interest as Mirror Protocol’s reserve ?

And just bit concern about anchor’s reserve

Would appreciate if some giga brain enlighten me for any other potential risk involved.


What if the mUSD asset had a tax when minted? Something like a 5% tax that could be used to incentive liquidity providers and Mirror Protocol stakers.

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This is my main concern the level of demand and for these structural changes to be made to Mirror to give the incentive for this it takes someone here to make this and propose that we migrate. This is the problem with defi. People forget that it is defi and always want some core group of developers to make the changes when in fact it takes us.

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Isn’t that a ponzi scheme? New entries pay for existing entries, that’s a ponzi scheme, it’s unsustainable eventually rewards stop and everyone wants out.

We still have disconnection between MIR as token and the protocol itself. Is it possible that the fees generated from musd used to buy mir
And send it to a burn address?

Maybe it is time to start appreciating mir token there. There is No use for the token but to incentive people.