I strongly disagree with trying to add mSilver to replace mSLV. Here’s the issue with that. The fact that iShares Silver Trust has fees is a GOOD THING for the mAsset world. There are not enough people minting mAssets right now to grow the Mirror ecosystem. While mSLV buyers are implicitly paying the ETF fees, the mSLV minters are implicitly receiving that fee (baked into stock price movement). We need as many incentives as possible to get people to mint mAssets.
The only value of having mirrored crypto would be making a particular crypto that is hard to buy via CEXes in parts of the world more easily accessible and making it easy to short a crypto. I agree with the sentiment that we really shouldn’t be trying to add mirrored cryptos. Commodities and stocks make way more sense to mirror.
Thanks for your response (love your chicken btw)
I think you’ve generally provided constructive feedback and that we agree on several things.
One thing to clarify: I wasn’t suggesting to replace mSLV with mSilver, but rather have them co-exist. I’m not sure if it’s even possible to delist an mAsset anyway.
Regarding the implicit fee, I don’t think the mSLV minter receives that fee, necessarily. For example, if an mSLV minter were to hedge by buying real SLV, then those fees would flow right through to iShares, and the mSLV minter does not profit any of those fees like you’re suggesting. However, in a different example, an mSLV minter could choose to hedge their mSLV using spot Silver, and in this case, you could think of SLV’s decay as the implicit fee that the mSLV minter would receive; this is a potential strategy that could be used at the discretion of the mSLV minter, but minting mSLV does not guarantee relative (to silver) profits for the minter.
To add to the point about needing as many incentives as possible for people to mint mAssets: I claim that having mSLV, representative of a centralized, trusted, and decaying asset, to be the only available silver-related mAsset, as opposed to actual spot silver, could be missing out on the choosy silver bulls (like myself) who prefer decentralization, trustlessness, and no decay, and therefore hinder this objective.
Thanks again! I look forward to hearing if you or anyone else has additional thoughts on this.
The management fees are a drag on the price. Since the mAssets track the price, then anything that creates drag on the price (implicit management fees) are to the benefit of the minter. In effect, the minters are earning the same management fees relative to the price of silver that the management company is. If a minter bought silver at spot and held as a hedge against an mSLV short position, they would have annual profits that roughly equal the management fees (plus their MIR liquidity rewards, of course).
I see your point on decentralization and trustlessness. I can get behind the idea of having mSilver as it more closely adheres to the spirit of crypto than mSLV. Getting rid of another low value/no value centralized player is always an interesting idea.
Please see other posts (VIX and lumber) about where myself and others have outlined move indepth than I will here why we can’t really do this right now. 1. Futures roll 2. Not having a good oracle for this yet 3. Platform is not derivatives friendly yet
I would love to see futures and options on here but it just isn’t to that point yet. Hopefully V4 or further
Thanks, I will try to find those other posts.
Looking at the mLumber post, it received good feedback and it passed quorum (although without the proper parameters) when put up for vote:
I found a comment you made about commodities in general, where you mention:
“Derivatives pricing is very complex and most oracles don’t allow for it.”
However, in the case of Silver, specifically, there is an Oracle for it. Silver (XAG) is being tracked by Band Protocol:
I see now the mVIX post where you try to explain in depth why a holdable asset (that follows the price of an index which tracks perpetually rolling futures prices) with no rollover cost would create weird price movements, and likely at the expense of the minter. I’ll try to further digest this. But are you thinking that this would be the exact same type of situation?
Yes but a lot of us in the community explained that even if it passed it wouldn’t work but they still decided to spend resources to get it to pass only to end right where we told them it would.
XAG is not a future again this is a forex quote index that tracks a spot silver settlement price of forex pairs. Futures are CME SI futures, which expire and roll. This means the protocol needs a mechanism for dealing with this i.e. how to cash settle it into UST if one doesn’t roll the future. And also something that explores how the minter doesn’t have to bear the cost of backwardation issues which would eventually be passed on to the traders anyways, not the minters.
So while VIX is an extreme example, SI futures function similarly. I am all for futures getting listed here, but again as I have said, we need to stop wasting time trying to get futures passed onto V2 mirror that has no support for them without Oracles support for them. Until Mirror has better oracle support and V4-5? platform support for derivates it’s going to be hard to make it work. We should be working toward laying out that plan so futures can actually succeed here.
Pretty sure Mirror is far enough behind the futures curve that it shouldn’t even be considered – other platforms are focusing specifically on solving futures. Mirror is much better off targeting synthetic spot assets (i.e. something you can’t trade in the real world) and stocks/cryptos
Yes, I am starting to be of the opinion as well. SOL has a lot of derivatives platforms popping up and it seems like there might even be some terra projects that do as well.
Vega is one project with its own chain that Do is invested in. Not sure if perhaps there are plans to use that and a backend to bring derivatives to Mir.
I really appreciate your responses here.
But I’m not understanding why you say that XAG is not a future, but then go on to talk about futures. Does Mirror need a way to handle futures before it can consider listing XAG (which is not a future)?
XAG is an index, not an asset. You need an asset to be a mAsset, futures are the asset that would be closest to what you are looking for since they are cash-settled and you originally brought up SI futures.
Just use SLV, it’s really the same thing that listing silver futures here would bring as SLV is based on Silver futures.
Why would you need an asset instead of an index? Anything that has a price feed can be an mAsset on Mirror. That’s somewhat the magic of Mirror.
mAssets are just that, something that tracks an asset.
Creating a synthetic on forex-based indexed commodity creates a perpetual future. And that’s why I keep saying Mir is not ready for futures. Please see my post on the VIX; it will have similar issues I brought up in the VIX post earlier this year.
To summarize here: Perpetual futures bring up all backwardation issues that the market markers (minters) would have to try to build price discover for. It essentially creates its owns future curve in a single asset i.e. bidding it up over the Index due to backwardation which is the measure of inflation, interest rates etc, all things the index doesn’t measure because it’s a settlement snapshot - it’s messy. It’s why nobody in all the financial mathematical geniuses in the world has yet to create this product in the mainstream financial markets. What they do instead is create derivatives (options and futures and options on those futures) on indexes, cash-settled for this reason - price discovery in a somewhat orderly way.
Maybe I don’t have the correct understanding but why couldn’t you just take “Spot Gold” or “Spot Silver”? Like XAG is an index, meaning it has a data feed of numbers, which is all Mirror needs to create an mAsset. There doesn’t actually need to be real world trading for it to exist.
You can use the “S&P 500” index rather than needing to go off SPY.
This avoids all the backwardation issues.
You are creating derivatives i.e. futures you when you make assets that tagged indexes that’s what the ES mini is, VX futures etc, they tag SPX and VIX. So when you take an index, something that has no value and create a asset that tracks it, this creates 1. a perpetual future which really don’t exist on indexes because of the idea of backwardation and contago and needing to be cash settled or 2. futures that settle at expirations which is what has been the standard for decades.
That’s a surface level, and I am not going to go deeper here into future metrics and indexes. You need to do some research on how futures work and why they are created.
I think you’re missing the fact that these never need to be settled. Just like what trades on Binance (Trillions are traded each year). Yes, it’s a perpetual future but you don’t have any of the underlying pieces because no one needs to (or even can) make a market with reality/the underlying.
There’s no alternative futures Marketplace for crypto, and all the perpetual futures track assets not indexes. With silver there’s a several trillion dollar futures market space that has backwardation that’s cash settled. It would create an opportunity that would be arbitrage until the price matches future dated CME SI futures, which would be a price higher than the spot price… So there would be a huge premium mismatch between the Oracle price and what it’s actually trading at and the minters would pass this cost on to the buyers (i e. Mint at the end of future curve price) and then you end up with a product that is just like SLV. Crypto doesn’t have commodity properties like this.
But I rest my case here. Do what you feel like you need to do.
The point being missed in the discussion is price discovery.
Synthetic assets on Mirror work because people can arbitrage the price against the underlying using TradFi accounts. They work imperfectly (continual premiums) because the fee structure and capital requirements of Mirror mean that arbs need a bigger price discrepancy before they can reliably make “risk-free” money from arbitrage.
Even though new assets directly using the index oracle price could be released, they would have terrible tracking error because there is zero capability to directly arb the underlying. To arb the asset, you would have to trade in other derivatives that do have backwardation, contango, etc. The solution to price discovery when the underlying can’t be directly traded is… periodic cash settlement (expiry dates).
Perpetual futures use funding mechanisms to keep prices in line with oracle price. That process inherently builds backwardation/contango into the mechanism.
And is the point that I’m trying to make with trying to create a product based on XAG. It’s a forex spot price not a future and not asset backed. Therefore if this was used to create a perpetual, the perpetual would be much higher than the spot oracle due to do exactly what you’ve just stated, pricing in backwardation. it’s inherent in the future’s curve which is why the futures curve exist.
It’s really a territory that’s yet to be tackled anywhere and as I continually mentioned this is why futures have cash settlement dates. I know the industry is changing and blockchain definitely makes for these changes possible but really perpetual futures on commodities are going to be complicated and create a huge possibility for failure so I don’t know why we keep trying to spend our time on this when there’s plenty of other more relevant things to tackle on this platform right now that have much higher efficacy of success
If Mirror’s price accuracy is being supported by TradFi arb then the platform is screwed when we try to diversify to international stocks. There just won’t be enough demand to not only trade those on Mirror but to also have enough people arbing outside.
The system needs to be self-contained