Today, mKo and mSPY collateral ratio was adjusted from 110% to 130% by the same community, who two months ago, voted to decrease the ratio from 130% to 110%. For people who only use the mirror protocol web app, the only way for them to possibly know is to go to the governance section, and read every poll passed by the community.
Personally, I only use mirror protocol web app and it was a close call even though I check my positions almost everyday after I invest in. I only happen to randomly tap the governance and read about the polls only to discover that I risk 100% loss of all my investment to a somewhat “safe” defi Strat. Why do I say safe? Well, my CR went from 130 to 136 since I started the loop, and SPY is not a volatile asset. Loopers just want an asset with a somewhat stable price, so they can get that sweet yield. Why is it in quotation marks? Well that’s because oracle was complained to have unrepresentative oracle pricing that took away a man’s life savings away:
oh and also sudden change in MCR
Why am I not interested in “governance”? That’s because MIR price is going down the shitter and I don’t have money just laying around to spend on polls, only for it to not go through. I am not a contributor, and a lot more people aren’t, that’s just how the world works.
So what does Mirror Protocol do to these people? Apparently they are fucked over because there is nothing clearer than what happens today. What would these people think? Something along the lines of: “the community scams all my money because they feel like it”, or “Mirror protocol govs actively tries to fuck up its investors and make money from it” Well they are wrong, but to them, they are right, because what they see is “something something out of the blue happened and I lose 100% of my money because of someone else in power”. Remember, these people does not expect this loop to be extremely risky. But some see fees that are unclear, rules that are inconsistent, risks that are high, and rewards that are equivocal, as “reasons” to avoid interacting with this protocol.
While I still can’t wrap my head around why I lose 10% of my principle from closing this position, I can postulate 3 possible outcomes of today’s MCR adjustments to the loopers: 1 risk losing everything by doing nothing, 2 putting more money in to ensure safer leverage, or 3 close their positions.
Pros for outcome 1: none
Cons for outcome 1: everything
Pros for outcome 2: no liquidation
Cons for outcome 2: less rewards, more money put in, increased exposure to risk (future changes that aim to fuck over loopers).
Pros for outcome 3: available funds for other delta-neutral Strats in other platforms, opportunities offered by competitors.
Cons for outcome 3: potentially lose money if interests are not enough to pay for fees (my case)
These outcomes incentivize loopers to choose outcome 3, provided that if they actually know actions are required to prevent liquidation. But after they closed their position, how much trust do they have left for this protocol? How much do they want to stay away from it? When this protocol offers attractive investments in the future, will they think about it as a bait?
I am not saying that any of these actions is unjustified. Quite the opposite, I believe the reasons make sense, and I would even say some are good reasons. However, reasons are useless to people that don’t care about them, and when this group grows big enough, disasters may happen.