With all due respect, mirror protocol killed itself

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.

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The question in my mind is, would you consider it inappropriate if a member of the Mirror Steering Committee profited off the liquidation? I don’t know the answer, I’m just asking.

And exactly here is their problem, a “root cause” if you like. Delta-neutral is 100x safer, as in case of liquidation you still have your mAsset.

And exactly here is your problem, a “root cause” if you like. Even if you don’t vote and don’t propose, it is more than profitable to read what is going on. For example instead of loosing money today, it was possible to make more than all you “loopers” would make in a year. But for that you had to do ONE click and scroll through several recent polls (it’s not like there are 10 polls daily). Truly unimaginable, requiring people to actively manage their high-risk leveraged loops with very low collateral ratio.

If someone is telling you that it is the safest way on Earth to have an almost-guaranteed APY of 80-100%, then… sorry. This is the same kind of situation as people buying into shitcoins, scams or sending their coins to get 2x as much because “Elon Musk” is doing a giveaway.

I hope you did read to the place where he admits that his collateral margin was 4% (four percent), right? High yield == high risk. Also, you do remember the famous crypto saying “only invest what you can afford to loose”? Turns out these two are not just meaningless phrases…

You do realise, that someone HAD TO profit in here? If it would not be “a member of the MSC” then it would be an anon guy who reads governance polls. Or a bot. Or a VC. Or a short-farmer. Or someone else. Someone HAD To dump the price down to reasonable levels.

You took risk. Someone also took risk too, assuming that there will be a liquidation cascade and that the price will reach some target level. If you don’t want someone else to profit of your loss, why play with leverage?

no why would I think it is inappropriate

You sound like my small girlfriend. I’d like to hear you continue the romance. Tell me, perhaps all loopers not only deserve to lose money, but to lose their respect as well?

With all seriousness, get a grip with reality. The liquidations and loss from the MCR change happened, and they are deserved. Nobody likes money taken away, and if a lot of people’s money are taken away because the rules changed, especially when there is a known ground of people who are in charge of the rules, that’s what it may take to kill a protocol. The nature of the protocol attracts loopers, and to not change the nature of the protocol, but to limit the people who uses it according to its nature is also another factor that may cause its downfall.

And please Frederick Choppin, don’t let anyone tell you to put yourself in someone’s shoes.

I think this project is not prioritized by developer at all. The management team may fade this protocol away over time because of the regulatory difficulty and operational difficulty on stock mirroring dapp. This is like a unregulated version of CFD(Contract for difference - Wikipedia) but applicably with worst price pegging history but better transparency. We can see many technical glitches not thoughtfully designed since the beginning, such as how dividend/stock split/reverse split/other corporate actions are handled. They are not handled at all. Ex-dividend day all long holder lose some money due to dividend adjustment. Or they will delist and relist the mAsset to avoid catastrophic result. Long/Stock LP reward is ill-designed - it does not consider liquidity/balancing/spread issue and users started to realize the protocol is flawed. Regulators are suing the management for creating unregistered securities. No developer resource is on the protocol for revamp.

Your example on how MCR changing back-and-forth is just a symptoms for the lack of management lead. No developers/management are putting resource for the situation so users (so called DAO structure) with no domain knowledge is throwing out votes (approved by the user community) with no economic sense and hope it solves things. They may not hurt the protocol, just it is not helping to resolve problems at all. All they could dare to make vote on is changing parameters when problem is at systematic level.

This already happened; it’s actually part of the problem. The governance is being whipsawed by anon whales because the founding team is no longer involved enough to make ‘protective’ votes when the whales put forward dangerous or manipulative polls.

Did it really go from 110% to 130%? Why couldn’t they have done it from 110 to 115 to 120 to 125 to 130 or something along those lines. Going from 110 to 130 is brutal. I feel bad for the regular users.

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It did. 110% for mKO must be a mistake at the beginning, because it is indeed ridiculous for a single stock asset. However, the mistake should have been corrected with small increment.