Mirror Protocol

Mirror Protocol emerged in the decentralized finance (DeFi) landscape in December 2020, launched by the South Korean company Terraform Labs, which was co-founded by Do Kwon and Daniel Shin. The protocol was engineered to bridge traditional financial markets with the blockchain, operating primarily on the Terra blockchain. Its core function was to enable the creation and trading of synthetic assets, known as mirrored assets or mAssets. These mAssets were designed to mimic the real-time price of real-world assets like U.S. equities, commodities, and ETFs, thereby offering global users, particularly those with restricted access to U.S. markets, a way to gain price exposure without direct ownership of the underlying asset.

The business model was centered around a minting mechanism where users could create mAssets by locking up collateral in a smart contract. This required an over-collateralization, typically 150% of the underlying asset's value, using Terra's stablecoin, TerraUSD (UST), or other mAssets. This collateralized debt position was intended to ensure the system's solvency. The protocol aimed to generate revenue streams implicitly through the ecosystem's activity, with its native MIR token facilitating governance and rewarding users who provided liquidity to the mAsset trading pools. The platform was built to be cross-chain, allowing mAssets to be accessible on Ethereum and Binance Smart Chain, broadening its user base.

The protocol's operations were entirely decentralized, with governance in the hands of MIR token holders who could vote on protocol changes. However, Mirror Protocol's trajectory was fraught with challenges. It faced intense scrutiny from the U.S. Securities and Exchange Commission (SEC), which investigated Terraform Labs and Do Kwon for potentially selling unregistered securities. The platform also suffered significant security breaches, including exploits that drained millions from its liquidity pools. The ultimate demise of Mirror Protocol was inextricably linked to the catastrophic collapse of the Terra/UST ecosystem in May 2022. This event rendered the protocol's collateral system untenable. The final blow came in August 2022, when Band Protocol, the oracle service providing price feeds for mAssets, ceased its support, leading to the effective shutdown of all operations.

Keywords: synthetic assets, mirrored assets, mAssets, Terraform Labs, Do Kwon, Terra blockchain, DeFi protocol, decentralized trading, collateralized debt position, UST stablecoin, cross-chain finance, crypto derivatives, oracle price feed, Band Protocol, SEC investigation, DeFi exploit, Terra collapse, financial protocol, blockchain finance, digital assets, tokenized stocks, asset mirroring, decentralized governance, liquidity pools, crypto trading platform