Mirrored ProShares VIX: Decentralized Volatility Index Mirror

What is Mirrored ProShares VIX

Friends, imagine you’re really interested in something—like a hot stock or a commodity—but for various reasons (such as geographic restrictions, high capital requirements, inconvenient trading hours, etc.) you can’t buy it directly. At this point, if there were a “magic mirror” that could “replicate” this thing for you, letting you own a “mirrored version” whose price moves in sync with the original, but you could trade it easily on the blockchain—wouldn’t that be cool?

Mirrored ProShares VIX (mVIXY) is exactly such a “mirrored version” asset. It’s not the real ProShares VIX Short-Term Futures ETF (VIXY for short), but a digital asset created on-chain by a blockchain project called Mirror Protocol. Its price strives to track the real-world price of the VIXY ETF.

Simply put, mVIXY is like a “digital avatar” of the VIXY ETF in the blockchain world.

Target Users and Core Scenarios

mVIXY is mainly aimed at investors who want to conveniently participate in traditional financial market volatility trading within the blockchain world. If you are bullish or bearish on future market volatility (the VIXY ETF is often seen as an indicator of market fear sentiment), but don’t want to or can’t trade VIXY ETF directly on traditional broker platforms, then mVIXY offers a decentralized alternative.

Typical Usage Flow

To obtain mVIXY, you usually need to “mint” it via Mirror Protocol. This process is a bit like exchanging gold for gold bars at a bank: you need to collateralize a certain value of cryptocurrency (such as stablecoins), and the protocol will mint you the corresponding amount of mVIXY based on the real-time price of the VIXY ETF. Of course, you can also buy mVIXY directly on supported decentralized exchanges (DEXs—a decentralized exchange: a platform that matches trades automatically via smart contracts, without relying on centralized institutions).

Project Vision and Value Proposition

mVIXY itself is one of many “mirrored assets” on Mirror Protocol, so to understand its vision, we need to look at Mirror Protocol’s grand goals.

Mirror Protocol’s vision is “democratizing finance”, meaning enabling anyone in the world to access all kinds of real-world assets without barriers, regardless of their location or capital.

The core problems it aims to solve are:

• Geographic restrictions: Many people in various countries and regions find it difficult to invest in foreign stocks or ETFs.
• High thresholds: Traditional financial markets may have high capital requirements.
• Inconvenient trading: Trading hours are limited, and fractional trading is not possible.

By creating mirrored assets like mVIXY, Mirror Protocol allows users to gain exposure to the price movements of the VIXY ETF without actually owning it. It’s like you don’t need to buy an entire house to share in the gains from rising property prices—you can do so by buying “property shares.”

Compared to similar projects, Mirror Protocol’s uniqueness lies in being a fully decentralized synthetic asset protocol, governed by the community, originally built on the Terra blockchain, and also supporting Ethereum and other chains.

Technical Features

The technical foundation of mVIXY is Mirror Protocol, a decentralized finance (DeFi) protocol based on smart contracts (smart contracts: computer programs stored on the blockchain that automatically execute when preset conditions are met).

Technical Architecture

The core mechanism of Mirror Protocol is over-collateralized minting. This means that when users want to mint mVIXY, they must collateralize crypto assets worth more than the value of the mVIXY they mint as security. It’s like taking out a loan from a bank, where the bank requires you to provide collateral worth more than the loan amount to ensure safety.

To ensure mVIXY’s price accurately tracks the VIXY ETF, Mirror Protocol relies on oracles (Oracle: third-party services that bring real-world data onto the blockchain). Specifically, it uses Band Protocol’s decentralized oracle network to fetch real-time price data for the VIXY ETF.

mVIXY exists on different blockchains, such as the CW20 standard on Terra and the ERC20 standard on Ethereum, allowing it to be traded on various decentralized exchanges (like Terraswap and Uniswap).

Consensus Mechanism

Since mVIXY is a synthetic asset on Mirror Protocol, it does not have an independent consensus mechanism. Mirror Protocol was originally built on the Terra blockchain, so its security depends on Terra’s consensus mechanism. For the ERC20 version of mVIXY, its security relies on Ethereum’s consensus mechanism.

Tokenomics

As a mirrored asset, mVIXY itself does not have a native tokenomics model like Bitcoin or Ethereum (such as total supply, inflation/burn mechanisms, etc.). Its value comes entirely from the real-world asset it tracks—the ProShares VIX Short-Term Futures ETF (VIXY).

However, the Mirror Protocol that supports mVIXY has its own native governance token, called MIR.

Basic Token Information (MIR)

• Token symbol: MIR
• Issuing chain: Initially issued on the Terra blockchain, also exists on other chains.
• Total supply or issuance mechanism: The issuance and distribution of MIR tokens are designed to incentivize protocol participants.
• Inflation/burn: The protocol mints and distributes MIR to reward liquidity providers and stakers, which brings some inflation. At the same time, some protocol fees (such as CDP closing fees) are used to buy back and burn MIR, or distributed to MIR stakers, balancing inflation.

Token Utility (MIR)

The main uses of MIR tokens are as follows:

• Governance: MIR holders can participate in major Mirror Protocol decisions by voting, such as adjusting protocol parameters, deciding to list new mirrored assets (like mVIXY), etc. This gives the community control over the protocol’s development.
• Staking rewards: Users can stake MIR tokens to earn protocol fee income and participate in governance.
• Liquidity incentives: To encourage users to provide liquidity for mirrored assets, Mirror Protocol distributes MIR tokens as rewards to liquidity providers.

Please note: mVIXY itself is not a token for investment returns; its value fluctuations depend entirely on the VIXY ETF it tracks. The risks of investing in mVIXY are similar to those of investing in the VIXY ETF, and may even be higher due to blockchain technology and protocol risks.

Team, Governance, and Funding

Core Members and Team Features

Mirror Protocol was initially developed by the Terraform Labs (TFL) team, co-founded by Do Kwon.

However, from the very beginning, Mirror Protocol has been committed to decentralized governance. The TFL team explicitly stated that they do not intend to retain or sell MIR tokens for profit, but instead hand over governance rights entirely to the community.

Governance Mechanism

Mirror Protocol adopts a fully decentralized community governance model. This means that any major protocol changes, new feature additions, economic parameter adjustments, or even the listing of new mirrored assets must be decided by MIR token holders through voting.

This model ensures protocol transparency and community participation, avoiding single points of failure or centralized entities controlling the protocol.

Treasury and Funding Runway

Mirror Protocol has an on-chain treasury, and its fund usage is also decided by MIR token holders through governance voting.

Roadmap

Since mVIXY is a specific mirrored asset on Mirror Protocol, its development roadmap is closely tied to the overall development of Mirror Protocol. Mirror Protocol’s roadmap usually focuses on the following aspects:

Historical Milestones and Events (Mirror Protocol)

• December 2020: Mirror Protocol officially launched, marking its entry into the decentralized finance (DeFi) space and releasing the first batch of mirrored assets, including mVIXY.
• Mirror V2 release: Introduced multiple improvements aimed at adding new asset types, incentivizing active governance, decentralizing protocol risk, and fully incentivizing all user groups.

Future Plans and Milestones (Mirror Protocol)

Mirror Protocol’s future plans usually revolve around the following directions:

• Add more mirrored assets: Continuously expand the types of real-world assets supported, allowing users to mirror more stocks, ETFs, commodities, etc.
• Cross-chain expansion: Further enhance compatibility and liquidity on different blockchains (such as Ethereum, BNB Chain, etc.).
• Protocol upgrades and optimization: Continuously improve the minting, liquidation, and oracle mechanisms to enhance efficiency and security.
• Deepen community governance: Explore more effective community governance models and encourage more users to participate in protocol decision-making.

Please note: Specific future plans will be dynamically adjusted according to community votes and market demand. It is recommended to check Mirror Protocol’s official channels for the latest information.

Common Risk Reminders

Investing in any blockchain project, including synthetic assets like mVIXY, comes with various risks. Here are some common risks you should pay special attention to:

Technical and Security Risks

• Smart contract risk: The core of Mirror Protocol is smart contracts. If there are vulnerabilities in the smart contracts, it may lead to asset loss. Although projects usually undergo audits, risks cannot be completely eliminated.
• Oracle risk: mVIXY’s price tracking relies on data provided by external oracles. If the oracle malfunctions, is manipulated, or provides incorrect data, mVIXY’s price may not accurately reflect the real price of the VIXY ETF.
• Collateral risk: Minting mVIXY requires collateralizing crypto assets. If the collateral price fluctuates sharply, there may be liquidation risk.
• Cross-chain risk: If mVIXY is bridged across different blockchains, the bridging technology itself may have security vulnerabilities.

Economic Risks

• Tracking error: Although mVIXY aims to track the price of the VIXY ETF, due to factors such as market liquidity, trading fees, and oracle update frequency, there may be tracking errors, causing mVIXY’s price to not fully match the VIXY ETF’s price.
• Risks of the VIXY ETF itself: The VIXY ETF tracks VIX futures contracts, not the VIX index itself. The VIX futures market has its own complexity and volatility, and holding VIXY ETF long-term usually faces decay (contango), so its performance may not meet expectations. mVIXY inherits these risks.
• Liquidity risk: If mVIXY’s market liquidity is insufficient, you may not be able to buy or sell at ideal prices.
• Liquidation risk: If you mint mVIXY and collateralize assets, when the collateralization ratio falls below a certain threshold, your collateral may be forcibly liquidated.

Compliance and Operational Risks

• Regulatory uncertainty: The global regulatory environment for cryptocurrencies and synthetic assets is still evolving. Future policy changes may affect the trading and holding of mVIXY. CoinMarketCap even marks it as “alleged SEC security.”
• Project operational risk: The continued development and maintenance of Mirror Protocol depends on community governance and the development team. If there are operational issues, it may affect the value and availability of mVIXY.

Important note: The above risks are not exhaustive. Before investing in any project, be sure to conduct thorough independent research and consult a professional financial advisor. This is absolutely not investment advice.

Verification Checklist

To further understand Mirrored ProShares VIX (mVIXY) and the Mirror Protocol behind it, you can refer to the following information:

• Mirror Protocol official website: Get the latest project updates, documentation, and community links.
• Mirror Protocol whitepaper: Learn in detail about the protocol’s technical principles, economic model, and governance mechanism.
• Block explorers:
• mVIXY contract address on Terra: Check transaction records, holder distribution, etc. for the CW20 version of mVIXY.
• mVIXY contract address on Ethereum: Check transaction records, holder distribution, etc. for the ERC20 version of mVIXY.
• MIR token contract address: Learn about MIR token circulation and on-chain activity.
• GitHub repository: View Mirror Protocol’s code activity, development progress, and community contributions.
• Community forums/social media: Follow Mirror Protocol’s Discord, Telegram, Twitter, etc. to learn about community discussions and project progress.
• Audit reports: Look for third-party security audit reports of Mirror Protocol smart contracts to assess their security.
• CoinMarketCap / CoinGecko: View market data, price trends, trading volume, etc. for mVIXY and MIR.

Project Summary

Mirrored ProShares VIX (mVIXY) is a synthetic asset provided by Mirror Protocol that cleverly brings the volatility investment tool from traditional financial markets—ProShares VIX Short-Term Futures ETF (VIXY)—into the blockchain world. For those who want to participate in volatility trading in a decentralized environment with lower barriers and more flexibility, mVIXY offers a unique option.

Mirror Protocol, through its over-collateralized minting mechanism and decentralized oracle network, strives to ensure that mVIXY’s price accurately tracks its real-world counterpart. The entire protocol is driven by the community of MIR native governance token holders, embodying the spirit of blockchain decentralization and community co-governance.

However, like any innovative technology, mVIXY and Mirror Protocol also come with technical, economic, and compliance risks. We need to be clear that mVIXY’s value fluctuations depend directly on the VIXY ETF it tracks, and the VIXY ETF itself is highly complex and risky. In addition, smart contract vulnerabilities, oracle failures, and regulatory uncertainty are all factors that must be seriously considered.

In summary, mVIXY is an interesting attempt to empower traditional financial assets with blockchain technology, providing investors with new possibilities. But please always remember, this is absolutely not investment advice. Before making any investment decisions, be sure to conduct in-depth research, fully understand its operating mechanism and potential risks, and carefully assess according to your own risk tolerance. For more details, please do your own research.