2022-10-18 Mirror Protocol report

2022-10-18 @mirror_protocol report

incept date: 2022-09-30
Invested: 22327.13 $UST
Mirror valuation: 21531.50 $UST (827.69)

Accumulated yields: 267.86 $MIR
yield/day (avg): 14.88 $MIR (3.09)

$MIR quote: 5.41 $UST

$UST quote: 0.0384 $USDC

net APY: 131.61%
net APR: 59.35%

Analysis

Dear @mirror_protocol,

Keep doing this. Forever, if you please, or, for at least the next 500 years.

Keep this level, sure, but you can even up the APY if you'd like.

love, geophf

Answer 2 to the supplying QI pop-quiz

Answer 2 of our supplying $QI pop-quiz is a new tab, 'Borrow AVAX,' in our SPREADSHEET!

total QI gained: $1,094.96

total AVAX gained: $1,458.87

total gain: $2,553.83

If you compare this to the other tabs, our total value is more, but are yields are MUCH less: $800 less, due to the borrow accumulation. 🤬

This is not how I WANT leveraged yielding to work, but, as SUPPLY and BORROW APYs on $AVAX are net-the-same, leverage on $AVAX cancels out.

Good to know! 😅

SPREADSHEET!

Also, to note here: The risk of the earlier approaches is that I trade all my $AVAX for $QI.

In this approach, I KEEP my $AVAX (as SUPPLY), BORROW $AVAX, then swap THAT to $QI.

The δneutral leveraged position MITIGATES the $QI-risk AND preserves my capital investment.

So: yeah.

But, also note that we're generating much more $QI ($1k, or $400 more) than the prior solutions, too.

Hm. The goal is to generate $AVAX, not $QI.

I'm not jazzed about exchanging making less for less risk and more $QI. Let's see if the exercises following give better outcomes.

Experiment α(2): Benqi AVAX self-loan to Anchor

Experiment α(2):

We have @anchor_protocol humming along.
We have @BenqiFinance on Avalanche humming along.

Let's loan myself $AVAX from @BenqiFinance to @anchor_protocol and see how long it takes the $ANC yields to pay-down the loan.

We will 'create' $AVAX from $ANC here.

To self-loan $AVAX, I need $AVAX.

I have 9.9 $sAVAX, so I'll swap that for $AVAX on @pangolindex (edging out @traderjoe_xyz at the moment).

So, now I have $AVAX. Before I loan myself $AVAX, I'll establish 2 new δneutral positions on @BenqiFinance, before finally loaning myself the borrowed $AVAX.

Why?

Because: LEVERAGED yields, folks. Or, as I call it:

Yields using Other People's Money.

Don't mind if I do. 😎

So, step 1: 

we fund our @BenqiFinance market ("Be your own bank") by supplying $AVAX.

Step 2: we go to the @BenqiFinance 'overview'-tab to see which are the viable δneutral positions.

Besides $AVAX, itself, $USDC (NOT: $USDC.e) and $WETH.e are net-positive yields (in $QI) on both supply and borrow sides.

Step 3: we establish our δneutral positions.

Let's start with $USDC, as it collateralizes at 80%.

We BORROW $USDC – I'm borrowing at 70% – 

then we immediately SUPPLY all of that borrowed $USDC.

Thus, we establish our $USDC δneutral position: our supply covers our borrow.

I do the same thing to establish the $WETH.e δneutral position:

BORROW $WETH.e,

then immediately SUPPLY that borrowed $WETH.e 

Now that I have my diversified δneutral positions establish, I'll borrow $AVAX to self-fund my @anchor_protocol position over on Terra Classic (which we'll get to, eventually).

Please note the net APY: 3.34%.

You may be grumbling right now, saying two things:

1. "Net 3.34% APY???" and
2. "You started with 10 $AVAX and now only have 1.4 $AVAX? How are either good things?"

Good questions! Let's address both concerns.

We started with 10 $AVAX (~ $250); now we have 1.4 $AVAX.

But, look at the @BenqiFinance market I've established for myself:

$460.35 supply-side

$236.61 borrow-side

earning a NET 3.3% interest.

I started with $250, I'm earning interest on ~$700.

This is LEVERAGED yielding.

Not only is this LEVERAGED yielding (and I'm yielding on ~$450 of Other People's Money!), but it's relatively SAFE leveraged yielding.

• As the markets go up, the supply goes up, covering the increased borrow value.
• Same for as the markets go down.

(relatively) SAFE, CAPITAL-PRESERVING LEVERAGED YIELDING.

This is the beauty of what δneutral yield-farming is.

So, δneutral has all those advantages (safe, capital-preserving, leveraged), but it's not going to get you anywhere quickly.

Let's get somewhere quickly, ... on the Terra Classic blockchain.

To get there we need to bridge our 1.4 $AVAX there.

But we can't. I don't see how to bridge $sAVAX anymore, either. Bummer.

But we can bridge valueless (?) $UST.

Not so valueless, anymore, eh?

First we swap the $AVAX for $UST.

Then we bridge the $UST over to Terra Classic using https://classic-bridge.terra.money/...

... after a moment, we see the funds on Terra Classic. YAY! 

I just loaned myself some money.

I need to track the loan and the repay.

Do you know what that means?

SPREADSHEETSZORXEN!

Yeup.

I just created my "Anchor Self-funding Experiment"-spreadsheet. 

So now I want to convert my $UST to $sAVAX.

It turns out I don't want to do that, after all. The price impact on @astroport_fi is 10% for that swap. But I can swap to a different, viable, collateral:

SWAP 2120.32 $UST -> 0.021129 $bETH

And now we provide that $bETH as collateral.

Hm. Only a ~30 $UST borrow gain. Oof.

But what just happened?

I converted (indirectly) my $AVAX to (bonded) $ETH, increasing my $ETH supply from 0.49 to 0.51.

I'm 'creating' $ETH from $AVAX now, folks. 

el geophf, wizard. 😎

To finish up:

• I BORROW 16 $UST on @anchor_protocol,

• then I immediately SUPPLY that 16 $UST on the EARN-side

Earning ~2100% $ANC yields and a net 11% $UST yields.

Sweet!

As I earn the $ANC yields, I'll repay my $AVAX self-loan (but that's for another day).

The. End.

Mirror: the Yield Conundrum

So, in my daily sweep of my @mirror_protocol positions, ...

HOWTO

I see $mNVDA farm is over-collateralized:

However, even the best @mirror_protocol SHORT yields are at or below @anchor_protocol EARN yield.

WAT DO? 

This is a conundrum.

Me, I argue δNeutral is superior to savings, particularly because you earn yields on both LONG and SHORT sides of a position, but you may yearn for safety first and ease-of-access to your funds.

Both are acceptable approaches.

If you opt to move the collateral-overage to savings, simply adjust the collateral to 200%, and *POOF* your collateral-overage (because it's $aUST, right? YOU COLLATERALIZE WITH $aUST? RIGHT?!?!) is moved to @anchor_protocol EARN, ... AUTOMAGICALLY! 

DONE! ✅

But, if you wish to strengthen your (in this case $mNVDA) δNeutral position, then you follow the steps for the MFPT

HOWTO

And, BONUS! I don't even have to adjust the LONG-side. The vault will grow by the 0.01 $mNVDA without my interference.

Oh, and p.s.: expanding the the $mNVDA short position is a SHORT sale. This means that in two weeks, I collect the $UST unlocked from creating (expanding) the short-sale position. 

More $UST to invest in two weeks.

I.

LIKE.

this.

Mirror Delta-Neutral Farming Picker Thingie

Question: Why, if the stock market has taken a beating, well: the assets I invest in, anyway, why has my portfolio value gone up?

Answer: I'm preserving capital assets with delta-neutral positions on @mirror_protocol, that's why.

Image courtesy of @flipsidecrypto 

On that note, and, as there is a LOT of collateral freed up from the stock-securities dipping, I am going to use my:

MIRROR FARM-PICKER THINGIE/MFPT (tm)

to compute which delta neutral positions should grow.

How do you work the MFPT-thingie (which is a thingie-thingie, but okay)?

• enter today's date in cell A5 
• enter each short APR from https://mirrorprotocol.app/#/farm into col C
• enter the @SpecProtocol APY into col D 
• SORT by Average, col E, Z->A

TADA! 

SO! My MFPT tells me the top three yielding delta-neutral positions are:

• $mNIO
• $mARKK
• and $mFB

I own (and short) $mNIO, so I'll expand that position.

And I will open new positions on $mARKK and $mFB.

XCĪT!

The Work

The first thing we do in delta-neutral farming is to look at ALL the collateral ratios:

• all ratios above 205% we take down to 200%
• all ratios below 180% we add to restore it to 200%

EVERY. SINGLE. DAY! 😤 #NoLiquidations #None 

Adjusting Positions

"What is that process of adjusting collateral look like?"

Glad you asked:

• SELECT an asset (in this case: $mNKE) 

• ADJUST its collateral to 200%

• CAPTURE returned $aUST

• RECORD on the MFPT

Lather.

Rinse.

Repeat for all owned mirrored assets.

Now that you've captured this collateral, the MFPT will tell you how much to invest in each asset

BY. DOING. MATH! ... such wow. 🙄🤪

Adjust existing short positions (e.g.: $mNIO) by first adding the freed collateral then adding to the short until collateral ratio 200%.

Now, 

• RECORD your new short-position
• RECORD the quoted-price of the mirrored asset

And then:

• RECORD the mirrored asset portion of your LP

The MFPT computes how much $UST (NOT $aUST) you need to zap* into to your LP.

You can 'zap'* $UST on @ApolloDAO or @SpecProtocol. I have my mirrored long position on @SpecProtocol, so we'll use that protocol in this exercise.

Part I:

1. Open the mAsset vault.
2. SELECT UST tab
3. ZAP in $UST
4. CHOOSE the 'Mixed'-yielding option.

*zap, v.: asymmetrically add $UST to an LP position

Why do I choose 'Mixed'-compounding? A philosophical treatise.

* δNeutral is about yields so I want to maximize the $MIR yields from these vaults, BUT:

* I've been stung, closing short positions, because LPs eat assets, so I also choose 10% compounding

Choose 90% staking

Okay. That? Above? 

That was the easy part: that was maintaining a δNeutral position.

Now comes the fun-part:

Creating a δNeutral position.

Buckle up.

Opening Positions

Fortunately, you now have some familiarity with δNeutral, given that you've maintained one, so creating one should be easy-peasy! Let's go

We will now create a $mARKK δNeutral position here in 5 steps, which are steps that create

a. the short-side and

b. the long-side

Creating The Short Side

• STEP 1, the most important step: SELECT $aUST AS COLLATERAL! (sheesh: why do they default to $UST? Who wants to fund with $UST when you can fund with $aUST? REALLY!)

(not that I'm super-intense about this ... or anything) 🤪

• STEP 2: ENTER the $aUST collateral amount from the MFPT (do you remember what that is?) (Keep up, buttercup)

• STEP 3: RECORD the short position created into the MFPT!!

Nah, fam, I'm not super-intense about everything.

Narrator: lies

My wife: hard agree.

me: HEY! 😤

• STEP 4 (okay, so I can't count. And I'm a maths major. Go figure): Select, leik, ya know, 'Farm,' and stuff. 🤪

But, also note the 'returned UST'-amount for later. That sweet, sweet active 'returned UST'-amount ... but: later. Not now. Later.

Narrator: wen?

me: l8r.

We just created a short-position, the most risky position in investing that you can own, so most people will never do that. You're now one of the select-few

We need to support our short position with a long position to convert it into a safe δNeutral position

Let's rock

Creating the Long-Side

Entering the quote-price of the asset and the amount SHORTed into the MFPT, it tells us how much $UST to zap into our LONG LP position on @ApolloDAO or @SpecProtocol (I use spec for this exercise; you do you)

• STEP 5: ZAP that $UST into your @SpecProtocol vault, as before

• Step 6 (the last tweet was step 5) (...wut.): Mix the compounding to 90% staked, then select 'Deposit'!

Congratulations! You are now a δNeutral yield-farmer. Just follow these 484892745 steps every day, and you good. *dies

Oh, and p.s.: You do know you SOLD something, right? when you created the SHORT position? 

You sold something.

So, in two week's time, you get to collect that $UST generated from that sale.

@mirror_protocol pays you passive yields and active short-sales. BONUS!