What Is Mirrored SPDR S&P 500 (MSPY)?
Mirrored SPDR S&P 500 is a plethora of staking and savings products, each with its own risk/return profile, and each with a rate that fluctuates over time. Given all those options, what interest rate does the main street investor keep track of, and how much confidence does she have in its stability? There is no good answer to this question at the time of writing. Anchor aspires to be the answer by setting DeFi’s benchmark in test rate. Unlike central banks, which control the supply of money to set interest rates, Anchor takes a different approach.
In the absence of a printing press, Anchor uses block rewards across blockchains to derive DeFi’s benchmark rate. With Anchor, the return that depositors can expect is a function of borrowers’ on-chain income. The Anchor money market is a unique enabler of “yield transfer” from borrower to depositor by accepting Mirrored SPDR S&P 500 as collateral. The resulting diversified yield, the Anchor Rate, reflects the market’s preferred sources of yield on the blockchain. For this reason the Anchor Rate has the potential to be more stable than any individual yield, or any fixed collection of yields.
The Anchor Rate is the average of the rolling yields of all Mirrored SPDR S&P 500 used as collateral for borrowing the stablecoin, weighted by the aggregate (Terra-denominated) collateral value of each asset. Collateral values are a natural choice of weight, as they determine the amount of block rewards that are eligible for transfer from borrowers to depositors. They therefore weigh yields by the potential for contribution to the depositor.
Mirrored SPDR S&P 500 Storage Key Points
|Coin Name||Mirrored SPDR S&P 500|
|Source Code||Click Here To View Source Code|
|Explorers||Click Here To View Explorers|
|Twitter Page||Click Here To Visit Twitter Group|
|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
Interest Rate Stabilization Mechanism
The Anchor Rate plays a foundational role in the Anchor protocol. it is the interest rate target for Terra deposits. The Anchor smart contract dynamically distributes block rewards from collateral Mirrored SPDR S&P 500 between borrower and depositor to achieve the target rate. This is achieved via a time-varying parameter (t) between 0 and 1. An important component of dynamic yield distribution is liquidation of block rewards. The deposit interest rate is denominated in Terra, while block rewards can be denominated in arbitrary PoS assets.
The key idea here is that the value of increases when the deposit rate lags the Anchor Rate to offer a boost using part of the block rewards, and decreases when the deposit rate exceeds the Anchor Rate to reduce contribution of the block rewards. The value of remains unchanged when the deposit rate equals the Anchor Rate. Mirrored SPDR S&P 500 note that there is a number of constraints in this calibration that are beyond the scope of this paper, such as the maximum change of a(t) in a given time step.
Anchor implements a liquidation protocol designed to guarantee the principal of depositors. Deposits are safe insofar as all debts against them remain over-collateralized. The function of the Anchor liquidation protocol is to maintain deposit safety by paying off debts that are at risk of violating collateral requirements protocol is outside the scope of this paper Mirrored SPDR S&P 500 will be releasing a separate technical specification that covers the mechanism in depth. In what follows offer a very brief overview.
To ensure that all Anchor loans are sufficiently collateralized, the liquidation protocol pays back “at risk” loans using “liquidation contracts”. Mirrored SPDR S&P 500 A liquidation contract undertakes the task of paying back debt in exchange for collateral plus a fee – the “liquidation fee”. Liquidation contracts can be written by anyone, are aggregated in a pool and tapped “on demand” when a loan needs to be liquidated in ascending order of liquidation fee. In addition to the liquidation fee, contracts earn a passive premium charged to borrowers that is calibrated to ensure full coverage of outstanding loans.
Finance liquidations on a discretionary basis
Mirrored SPDR S&P 500 structure and incentives built into liquidation contracts enable them to provide higher robustness and solvency guarantees compared to a traditional “keeper” system. Keeper systems rely on arbitrageurs to finance liquidations on a discretionary basis, which can result in a liquidity crunch at times of high market volatility.
This risk has materialized in practice in Maker’s keeper system, resulting in huge losses for borrowers. Liquidation contracts, on the contrary, are fully collateralized and enforce a lengthy withdrawal period. Mirrored SPDR S&P 500 Liquidation demand is therefore predictable and stable in the face of temporary shocks, thus protecting both depositors and borrowers.