Introducing: Wrapped mAsset Strategy

Users who currently hold mAssets for price exposure to equities currently forego the dividend yield enjoyed by their counterparts in the traditional equity markets. This can constitute a significant driver of asset returns especially for more ‘value’ equities recently listed, e.g. mJNJ and mKO. Hence, Nexus has developed a wrapped mAsset Strategy that utilises delta-neutral principles and Mirror short farming to provide users with yield that will mimic existing dividend distributions.

Instead of purchasing mAsset, the users may mint or purchase wrapped mAssets with Nexus (nmAssets), effectively an yield bearing mAssets.

Strategy

  1. The user deposit mAsset to Nexus mAsset vaults + minting fee in UST

  2. Short farm is created for same mAsset, utilizing deposited mAsset as a collateral

  3. LTV set at min LTV + 0.1%

  4. Borrow UST from Nexus UST vault (LP Money Market) with locked UST as collateral. Pay minting fee from stage 1 to Nexus UST vault

  5. Purchase mAsset from mAsset-UST pair, same kind and amount as shorted in stage 2

  6. Collect rewards & Distribute

  7. Once locked UST from stage 2 is unlocked; provide it to Nexus UST Vault

Source of Yield

  • nmAsset Minting Fee
    • Paid by nmAsset minter, paid to UST depositor (LP Money Market)
  • mAsset sLP rewards
    • Buyback to Psi, paid to nmAsset holder

Limitations

  • Observing on-chain distributions of mAssets, mAssets are mainly utilized as a mean for liquidity farming or traded on Ethereum blockchain for arbitrage opportunities. Thus, directional investment demand for traditional assets seems to be less evident yet on Terra Blockchain. Considering that the nmAssets would address the user group who wishes to make a long position on mAssets, such observation dictates there may not be sufficient demand for such product in the market.

  • Closing nmAsset position would involve 1.5% mirror protocol fee, thus in order to fully serve the users best interest, readily available method to trade nmAsset is required. However the current AMM DEX requires substantial cost to provide liquidity.

We would like to take this opportunity to hear feedback on this product idea, especially with regards whether this product may have sufficient demand to be worthwhile building

2 Likes

I’d love to be able to use this strategy to earn “dividends” on my growth stocks, which usually don’t pay any real dividends! If enable, I’d migrate a good part of my stock portfolio to this protocol.

2 Likes

Hey Shimmy, I’m finding it hard to visualize the flow of this strategy…

Would be nice if you could elaborate a bit more on this one or provide a flowchart like the ones in the other posts?

Hopefully this can be useful.

  • You have 1 mPYPL
  • You use 1 mPYPL as collateral to ShortFarm 0.32 mPYPL ( this will give you MIR rewards )
  • You then borrow UST from Nexus for 2 weeks ( UST returned from shorting are locked for 2 weeks in Mirror Protocol ), with that UST you buy 0.32 mPYPL

Now you have the initial quantity 1 mPYPL, a debt of 0.32 mPYPL and again 0.32 mPYPL
1 - 0.32 + 0.32 = 1 mPYPL

Same exposure as before, but some MIR rewards (these might be converted in UST or mPYPL)

these rewards constitute the " dividend "

Crystal clear, thank you Pippellia!