Thanks to DeFi, Here’s How You Can Trade Synthetic GME, 24/7
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Thanks to DeFi, Here’s How You Can Trade Synthetic GME, 24/7

Keep trading stonks even if Robinhood says no.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

We all know what happened in late January of 2021. With a number of traditional stock brokerages facing liquidity issues, trading restrictions were placed on several securities, including GameStop (GME). What many don’t realize, is that the DeFi space has already facilitated the 24/7 trading of synthetic GME.

Synthetic Assets Explained

Synthetic assets, frequently referred to as ‘synthetics’, are gaining notoriety among digital asset enthusiasts and experienced investors alike. The recent situation with popular stock brokers such as Robinhood and Interactive Brokers haulting certain trading activity showed the world just how practical synthetic assets can be.

Take GME, for instance. If you’re at all familiar with r/Wallstreetbets, you know that GME trading remains extremely popular. In fact, the entire Gamestop, WallStreetBets, and Robinhood fiasco has made the case for DeFi even stronger among retail investors.  

Synthetic stocks allow traders to trade on the price action of a real-world stock, without owning the actual stock. The price action behaves like the real-world stock by tracking its price through data oracles, like Chainlink. 

Though synthetics follow the model of traditional derivatives, they come with a few advantages over the model they are built upon. Anyone can issue synthetic assets. In terms of the big picture, synthetic assets empower the trader with worldwide liquidity, borderless transfers, and no centralized control that can cease certain trading activities. 

Using synthetic crypto assets, you can move freely between different asset classes. You can switch between equities, commodities, and other assets—without actually holding any of them.

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The question that arises next is how to actually trade a synthetic version of GME. Mirror Protocol is one platform that makes synthetic GME possible.

How Does Mirror Protocol Work?

Founded in December 2020, Mirror protocol works by creating “mirrored assets.” In short, these ‘mirrored assets’ are tokenized versions of the real assets that mirror or track the asset’s price movement. Mirror protocols’ primary aim is to extend access to US equities to retail investors based outside the US. Currently, the primary user base is in Southeast Asia.

Mirror has more than twenty assets, at present, enabled for trading on the protocol. In early February 2021, the protocol users voted to whitelist GameStop and AMC Entertainment on the platform allowing non-US residents to trade synthetic versions of GameStop and AMC. Both of these assets are available on the protocol under the tickers mAMC and mGME.

How Do I Trade Synthetic GME (mGME) on Mirror Protocol?

Working with mGME on Mirror Protocol is fairly user friendly. To mint mGME, you must lock up more than 150% of the current asset value in Terra stablecoins or mAssets as collateral. The system running the protocol reads in underlying asset prices via a decentralized price oracle where prices are updated every 30 seconds. 

When the price of mGME or any other mAsset drifts significantly from the primary market, traders are incentivized to burn the asset, thereby claiming the collateral. To burn an mGME, the issuer must burn the equal amount of mGME issued when opening the collateralized debt position. The protocol then returns the collateral to the issuer.

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Do you think that synthetic versions of GME and AMC will result in a further increase in demand for synthetic assets? Let us know below in the comments section. 

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