[tdhoot]

> But to oversimplify, under the Mirror Protocol, the idea is to keep prices of the synthetic -- or “mirrored” -- equities in the ballpark of the real thing by offering incentives for traders to arbitrage price discrepancies and manage the actual supply of tokens. Users can create, or “mint,” new tokens when prices are too high by posting collateral, and destroy, or “burn,” tokens when prices are too low, driving the price up or down.

This seems pretty similar to the authorized participant model used successfully with ETFs, so not sure if it's actually an issue.

[ethn]

It’s the redemption of the real underlying that allows ETFs to work.

[arcticbull]

Yes, its important for tracking that authorized participants are able to both create and redeem the ETFs for the underlying. This is why the Grayscale family does such a god-awful job of tracking the underlying. Check out the premium over time. [1]

I suspect these are more like perpetual futures or CFDs?

[1] https://ycharts.com/companies/GBTC/discount_or_premium_to_na...

[nly]

Not always. There are synthetic ETFs backed by nothing but swap contracts.

For example, commodities ETFs typically work by throwing cash in to treasuries and purchasing the total return swap contracts between those treasuries and some benchmark of commodity future contracts.

The major difference with these blockchain tokens is that the collateral (the stablecoin) held against the stock benchmark is itself completely synthetic.