| You can "burn" the synthetic and claim part of the collateral. I don't think there is a problem in this particular situation. The place where there will be a problem is where MakerDAO had problems: when there aren't enough people willing to mint synthetics. The only reason to mint a synthetic is in order to sell it, in order to get a synthetic short position. If not enough people want to do this, but other people want a long position, this will generate excess demand for synthetics and the synthetics will trade consistently above the price of their real-world underlying. This is precisely what happened to MakerDAO before it turned itself into a "stablecoin index fund". DAI was trading way above $1.00 for several months running. MakerDAO's goal was to provide a trustless stablecoin. If it costs $1.15 to buy one this week and $1.00 next week, it's not very stable. Those 15 cents didn't make DAI expensive -- they made DAI a failure at its goal of producing a stable coin. Mirror's case is different. They're not trying to create a stablecoin. If the synthetics trade at a premium to the underlying, that difference is effectively a brokerage fee charged in order to open a long position. If the fee charged to open a long position swings around by 15% week-to-week that is certainly unattractive, but it doesn't make Mirror a failure. This might actually work as expected. The likely failure mode will be annoyingly high fees for long positions, rather than failure to deliver on its promise (as happened with MakerDAO). |