Constant-product AMM

Terraswap and Astroport are automated market-maker (AMM) protocols implemented with smart contracts on the Terra blockchain. An AMM enables a decentralized on-chain exchange for the various assets involved in Terra ecosystem. For more details regarding these protocols, please refer to:

• Terraswap documentation: https://docs.terraswap.io.

• Astroport documentation: https://docs.astroport.fi/astroport/astroport/astro-pools/constant-product-pools#how-constant-product-pools-work.

The delta-neutral strategy uses constant-product AMMs offered by Terraswap and Astroport, to trade between UST and cw20 tokens, including mAsset, MIR and SPEC in the following situations:

• mAsset -> UST (Terraswap): When mAsset short position is opened or increased (at delta-neutral position open and reinvestment events), the minted mAsset is swapped for UST by Mirror's smart contract; at rebalance events, moving from a net long state back to the neutral state;

• UST -> mAsset (Terraswap): At rebalance events, moving from a net short state back to the neutral state;

• MIR -> UST (Terraswap or Astroport): At reinvestment events, the Aperture delta-neutral smart contract swaps MIR reward for UST via Terraswap or Astroport, whichever provides the better rate;

• SPEC -> UST (Terraswap, or potentially Astroport in the future): At reinvestment events, the Aperture delta-neutral smart contract swaps SPEC reward for UST via Terraswap; at this time there is no SPEC-UST liquidity pool on Astroport, but the Aperture delta-neutral contract is already implemented to check for such a pool on Astroport. As a result, when the SPEC-UST Astroport pool is created and provides a better rate than Terraswap, SPEC swaps will automatically be routed to Astroport.

To learn about the mechanism of a constant-product AMM, please refer to https://docs.terraswap.io/docs/introduction/mechanism/.