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A Primer on PRISM Protocol & Hashed’s Value-Add

Disclosure: Hashed has established, maintained, and enforced strict internal policies and procedures designed to identify and effectively manage conflicts of interest related to its activities. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. Furthermore, references to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services.

Context

Decentralised Finance (“DeFi”) has come a long way since it started gaining traction in 2020. There have been a range of DeFi protocols that launched across different financial verticals — lending / borrowing, exchanges, derivatives, etc. Most of these aim to innovate on top of traditional financial products; but yet, the market and users still demand for better capital efficiency.

An example — today, DeFi users can take out permissionless loans by pledging their digital assets as collateral and borrowing against their value. However, this results in capital inefficiency, since part of their collateral that could be earning yield elsewhere is “stuck” with overcollateralised loans. Unexpected liquidations of your principal asset may also occur due to the speculative nature of crypto.

PRISM is a new DeFi derivatives protocol that innovates on these inefficiencies by allowing users to split their yield-bearing assets into two distinct pairs: (i) the yield component and (ii) the principal component.

This mechanism unlocks a slew of strategies to improve the capital efficiency of the whole asset — E.g. users raising liquidity by swapping their asset’s future yield for a fixed price today and borrowing against that instrument, while maintaining price exposure through their principal token.

Value proposition of PRISM: deconstructing a single asset into distinct pairs

PRISM Ecosystem

PRISM enables users to place their yield-bearing assets as Collateral Tokens (“CT”) into a vault, which then splits into a Yield Token (“YT”) and Principal Token (“PT”).

The minted YT and PT will have values freely determined by the market, as they will be available for trading on PRISM’s Automated Market Maker (“AMM”). They can be used for various purposes at the asset-provider’s discretion.

In PRISM v1.0, users may interact with the protocol by doing any of the following:

  1. Provide LUNA as collateral to mint a perpetual yield token (“yLUNA”) and perpetual principal token (“pLUNA”)
  2. Purchase yLUNA or pLUNA from the AMM
  3. Purchase $PRISM and stake to receive rewards and participate in protocol governance proposals
  4. Provide liquidity to the AMM by staking token pairs in pools for rewards from transactions and liquidity mining incentives
PRISM enhances the capital efficiency of any yield-bearing asset by enabling the tokenisation of its future cash flows into a Yield Token

Things to do with yLUNA:

  • Stake yLUNA in PRISM to earn original staking rewards, e.g. airdrops, swap fees
  • Provide yLUNA liquidity on the AMM by minting a yLUNA-PRISM LP — entitles LP to liquidity incentives and AMM fees
  • Sell yLUNA on the AMM for your desired asset and/or use as collateral

Things to do with pLUNA:

  • Stake pLUNA in PRISM to exercise proxy voting rights for governance proposals
  • Provide pLUNA liquidity on the AMM by minting a pLUNA-PRISM LP — entitles LP to liquidity incentives and AMM fees
  • Sell pLUNA on the AMM for your desired asset and/or use as collateral
Source: PRISM’s litepaper

Where Hashed can Contribute and Value-Add

1. Hashed has significant liquid LUNA holdings that can contribute to PRISM’s TVL

PRISM’s v1.0 will only accept LUNA as collateral, so a significant amount of seed liquidity by a core participant of the Terra network like Hashed will help boost TVL. This benefits both parties as Hashed continues to receive staking rewards through yLUNA while unlocking capital efficiency with pLUNA; and PRISM can facilitate a deeper and more liquid AMM with Hashed’s liquidity and market-making efforts.

2. Hashed is a team of blockchain experts, builders and ex-TradFi brains that can support and advise PRISM’s go-to-market strategy

There are many ways to build trading volume for PRISM’s different instruments (yLUNA, pLUNA, PRISM, xPRISM, UST, etc.) and one method would be to develop an “alert bot” to broadcast information through Telegram. Hashed has the developer resources capable of building elaborate bot features and can couple its technical contribution with TradFi expertise to devise trading strategies that work best for the protocol.

3.Hashed can coordinate PRISM with synergistic portfolio companies

Hashed sees potential collaboration opportunities between PRISM and its portfolio companies — e.g. Pylon (lossless contribution of YTs), Valkyrie (viral social growth marketing), Stader (decomposition of all staking products), Mirror (decomposition of mAssets), Anchor (decomposition of yield-bearing stablecoin).

Hashed is one of Terra’s biggest backers since genesis and will continue to look for ways to collaborate with quality early-stage projects. PRISM’s goal to synthesise new financial instruments on Web 3.0 and enable their full functionality is aligned with Hashed’s vision for Terra’s future.

Looking forward to building together!

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Empowering mass adoption of the decentralized future through network building of the protocol economy.

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cpt n3mo

cpt n3mo

VC | Investment | Research @ Hashed; Articles are my personal views and not financial advice.

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