LSDFi Season — Prisma Finance

LIZZIE LU
ZMQuant
Published in
3 min readJun 29, 2023

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LSDFi Season — Prisma Finance

The end game for liquid staking derivatives?

Lybra is a project that leverages ETH liquid staking derivatives (LSDs) as collateral to mint stablecoins, taking advantage of the popularity of both LSD and stablecoin assets. It is a fork of Liquity @LiquityProtocol, but with notable improvements to overcome its shortcomings. However, there are two significant drawbacks to consider:

  1. The stablecoin generated by Lybra, known as eUSD, is an interest-bearing stablecoin that offers holders real returns from collateral earnings and governance token emissions. This design contradicts the incentive for users to leverage their positions.
  2. Although eUSD currently has liquidity pools on Curve, it lacks CRV or any other sustainable incentives, resulting in high liquidity costs. A similar protocol called Gravita Protocol also faces similar challenges.

However, there is now an upcoming protocol Prisma Finance. Boasting support from industry giants such as Curve, Convex, Frax, Conic, and major investors including Binance and OKEX, Prisma Finance is set to impress. It follows a Liquity+LSD model, like Lybra, but sets itself apart with significantly lower liquidity costs.

Having missed Lybra, now is the time to seize the opportunity and get involved with Prisma Finance.

Prisma is a new DeFi primitive focused on unlocking the full potential of Ethereum LSD, mitigating the risk of centralized assets for stablecoins. The haunting memories of the previous decoupling issue with $USDC still linger. Furthermore, Prisma’s integration with convex and curve plays a pivotal role in amplifying the flywheel effect, resulting in a positive feedback loop.

Prisma is backed by Curve Finance founder, Convex Finance founders, FRAX Finance, Conic Finance, Tetranode, Llama Airforce, Michael B. of LlamaNodes, Coingecko Founders, Amplice and Ivan from GearBox, OKX Ventures, DeFiDad, MrBlock, Impossible Finance, 0xMaki, GBV, Agnostic Fund, Swell Network Founder, Magnus from Dialectic Fund, Carlos from BITKRAFT, Adam Cochran, Eden Director of research at The Block, Kinnif from Fisher8, Tascha from Stella, Ankr Founders, Sam from NodeGuardians, MCEG, Eric Chen and Mirza from Injective, and many more.

The Key Features

Prisma supports multiple collateral options such as wstETH (Lido), cbETH (Coinbase), rETH (Rocket Pool), sfrxETH (Frax), and WBETH (Binance). These established options indicate the potential profitability of the platform and the intense competition that can unfold.

Being a fork of Liquity, Prisma inherits the underlying security measures. It also incorporates the ve (voting escrow) model, ensuring sustainable governance and incentives.

Moreover, users can provide acUSD minted through collateral and earn CRV, CVX, and PRISMA (the governance token) on corresponding liquidity pools. Additionally, they can also enjoy the LSD rewards.

Through DAO governance, protocol incentives are rewarded to liquidity providers, thereby avoiding the plight faced by Lybra’s eUSD.

Tokenomics

The governance token PRISM will be used to incentivize:

  1. The stability pool
  2. The lending pools: wstETH, cbETH, rETH, sfrxETH, and WBETH
  3. Users who vote on the acUSD pool on Curve (unconfirmed)

The governance token vePRISMA is used to determine protocol parameters, including:

  1. New collaterals
  2. Pool parameters for collaterals
  3. Protocol fees

Lending Mechanism:

The protocol automatically utilizes the income generated from user’s collateralized LSD assets to repay debts. This approach is more reasonable compared to Lybra’s distribution of income to stablecoin holders.

References

Prisma website:https://www.prismafinance.com/

Prisma intro:https://mirror.xyz/0xcaD9653550286Eb1D4779D622A6a5218b446b57C/wYAgS4n7aL4tNFdxSed_m_5nrNXg_3yNc18CwBdCyfU

Community:https://discord.gg/prismafinance

By Jason Liu & Lizzie Lu

About ZMQ

ZMQ is a Leading Global Quantitative Market Maker and liquidity provider in Digital Assets. Since jumping into the crypto market in 2018, ZMQ has been focusing on providing liquidity globally for token projects and exchanges, institutional crypto investments and consulting services to bring better price discovery, trading executions, transparency to investors and efficient pricing to the market.

If you have any new ideas about crypto market making and liquidity service, please reach out to us at liz@zmquant.com!

Website: www.zmquant.com

Twitter: @zmquant_com

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LIZZIE LU
ZMQuant
Editor for

Crypto Market Making | Hedge Fund | Investment | Advisory | Marketing | Web3/NFT/Game/DeFi / Layer1,2