Prisma Finance is a decentralized borrowing protocol that allows users to mint a stablecoin, mkUSD, fully collateralized by liquid staking tokens (LSTs). Launched on the Ethereum mainnet in August 2023, the Prisma Finance protocol is non-custodial, immutable, and censorship-resistant. ^[1][2][7]

Overview

Prisma stablecoin - mkUSD is incentivized on Curve and Convex Finance to create a capital-efficient flywheel where users can receive trading fees, CRV, CVX, and PRISMA on top of their Ethereum staking rewards. The Prisma DAO is in charge of parameters, emissions, and protocol fees. ^[3][4]

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, etc. ^[3]

Prisma Token

Governance

Launched on the Ethereum network on November 2, 2023, PRISMA is the governance token of the Prisma protocol. It is distributed to users of the protocol for performing a variety of actions and can be locked to participate in protocol governance. ^[6]

PRISMA uses the veToken model which controls several aspects of the protocol: The stability pool, Pool parameters for new collaterals, Protocol fees, and Emissions. Governance participants, among other things, can incentivize the minting of mkUSD or change mint and borrow fees on their collateral of choice to incentivize LST protocols to participate in Prisma’s governance. vePRISMA holders can also choose to incentivize any LP tokens with PRISMA emissions. ^[5]

Tokenomics

PRISMA has a maximum total supply of 300 million. All tokens were minted immediately when the protocol was deployed. Tokens are initially held by the Treasury, and released gradually over time.
The supply of PRISMA is allocated as follows:

• 62% (186,000,000 PRISMA) are allocated towards emissions. These emissions are directed by the Prisma DAO and incentivize certain actions within the Prisma Protocol. Emissions can additionally be used to incentivize liquidity on liquidity pools.
• 20% (60,000,000 PRISMA) are allocated to the Core Contributors. These tokens will be unlocked linearly for 12 months starting at Genesis.
• 10% (30,000,000 PRISMA) is allocated to Early Supporters who assisted in bootstrapping costs associated with the initial development of the Prisma Protocol. These tokens will be unlocked linearly for 12 months starting at Genesis.
• 5% (15,000,000 PRISMA) will be held in the Prisma DAO Treasury.
• 3% (9,000,000 PRISMA) will be distributed towards veCRV voters and Prisma Point holders. ^[5]

Utility

PRISMA allows users to mint Prisma’s native overcollateralized stablecoin (mkUSD) against listed LSTs, providing holders of liquid-staking ETH tokens with capital efficiency. With the help of Ethereum staking rewards, loans secured by LSTs eventually pay themselves back. With the addition of a Curve pool, users can then stake their stablecoins and receive further rewards in the form of CRV and CVX which the protocol will heavily incentivize by participating in the Curve wars. ^[3]

mkUSD

mkUSD (formerly known as acUSD) is a stablecoin that is fully/over-collateralized by liquid staking tokens (LSTs). It is minted on the Prisma Finance protocol, which is a decentralized borrowing platform. Prisma is conducting a guarded launch, meaning that it will progressively raise the borrowing limit of mkUSD, while ensuring that the nascent protocol is operating as intended. ^[8]

On September 15, 2023, Prisma lifted the cap of mkUSD from $20M to $30M — that level was reached in less than two hours.

"We’re pleased to announce that the debt cap for mkUSD has been reached within 1hour and 40m." - Prisma Finance tweeted^[9]

The primary yield opportunity driving the demand is a module called a “stability pool,” which has attracted over $21M worth of mkUSD. The stability pool is used to settle debts that need to be liquidated — in turn, the pool receives the liquidated users’ collateral, according to Prisma’s documentation. This mechanism was pioneered by Liquity, the issuer of the LUSD stablecoin, which is purely backed by ETH. ^[8]

Prisma DAO

Introduced on October 30, 2023, Prisma DAO is a decentralized and trustless environment that allows for community-led growth, development, and self-sustainability. DAO members gain voting power by locking their PRISMA, the longer these tokens are locked, the higher the voting power. The more voting power a user holds, the greater the decision-making power the voter receives. ^[10]

The DAO can formally vote on the following:

• Directing PRISMA emissions
• Modifying fees
• Adding or removing collateral
• Pausing or unpausing protocol functionality
• Transfer protocol fees
• Adjusting the quorum on admin votes. ^[10]