We are excited to announce the details of our airdrop to OSMO delegators and Prism’s new Osmosis validator.
As discussed in our recent announcement, Prism V2 will be a sovereign blockchain built using the Cosmos SDK. It will be the first layer-1 dedicated to harvesting, trading and deploying of yield, enabling users to split any yield-bearing asset into its separate yield and principal components. It will be the yield hub where users trade cashflows of major Proof-of-Stake (PoS) and DeFi assets, empowering them to swap between fixed and floating yields. Bespoke features built at the blockchain level will facilitate the stripping of yield and spawn an ecosystem of innovative dAPPS utilising cashflows generated by yield-bearing PoS and DeFi assets.
Launched originally on the Terra Classic network, in February 2022, Prism quickly found product market fit with its innovative LUNA derivatives peaking at ~$800m TVL, ~$70m in liquidity on its native AMM and ~$3Bn annualized trade volume within 3 months of launch. Following the crash of Terra in May, time was taken to completely redesign the protocol. Prism V2 no longer has the limitations of building with smart contracts on someone else’s blockchain, but can now use smart contracts and core modules on its own blockchain to reach its full potential.
Prism V2 works by allowing users to take yield-bearing assets (YBAs) such as ETH, ATOM, DOT, MATIC, OSMO or LUNA and splitting them into two fixed term assets; a Principal Token (PT) and a Yield Token (YT). The YT allows the user to earn all the yield generated by the YBA during the fixed term and the PT allows the user to claim back the YBA at the end of the fixed term. The free market will determine the price of these assets on Prism’s new capital efficient AMM. By trading their future yield users neither have to lock away their assets for long periods of time to earn future yield, nor risk liquidation and pay volatile interest rates to raise capital against their assets. More exciting details will be published in due course.
Osmosis & Prism
- Trading yield — As OSMO is among the largest and highest yielding layer-1s in the interchain, it will be one of the most exciting assets Prism will initially whitelist, allowing OSMO holders to trade their future yield for a fixed period of time (see below for examples).
- Osmosis Liquidity Outposts — Prism protocol users will require deep liquidity for the underlying assets they would like to refract. With the dawn of Osmosis Liquidity Outposts, and the fact Osmosis has the largest liquidity on the interchain for OSMO, ATOM, ETH, USDC and more, it could be a great benefit to deploy an Osmosis Outpost on Prism if both communities were supportive. This would provide a seamless experience for users of Prism allowing them to access Osmosis’ liquidity without leaving Prism Chain.
- Liquidity Providing — OSMO holders who provide liquidity on Prism’s innovative AMM will potentially earn the highest yield for pure OSMO exposure in the interchain, They will receive a combination of; OSMO PoS Yield + Swap Fees + Liquidity Incentives + Prism PoS Rewards + Flashloan Fees. More details on Prism’s bespoke AMM will be published shortly.
Airdrop Eligibility 🪂
To celebrate this exciting opportunity, Osmosis holders can earn an airdrop by delegating to Prism’s Osmosis validator. This allows OSMO holders to support the development of Prism’s new Layer-1 and puts the Prism airdrop in the hands of those who are actively choosing to receive it and are most likely to take advantage of the opportunities Prism will offer.
Snapshots will be taken weekly commencing 9th February 2023. A weighted average of balances from the weekly snapshots will be used to determine the airdrop amount which will be claimable after mainnet launch.
If you use Keplr you can click here to delegate to PRISM Validator and make sure to click “Redelegate” or “Delegate”.
Using the following assumptions in the examples below:
(1) ATOM’s price is $10
(2) ATOM’s current variable yield is 20%
(3) Yield Token — The market is currently paying 0.15 ATOM for the right to receive the staking yield of 1 ATOM over the next year. This means the yATOM one year token is trading at 15% of the price of ATOM
(4) Principal Token — The market is currently paying 0.85 ATOM for the right to receive 1 ATOM in one years time. This means the pATOM one year token is trading at 85% of the price of ATOM
- Raising Money: A user with 10,000 ATOM wishing to raise capital, but keep their full exposure to ATOM decides to sell their right to receive ATOM’s yield for one year and receives 1,500 ATOM right now (2) which they can instantly swap to 15,000 USDC (1).
- Fixed Interest Rate: A user buys 10,000 pATOM for an amount of 8,500 ATOM (4) which gives them the right to receive 10,000 ATOM in one years time. This gives the user a fixed yield of 17.6% without having to manually claim any staking yield.
- Exposure to Interest Rates: A user believes that the yield on ATOM will increase over the year and the market is currently mispricing the right to receive yield for one year. They buy 10,000 yATOM for 1,500 ATOM (3). The yield on 10,000 ATOM ends up being 3,000 ATOM over the year. The user has therefore made a 100% return on their capital whereas they would have only made a 30% return by holding ATOM.
- FX Swap: A user may be swapping their yield received from ATOM to fund a purchase of another asset such as OSMO. Rather than performing the manual process of frequently selling variable rewards, they instead sell their yATOM and use that to purchase yOSMO, pOSMO or OSMO. Similarly, a holder of ATOM may have future expenses in their native currency of EUR. They could use ATOM to mint pATOM and yATOM, and immediately sell the yATOM for EUR whilst keeping their full exposure to ATOM by holding thier pATOM.
- Liquid Staking: A user wants to earn ATOM’s staking rewards but wants the flexibility to trade their position without having to wait for the unstaking period of 21 days. They mint pATOM and yATOM. Their yATOM allows them to claim their staking rewards with no unstaking period. If they want to trade their position, there is no unstaking period and they could trade their yATOM or pATOM instantly. They could also lend out their pATOM in a money market protocol to earn additional yield or be a liquidity provider in the pATOM pool and earn AMM fees.
- Arbitrage: The price of ATOM moves down from $10 to $9 (1), but pATOM price remains at $8.5 (4), and yATOM price remains at $1.5 (3). A user buys ATOM for $9 and mints yATOM and pATOM, which they immediately sell for $1.5 and $8.5 respectively, netting a risk-free profit of $1 per ATOM. This process can then be repeated until prices normalize.
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This paper is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. This paper reflects current opinions of the authors and is not made on behalf of any entities associated with them, or their affiliates and does not necessarily reflect the opinions of entities associated with them, their affiliates or individuals associated with them. The opinions reflected herein are subject to change without being updated.