Prisma Finance is a new entrant in the Curve Wars of the liquid-staking derivate sector, offering high yield opportunities for ETH holders. JPEG’d DAO can benefit from this yielding opportunity by using some of its ETH to deposit on Prisma and farm in a nearly delta-neutral manner.
JPEG’d could use some the ETH in treasury to farm on Prisma.
JPEG’d treasury is robust and partly sitting idle. Using Prisma finance would be a way to diversify the yield opportunities and increase the protocol’s revenues.
Prisma Finance is similar to Liquity, offering a stablecoin: mkUSD against Liquid Staking ETH tokens. Like Liquity it offers a stability pool, whose role is to provide the necessary liquidity to cover the debt from liquidated vaults.
Using a portion of the DAO’s treasury, the following farming strategy is suggested:
- Convert ETH to wstETH (wrapped staked ETH)
- Create Prisma Vault and deposit wstETH as collateral
- Use wstETH collateral to mint mkUSD
- Deposit mkUSD into Stability Pool
The MCR (minimum collateral ratio) would be kept at a maximum of 200% at all times, giving a 50% drop buffer against liquidations.
Depending on market conditions it seems reasonable to believe this strategy will yield double digit APRs as seen below.
|Prisma Strategy Yield Split||ETH Value||Yield||Weighed Yields|
|mkUSD Value Borrowed in ETH||0.25||-2.00%||-0.50%|
|Yield on Active Debt Position||0.25||12.00%||3.00%|
|0.5% mkUSD Mint Fees||0.00125||0.00%||0.00%|
|Value as ETH in mkUSD Stability Pool||0.24875||20.00%||4.98%|
|Total Yields Relative to stETH Deposit||10.98%|
Allow the team to use up to 5k ETH to farm on Prisma Finance to generate yield for JPEG’d DAO using the strategy described above.