Prisma

Lending

Prisma is a decentralized borrowing protocol that issues the mkUSD stablecoin, which is fully backed by liquid staking assets.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Prisma is a fully collateralized stablecoin issuer that is completely immutable, which makes it an attractive platform for users who want to optimize their yield on liquid staking tokens.
What we like less
Due to the protocol's redemption mechanism, the riskiest or least collateralized vaults are always targeted first when someone redeems mkUSD. As such, users may have their collateral vaults redeemed against even if they are overcollateralized. To avoid this, users must maintain a high collateral ratio relative to the system's other vaults.
What it means for you
Prisma allows you to mint the mkUSD stablecoin to be deployed across DeFi while continuing to earn yield on your liquid staking tokens.
Information
Exploit/Hacks
One
Info
  • Website
  • Token: PRISMA
  • Tags: Lending
Key Metrics
  • TVL: $44.4M (Rank #97)
  • TVL Ranking by Lending: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $44.41M
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by several experienced auditors including Zellic and MixBytes
  • Anonymous team reduces transparency
  • One unmitigated protocol hack since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over six months reduces technical risk as smart contracts are moderately battle-tested
  • Top 5% by total value locked reduces risk
  • Requires members of a DAO to vote on-chain for approving contract upgrades
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Robust controls in place to prevent risky borrowing
  • Solid mechanisms in place to ensure healthy liquidations
  • Robust methods to accrue protocol reserves
Things to know about Prisma

How Prisma works

Prisma is a protocol that allows users to mint mkUSD, a synthetic USD stablecoin, by depositing supported liquid staking tokens (LSDs) like wstETH, cbETH, rETH and sfrxETH as collateral. Users can adjust their collateral ratio (minimum collateral ratio of 120%) and borrow mkUSD based on their personal risk tolerance. Users must have a minimum debt of at least 2,000 mkUSD in order to open a borrow position. This is to ensure that there is enough incentive for liquidators to step in and cover the position in case of a shortfall. Users can also repay mkUSD and withdraw their collateral at any time. Holders who bought mkUSD on the open market can also redeem their mkUSD against other borrowers' LSD collateral in return. Raft maintains the stability and peg of mkUSD through a combination of hard and soft peg mechanisms, such as stability pool, liquidations, fees, incentives, and governance.

How Prisma makes money

Prisma generates revenue through a combination of fixed fees and borrowing interest rates. Users are charged a one-time minting fee when they borrow mkUSD against their collateral, which is added to their total debt and varies algorithmically between 0.5% to 5%, with an additional Liquidation Reserve charge that's refunded upon debt repayment. Additionally, a continuous borrowing interest rate is applied to the outstanding debt over time, serving as a recurring source of income for the protocol. The Prisma community, through governance votes, can adjust both the fixed fees and the interest rates, allowing the protocol to respond to market dynamics while incentivizing user participation and ensuring protocol stability and liquidity.

How you make money on Prisma

You can make money on Prisma by depositing supported LSDs as collateral to mint mkUSD. You can now use this newly minted mkUSD to earn yield from other DeFi protocols, while your collateral ratio improves over time due to the accruing of staking rewards on your underlying LSDs. You could also swap your mkUSD for more LSDs to leverage your exposure to a specific LSD asset.