@prism_protocol intro
S01E03 - yLUNA-perp pricing
Small reminder - with PRISM we will be able to split $LUNA into $pLUNA and $yLUNA. Those 2 tokens will last forever, i.e. $yLUNA will entitle you to $LUNA staking rewards until end of times.
Let's try to a price on $yLUNA!
/1
S01E03 - yLUNA-perp pricing
Small reminder - with PRISM we will be able to split $LUNA into $pLUNA and $yLUNA. Those 2 tokens will last forever, i.e. $yLUNA will entitle you to $LUNA staking rewards until end of times.
Let's try to a price on $yLUNA!
/1
Present value (PV) of $yLUNA is equal to PV of all $LUNA staking rewards and airdrops to $LUNA stakers.
Quick check in Terra Station and we know that staking LUNA gives us 3.19% APR right now.
station.terra.money
/2
Quick check in Terra Station and we know that staking LUNA gives us 3.19% APR right now.
station.terra.money
/2
Courtesy of terra.smartstake.io/airdrops it's easy to check APR on regular airdrops of:
$ANC - 1.21% for the next 77 weeks
$MINE - 0.65% / 90 weeks
$MIR - 0.43% / 11 weeks
$VKR - 0.60% / 52 weeks
@SmartStake is a wonderful community validator btw - I recommend delegating to them
/3
$ANC - 1.21% for the next 77 weeks
$MINE - 0.65% / 90 weeks
$MIR - 0.43% / 11 weeks
$VKR - 0.60% / 52 weeks
@SmartStake is a wonderful community validator btw - I recommend delegating to them
/3
A summary of $LUNA staking rewards and regular airdrops (by week) below.
/4
/4
We have the 'cashflow' part in the DCF method. Time to tackle the 'discounting' part!
As mentioned in previous episode (
In my opinion, the only rate that makes sense is the Anchor Earn APY of 19.50%.
/5
As mentioned in previous episode (
https://twitter.com/AgilePatryk/status/1449829853071544325), one should use a risk-free rate for discounting.
In my opinion, the only rate that makes sense is the Anchor Earn APY of 19.50%.
/5
However, that 19.50% is APY, i.e. it takes into account compounding, which Anchor Earn does for us every block (5-6) seconds.
We need to translate that to Weekly Percentage Rate (WPR) as all calculations below will be done week-by-week.
/6
We need to translate that to Weekly Percentage Rate (WPR) as all calculations below will be done week-by-week.
/6
aprtoapy.com is a convenient little tool that can translate APY to APR. Assuming weekly compounding, we get:
APY = 19.50%
APR (weekly compounding) = 17.85%
WPR = APR * (7/365) = 0.3422%
/7
APY = 19.50%
APR (weekly compounding) = 17.85%
WPR = APR * (7/365) = 0.3422%
/7
Theoretically I could write some math formulas and arrive at exact numbers.
I decided to go for approximation with a sheet instead, so that you can run the numbers in different conditions, e.g. change in APR or new regular airdrop.
docs.google.com/spreadsheets/d…
/8
I decided to go for approximation with a sheet instead, so that you can run the numbers in different conditions, e.g. change in APR or new regular airdrop.
docs.google.com/spreadsheets/d…
/8
The assumptions:
- APR does not change
- Value of airdrops (in $LUNA-value) does not change
- Anchor Earn rate does not change
- No new airdrops
- Eternity = 9999 weeks 😇
/9
- APR does not change
- Value of airdrops (in $LUNA-value) does not change
- Anchor Earn rate does not change
- No new airdrops
- Eternity = 9999 weeks 😇
/9
Calculated price of $yLUNA is 0.20652 $LUNA.
There have been some assumptions made on $yLUNA / $pLUNA ratio - I have seen (and used myself) 0.15/0.85. Now we know that the ratio is ~0.21/0.79.
The yield-bearing part is somewhat heavy, right?
/10
There have been some assumptions made on $yLUNA / $pLUNA ratio - I have seen (and used myself) 0.15/0.85. Now we know that the ratio is ~0.21/0.79.
The yield-bearing part is somewhat heavy, right?
/10
So, if anyone were to offer you $yLUNA for 0.15 $LUNA, grab it all - regardless of the amount.
Put a mortgage on the house, sell your car, sell your dog, borrow from all friends and family - arbitrage opportunities that good don't happen often.
/11
Put a mortgage on the house, sell your car, sell your dog, borrow from all friends and family - arbitrage opportunities that good don't happen often.
/11
--- a little extra ---
Let's assume that core staking APR goes to 10%, as it was advertised with #Columbus5, all else unchanged.
That would increase the price of $yLUNA to 0.59206 $LUNA.
A whopping 0.59 / 0.41 ratio between $yLUNA and $pLUNA.
/12
Let's assume that core staking APR goes to 10%, as it was advertised with #Columbus5, all else unchanged.
That would increase the price of $yLUNA to 0.59206 $LUNA.
A whopping 0.59 / 0.41 ratio between $yLUNA and $pLUNA.
/12
--- a little extra 2 ---
I have drafted this thread yesterday, when the core staking reward was 4.02%.
Decrease 4.02% -> 3.19% dropped the calculated price of $yLUNA from ~0.26 to ~0.21 $LUNA.
That's for you to see, how APR-sensitive $yLUNA will be.
/13
I have drafted this thread yesterday, when the core staking reward was 4.02%.
Decrease 4.02% -> 3.19% dropped the calculated price of $yLUNA from ~0.26 to ~0.21 $LUNA.
That's for you to see, how APR-sensitive $yLUNA will be.
/13
S01E04 - "pLUNA-perp pricing" will be published on 19 Oct 2021 @ ~1600 UTC
Full list of episodes here:
/14-end
Full list of episodes here:
https://twitter.com/AgilePatryk/status/1448951059402137611
/14-end
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