Today, we will look into some (rudimentary) use cases and strategies using $yLUNA.
$pLUNA might sneak here or there, but in general, I will leave its story until the next episode.
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Almost entirety of what you'll read in a moment is based on PRISM Protocol litepaper, available here: prismfinance.app/PRISM-litepape…
In particular, on 2 pictures below.
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[1] Stake your $yLUNA with @prism_protocol - this way you will keep all staking rewards *and* airdrops to $LUNA stakers, with no slashing risk and no unstaking period.
Pretty darn cool, if you ask me. No more 21 days of wait to undelegate your $LUNA and use it elsewhere...
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And if that is not enough to convince you to stake with @prism_protocol, yet another table from the litepaper suggests an ongoing airdrop of $PRISM to $yLUNA stakers.
[2] $yLUNA will be a standalone token, so we'll be able to provide it with $PRISM into $yLUNA - $PRISM LP and earn transaction fees and... $PRISM incentives.
As much as 30% of total $PRISM supply will go towards "Community and Liquidity incentives"
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Even more surprisingly, providing $yLUNA to LP will allow us to keep the $LUNA staking rewards and airdrops. 🤯
Good that I am writing this series, as that fact somehow escaped my attention until now...
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Provide $yLUNA to LP
- staking rewards & airdrops
- LP incentives
- transaction fees
In any case: I would keep only a portion of $LUNA staked directly, e.g. to @angelprotocol. 👼
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Next!
[3] Since $yLUNA is a token, we could buy it or sell it. "Why would we do that, ser?" you ask? Please allow me to explain.
It might not be as mind-blowing as the [1] and [2], but should still be fun. ;-)
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Imagine you sell $yLUNA for ~0.4 $LUNA. That's equivalent of 6.50% APR on staking rewards.
This means: whatever happens, you have exchanged variable APR on $LUNA staking into fixed APR *and* you got those staking rewards up-front.
It's up to you what'll do with the money.😎
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Or, you could buy $yLUNA at ~0.21 $LUNA, which is equivalent of current 3.19% APR.
Once the staking rewards go to 10%+ (soon, hopefully), price of $yLUNA will likely go to ~0.59 $LUNA. That's a 2.5x move just on stacking up $yLUNA.
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[4] Last but not least, @mars_protocol is coming soon-ish. A proper money market will allow us to borrow against more tokens than $bLUNA and $bETH in @anchor_protocol.
So, we could lend $yLUNA for certain APR, or borrow against it.
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That borrowing part will become particularly interesting when fixed-term variants of $yLUNA become available in future releases of @prism_protocol.
We will be able to borrow against $yLUNA-12m, i.e. 12 months worth of $LUNA staking rewards and...
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... keep $pLUNA-12m, which becomes redeemable 1:1 to $LUNA after a year.
No risk of liquidation, you only risk the yield (=staking rewards & airdrops).
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S01E06 - "What can I do with pLUNA?" will be published on 21 Oct 2021 @ ~1600 UTC
Now that we have tools to price $yLUNA, we can shift the focus to $pLUNA.
As I will try to explain pricing them both tandem will be a bit like chess - easy to learn, hard to master.
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The foundation for our pricing will be these 2 simple rules. You can always: 1) Split 1 $cLUNA (=1 $LUNA) into 1 $pLUNa and 1 $yLUNA 2) Provide 1 $pLUNa and 1 $yLUNA back to @prism_protocol and get 1 $cLUNA (= $LUNA) back.
In other words:
$LUNA <=> $pLUNA + $yLUNA
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With this, the formula for $pLUNA boils down to:
$pLUNA = $LUNA - $yLUNA
Simple, right? Well, only on the surface, unfortunately.
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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!
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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.