Crypto Gloss

Prisma Finance

Prisma Finance is an Ethereum CDP (collateralized debt position) protocol that issues the mkUSD stablecoin exclusively against liquid staking tokens (wstETH, cbETH, rETH, sfrxETH) — deep within the Curve ecosystem — using vote-escrow tokenomics to direct mkUSD liquidity incentives and a debt interest model calibrated to LSD yield.

Overview

Launched in 2023, Prisma Finance targeted the intersection of two dominant DeFi themes: the liquid staking derivatives (LSD) boom post-Ethereum Merge and Curve Finance’s deep stablecoin liquidity. By accepting only Ethereum staking derivatives as collateral and integrating tightly with Curve, Convex, and related vote-escrow protocols, Prisma created an LSD-specific borrowing layer where users could leverage their staked ETH yield without selling their staking position. The PRISMA token governs the protocol with a vote-escrow model replicating Curve’s mechanics.

mkUSD Stablecoin

mkUSD is Prisma’s CDP-issued stablecoin:

  • Overcollateralized — users mint mkUSD by depositing LSD collateral at minimum collateral ratios (typically 110–120% depending on collateral)
  • Hard peg mechanisms — redemption floor (1 mkUSD always redeemable for $1 of collateral at face value) prevents mkUSD from trading below $1; ceiling maintained by PRISMA governance and Curve pool depth
  • No interest rate — mkUSD carrying cost is the one-time minting fee (similar to Liquity’s one-time fee model, not ongoing interest)
  • Curve integration — mkUSD is designed to live in Curve stable pools, with PRISMA emissions directed by vePRISMA voters toward mkUSD/crvUSD or mkUSD/FRAX pools

Supported Collateral

Prisma accepts Ethereum LSD tokens only:

  • wstETH — Lido wrapped staked ETH (primary collateral)
  • cbETH — Coinbase staked ETH
  • rETH — Rocket Pool staked ETH
  • sfrxETH — Staked FRAX ETH (frxETH staking version)

All collateral generates underlying staking yield for the user while serving as CDP backing, meaning borrowers effectively receive a “yield-bearing loan” — the staking APR partially offsets the mkUSD minting fee.

PRISMA Token and vePRISMA

Prisma uses a Curve-inspired governance model:

PRISMA:

  • Governance and emissions token
  • Locked for up to 52 weeks to receive vePRISMA
  • veLockers direct mkUSD liquidity incentives to Curve pools via gauge-style voting

vePRISMA:

  • Weighted governance power decaying with time remaining on lock
  • Gauge voting rights: direct PRISMA emissions to mkUSD Curve pools
  • Bribe market: protocols and Curve wars participants pay vePRISMA holders to vote for specific pools

Curve Wars Integration

Prisma positioned itself within the “Curve Wars” ecosystem:

  • mkUSD needs Curve pool depth for peg stability and liquidity
  • PRISMA emissions direct Curve gauge votes toward mkUSD pools
  • Convex Finance, Stake DAO, and similar Curve aggregators can boost mkUSD pool APYs by directing their veCRV votes
  • vePRISMA bribe market enables direct incentive payments to voters

Sources

  1. Prisma Finance Documentation — Prisma Finance Team, 2023. Describes CDP mechanism with LSD-only collateral, mkUSD stability mechanisms (redemption floor, over-collateralization), PRISMA/vePRISMA governance model, and integration strategy with Curve Finance for mkUSD liquidity.
  1. “LSDfi: Staking Derivatives as DeFi Collateral” — Delphi Digital, 2023. Surveys the wave of LSDfi protocols using stETH, rETH, and cbETH as CDP collateral including Prisma, Lybra, and Raft, analyzing why the post-Merge yield environment made LSD-backed stablecoins attractive and the collateral risk differences between LSDs.
  1. “CDP Stablecoin Mechanisms: Beyond DAI” — Messari Research, 2023. Compares redemption-floor CDP mechanics (Liquity, Prisma) against interest-rate CDP models (MakerDAO, Aave GHO), evaluating which mechanism provides better peg stability under different liquidity and demand conditions.
  1. “Curve Wars in 2023: New Entrants and Strategies” — Bankless Research, 2023. Maps the Curve Wars ecosystem in post-Merge 2023 with new entrants including Prisma, evaluating how PRISMA token bribe dynamics compare to Convex/Stake DAO established players and whether mkUSD achieved sustainable Curve pool depth.
  1. Prisma Finance Governance and Collateral Updates — Prisma DAO, 2023. Governance forum discussions covering collateral addition decisions (cbETH, sfrxETH additions), collateral ratio adjustments, PRISMA emission rate changes, and integration proposals with major Curve ecosystem protocols.

Related Terms