Introducing: Nexus Boosted Prism Farming

New ideas in DeFi never cease to amaze us and it seems like we’re starting 2022 with a slew of new innovations in the space. Today I’d like to focus on the recently announced AMPS program from the Prism Protocol team regarding their upcoming Prism Farm and what Nexus can do to optimize yields for users.

Introduction

Over the next 12 months, users can stake yield bearing assets into the Prism Farm module to receive PRISM tokens in return. Only yLuna is accepted at launch but it is their intention to include other Terra-based yield bearing assets in the future.

13% of the total supply of $PRISM (130mil tokens) is allocated for the farming event but its distribution is not uniform. Unlike vanilla ‘stake-to-earn’ farming mechanisms, Prism Protocol borrows a concept popularised by Platypus Finance on Avalanche.

Users are both yLUNA stakers and xPRISM stakers are entitled to a greater share of the per block $PRISM rewards distributed compared to users who only have yLUNA staked for the farming event. Furthermore, the criteria that determines a user’s receipt of $PRISM rewards does not simply depend on the amount of xPRISM staked but also on the amount of time the tokens has been staked.

This is because, every block, xPRISM stakers accumulate a non-tradeable AMPS ‘token’. The more AMPS a user has, the greater the yield received. Furthermore, if users unstake any xPRISM, the total amount of AMPS accumulated and therefore entitlement of boosted farming rewards will disappear.

The Nexus Proposition

The seasoned and shrewd DeFi participant would realise that this mechanism bears similarity to the symbiotic relationship between Curve and Convex on Ethereum. Nexus proposes to build the underlying smart contracts to bring this model to Terra.

Both users who hold $PRISM tokens and yLUNA who wish to maximise their yield would be incentivised to stake their tokens with Nexus as they would benefit from the much larger ‘AMPS’ power of the Nexus vault contract. In a nutshell, this allows users to gain much higher yield than they would otherwise have if they deposited on their own.

The contract will be set up to accept xPRISM and yLUNA deposits from users with the former on a one-way basis until the end of the farming basis and the latter withdrawable at any time.

User Benefits

User Group 1 (xPRISM holders):

  • Yield comes from xPRISM (protocol fees) and rewards sharing from yLUNA depositors
  • xPRISM given to Nexus will be locked without exception until the end of the farming period with users receiving nexPRISM in return
  • Nexus will either set up a PoL pool for nexPRISM/Psi or give incentives to users who provide liquidity
  • While there will not be any deposit fees for using the vaults, users may find that nexPRISM may not trade 1:1 against xPRISM

User Group 2 (yLUNA holders):

  • Yield comes from the base $PRISM incentives and the boosted yield from this strategy
  • yLUNA stakers simply deposit their tokens into Nexus and benefit from yield much higher than they would be able to achieve on their own
  • Users can unstake at any time and there is no deposit fee

User Group 3 (Psi stakers):

  • Nexus will charge a performance fee to users participating in this strategy; this fee will be added to the existing yield accruing to $Psi token stakers

Looking Ahead

As the Prism team has indicated that they might use the AMPS token in other ‘boosting’ programs, accumulation of AMPS by the Nexus vault also has the potential to reap greater benefits in the future. By locking up protocol tokens for an indefinite period of time, Nexus commits itself to the long term success of both the Terra blockchain and its constituent protocols.

We seek the community’s thoughts about this product. We are already speaking with the Prism team on how we can actualise these vaults to the benefit of all users.

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Nice! Whether in group 1, 2, or 3, everyone stands to get higher yield. I assume that group 3 includes all PSI stakers, and not a subset staked to a specific strategy in some way?

The nexPRISM vs xPRISM pricing is interesting… I would expect nexPRISM to price a bit cheaper since you are taking a longer-term risk in exchange for higher yield, but I guess that depends how much higher the yield is as well.

Do you see this having separate lockup periods like with Pylon pools (3mo, 6mo, etc) or just 1 like bPsi-DP24m? It could be interesting to lockup xPRISM longer for a larger share. :thinking:

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Very interesting.
I would assume that those who are currently on xPrism pledges and yLuna stakers will likely not move their xPrism in fears that they will lose all the AMPs that they’ve been accumulating for the last 20 days.

In order for Nexus to build up a sizeable AMP in a short period of time to have the yLuna staking APR to be much higher than what an individual can achieve, Nexus will need to attract significant amounts of xPrism to its vaults. This will allow Nexus to build up the AMP as quickly as possible. Two possible solution for this will be:

  1. Nexus incentives for xPrism pledgers to move over to Nexus vaults
  2. Partnership with Prism that allows xPrism pledgers to shift without affecting their accumulated AMPs

I would much prefer Point 2 because Point 1 will negatively affect the protocol, from at least an emission standpoint, unless the team would want to incentivise it in other ways. Point 2 will make sense even for Prism:

  1. Locks Prism from selling for a 12-months period. The current AMPs only builds up until 100 days pledged. So any excess Prism from there might be sold. By locking it into nexPRISM, this ensures that all locked xPrism into Nexus is locked for a full 1 year period.
  2. Provides additional utility to xPrism from the current utility of just pledging for additional governance and additional APR for yLuna farm.
  3. Establish new arb opportunities for xPrism

As for yLuna, perhaps a UI on Nexus to directly interact with yLuna farm will be good.

An incentive emission could increase the inflation of Psi again, perhaps we could utilise some of the incoming liquidity from Pylon to establish a pool instead of emissions.

Might introduce complexity, but recently @TundraV1’s tweet did spur some ideas to increase the demand for Psi. Staking Psi to individual strategies will entitle you to a higher share of the profits generated from that individual strategy. A higher staking to an individual strategy will:

  1. Demonstrate that Nexus users have a high conviction that strategy is beneficial to the protocol & has a high revenue potential
  2. Amount of Psi staked can signify which of the strategies are highly sought after, and which strategies can sunset so that the team doesn’t need to maintain it.
  3. We can also have Nexus strategists deploy their strategy on Nexus, and they get a cut of the revenue from that particular strategy. (as per Nexus’ vision on the litepaper)

The above idea on staking of Psi to a strategy is still preliminary. Just thinking out loud.

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yeahp, current model refers group 3 to be all Psi stakers.

In terms of price of nexPrism, I agree that some discount is inevitable, however the peg will depend on following factors imo;

  • how popular is nexPrism ( which will depend on how much higher yield it provides); because the users will buy nexPrism rather than to mint it if there’s discount on nexPrism, thus keeping the peg

for nexPrism, due to how AMPS model is structured, the initial suggested lock-up period is perpetual. This could be logical if Prism is to deliver further products with AMPS model (like LP farming, yAsset farming etc) which they current do have plan to do so. If Prism however pivot away from such plan and perpetually staking of xPrism no longer is a rational, option, the team will actively start an proposal for the community to decide whether we should change the lockup mechanism (allowing withdrawal of xPrism).

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Option 1 is not on the table atm as per the point you’ve mentioned; option 2 is interesting, I will find out whether that is technically possible. (I think it could be difficult how AMPS model is structured)

In terms of UI, there will be new 2 vaults on Nexus frontend for the users; xPrism staking vault & yLuna vault.

  • thank you for that idea over aligning & reflecting Psi staking towards the monitoring tool for the upcoming or incumbent strategies; that is defo one of the options that we are exploring - we will suggest more detailed idea or design once ready via forum at an idea level to openly discuss; if there’s any specific model that you are thinking, kindly share as well!
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I had asked about the staking to a subset of strategies specifically because I don’t think it is something that Nexus should do just quite yet. However, I think down the road when the protocol is more mature it should definitely be reconsidered. I don’t think there should be any fracturing of yield for PSI governance until the protocol TLV grows enough and strategies are diverse enough to where everyone doesn’t just all pile onto the best strategy only. A category of strategies with similar risk might also be a good route to take.

Anyways, I’m getting off topic… I think if we could get a partnership going and, if possible, have AMPs transferred over as Max mentioned that would be sick! The boosted Prism farming would rely heavily on attracting as much xPRISM as we can, so anything at all on that front would be helpful. I will keep thinking on it, if there was a way to further incentivize without PSI emissions of course.

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I think there is a simpler (?) third option to attract xPrism to the vaults: the vault could distribute profits to yLuna / xPrism depositors in a fixed proportion, e.g.: 60% to yLuna depositors, 40% to xPrism.

This way, if there are too few xPrism deposits, nexPrism APR would be huge, encouraging users to deposit more xPrism, until risk/adjusted returns for yLuna / xPrism are equalized.

It would be good to have some analysis to find a good ratio of profit sharing between yLuna / xPrism depositors, so that total the strategy overall have the best capital efficiency. Having that parameter adjustable by governance would be good too.

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Hey Shimmy,
Could the Nexus Prism Farming include arbs into the strategy?

Rather than allowing deposits of yLuna & Prism only, perhaps we could have a separate vault for pLuna to capture more yield for those who wants to participate in arbs.

From time to time, some arb opportunities may arise where the sum of pLuna & yLuna parts are trading at a premium compared to cLuna or Luna, in which in that case, we might want to withdraw yLuna from the vaults to make the swap to cLuna or Luna to extract the premium. It would subsequently be refracted again in its yLuna / pLuna parts to participate in the yLuna farm again.

This could be a strategy of its own, but integrating it into the Nexus boosted farm may make be better UX for the user.

Hi Max,

Just thinking out loud here whether this would be a more appropriate product for a protocol like White Whale. Ideally, I would want the Nexus product to be as simple as possible to attract the widest participation possible.

That being said, if the arbs were significant enough and occurs with sufficient frequency, we could study this a little more in depth.

Hi Alex, makes sense, this could be a separate discussion to have WW arb vaults as part of the Nexus strat.

Hey guys, since the vested Prism will start unlocking today or tomorrow, are we going live with this vault soon?

We are working towards it, although we will need a bit more time tbh

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