Today, we are introducing some exciting new changes to Prisma with the launch of two new vaults for wstETH and sfrxETH in addition to some changes to the fees of the current vaults. By offering these new vaults, Prisma can meet the borrowing needs of both short-term and long-term borrowers while also helping the mkUSD peg. So let’s dive into how these new vaults can benefit you!

Why introduce new vaults?

Each user has different needs and by offering two options you can pick whichever strategy caters more to your needs. The main differences are the costs of opening these vaults and the redemption risk. Depending on whether you want to borrow mkUSD or use Prisma to leverage your ETH position, each vault can serve a different purpose.

1. Consider the cost

   Not all vaults cost the same; some are better for short-term borrowers, and some for long-term borrowers.

   Short-term borrowers can benefit from the new vaults, which will be introduced with a 0% mint fee*, this new vault provides cheaper borrowing costs for users that don’t want to borrow for longer than ~3 months.

   Long-term borrowers benefit from the current vaults, which have a lower interest rate* of 4% compared to the new vaults 6%, the current vaults provide a cheaper borrowing cost for users that want to borrow for longer than 3 months.* Both the interest rate and mint fee are subject to change pending a DAO vote

2. Redemption risk

   Redemptions are an important mechanism for Prisma to help mkUSD stay at its peg of $1, they work by paying off the debt of Prisma’s riskiest users in return for their collateral. When someone redeems, they are charged a fee. This redemption fee** will be 1.5% for the current vaults and 1% for the new vaults.**Redemption fees are subject to change pending a DAO vote

   Current vaults will have lower redemption risk because of the higher redemption fee. The new vaults introduce a rebate system that gives the redemption fee to users whose vaults have been redeemed against.

   While the current vaults have less risk of getting redeemed against because of the higher redemption fee, the new vaults introduce a new mechanism that will pay the 1% redemption fee to the user vault that got redeemed against. What does this mean?

   Example: Alice opens a vault on Prisma using the new vault. Bob sees an arbitrage opportunity and redeems Alice her vault, paying the 1% redemption fee. In return for getting redeemed, Alice receives this 1% redemption fee. While getting redeemed, Alice does not incur losses but does reduce or lose her exposure to her collateral.

What are the benefits of this new update?

• Cheaper borrowing costs for short-term borrowers

• Redemption fee rebates for short-term borrowers

• Reduce redemption risk for long-term borrowers

• Allow for lower collateral ratios for long-term borrowers

• More fee revenue for the PRISMA DAO

Try it now at app.prismafinance.com/vaults

Getting in touch

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