[Proposal] Adding yLuna as collateral

yLuna is a new token created by prism protocol.

What is Prism Protocol?
Prism protocol is derivatives protocol unlike any other, prism protocol takes token and separates it into Principal Token and Yield Token, currently in only supports LUNA, so you can take LUNA and get pLUNA and yLUNA. pLUNA reflects price more than yLUNA, while yLUNA has all of LUNA’s yield and other benefits from staking LUNA.

Why add yLUNA?
Price of yLUNA = LUNA - pLUNA, while yield of LUNA = yLUNA, which means that we get more income for protocol. The price of yLUNA is roughly 80% of LUNA, which would mean that every person that used yLUNA, instead of bLUNA, would give protocol around 20% more income.

1 yLUNA gives same yield as LUNA or bLUNA, but the price of it is 20% lower, so if user were able to borrow with yLUNA as collateral we would get 20% more income than if they used bLUNA


I don’t think many people have understood the implications of what you wrote… the explanation seems to be too short.


EDIT: Won’t edit the answer below but I misread the initial claim and so please ignore the “isn’t 100% true” part

What you wrote isn’t 100% true, yield of yLuna is still Luna that’s wrapped into cLuna and then split, you as a user may choose to take it all out as yLuna, the protocol does the swap in place. When adding new collateral there’s always the need to check if sufficient liquidity and volume exists, we don’t want to hold an asset that no liquidator wants to touch, yLuna seems to be past that in my opinion so that’s good.

Anchor is shifting as we speak, the sAvax collateral won’t provide any yield and so I imagine that future collateral will follow the same path, so the yield yLuna provides is of no interest to this conversation. I wouldn’t mind it being added but it isn’t a priority as it’s price is heavily correlated to Luna and therefor doesn’t help us with the diversity we need.


I am not sure to which part you are referring and saying it is not true, 1 yLuna is giving the same yield as 1 LUNA.

What I am saying is that borrowing with yLuna would give protocol better returns than borrowing with bLuna, since to borrow the same amount of UST with the same collateral ratio, a person would have to put up more yLuna.

Pretty sure you had it saying that yLuna would give yield in yLuna, and that’s what I opposed, but consering it’s now edited I can’t be sure what was written before. Still my point stands, the protocol is shifting, doesn’t matter what the yield is, sAVAX proves that… the protocol will now only be paid in borrow APR, it’s not up for vote yet but sAVAX already works like that and nobody cared enough to ask.

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I never said that, I might have written something that made you think that, English is not my first language. I agree with shifting to V2, but yLuna would still work in V2 it would work even better.

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You can click the pencil and see previous versions before the edits; don’t see what you are talking about though


That’s good to know thanks, must have misread it.

@JonathanSmith I apologize for claiming what you wrote wasn’t true.


yLuna could be added. Just have to make sure there is sufficient liquidity behind in on DEX. That seems to be happening so in time it is certainly possible.

bLuna is old and dated and will be replaced over the course of this year.

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This is genius, I have to write more words to post so let me say it your an einstein.

What will bLuna be replaced by?

competing liquid staking derivatives such as stLUNA and LUNAx

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Here’s a thought experiment.

Anchor refract LUNA into yLUNA and pLUNA

yLUNA can be used as collateral for borrow as you’ve described with the benefits you’ve described.

Anchor takes the pLUNA and could do one of two things.

Option 1. It keeps the pLUNA as additional collateral that can be used to top up the Yield Reserve. E.g. Sells pLUNA for UST. Would necessitate an Astroport pool with good liquidity.

Option 2. It could take the pLUNA and use it as collateral in Fields of Mars to borrow additional UST to top up the Yield Reserve.

In both of the above cases you are effectively forfeiting your pLUNA to the Anchor Protocol to use the system, but perhaps the incentive to do this is a greatly discounted borrow rate, say 20%?

Option 2 might be the better choice as Fields of Mars allows smart contract to smart contract borrowing with the right conditions. Anchor would obviously be a candidate for whitelisting. pLUNA is kinda useless right now, but it does have value. Even if it is only 20% the value of LUNA, it could be useful collateral to Anchor in times of need, and via Fields of Mars could be leveraged 2x and single sided.

It would also allow unwinding of positions so if you pay back your Anchor loan you could get that pLUNA collateral back also given its correlated to leverage being taken out of Anchor.

Any Prism and Mars devs here?

[Edit] I suppose the issue is if the Anchor Yield Reserve spends that borrowed UST credit, it would have a liability that has to paid back, and also Mars borrowing costs. There’s a sacrifice someone has to make somewhere down the line.

Maybe a % of the yLUNA is kept by the protocol to pay these obligations? So keeps 10% of yLUNA for servicing obligations?

Thing is, borrowers depositing Luna expect to be able to take it back when they want to, now say the yield reserve depletes and Anchor sells pLuna or borrows against it, Anchor now has no cashflow to buy it back and I want my Luna back, what happens?

@JonathanSmith I applaud your proactiveness.

While yLUNA is merely a month old, I think there is merit in waiting to see how use cases expand and liquidity builds across the ecosystem.

FWIW, 2.4mm yLUNA (> 60% of supply) is staked in the PRISIM farm. You can watch this amount build here

At the base layer, this idea makes sense.

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Why would anyone do this, they would lose money, it would be just better for them and protocol to take luna and trade it for yLuna

Maybe Anchor could introduce a type of term deposit where you are locked in to handing over your pLUNA as collateral for Anchor to borrow against to support the YR? Once the term ends the position unwinds and the collateral is handed back. Term deposits might over more favourable interest terms E.g. Get more of the YR than others.

I’m riffing here.

[Edit] I guess the idea is you sacrifice your pLUNA for a higher yield in UST. Some people might be interested in this because you still have relative exposure to LUNA price and it’s yield via yLUNA and you are also earning a high rate on your UST balance.