Strategies
Part of what makes Pryzm so groundbreaking is the many different yield strategies it unlocks. By providing financial primitives like yield and principal separation through refraction, trading markets, and liquid voting to users, Pryzm opens up new and diverse ways to earn yield. This page contains several strategies for users. Because there are so many ways to use Pryzm, this list is not exhaustive but can help you get on your way to learning about Pryzm's many offerings.
Liquid Staking
Unlike regular staking where your assets are locked with a validator, liquid staking allows you to trade a tokenized staked asset freely. When you liquid stake an asset on Pryzm, you receive a cToken, which will compound your staking rewards daily, earning you more than you would through traditional staking. To learn more about LSTs and staking, visit the Staking 101 page. Visit the liquid staking guide to learn how to liquid-stake your assets.
Liquidity Providing
Liquidity pools allow assets to be swapped with minimal slippage. By providing liquidity to swap pools, you can earn yields generated from swaps and other sources. Follow this guide to learn how to provide liquidity to pools and start earning rewards. You can even stake LP tokens to earn an increased yield through restaking.
yTokens
Yield tokens (yTokens) represent the yield-earning portion of an LST or cToken. yTokens have a maturity date, which is the date at which the token will stop earning yield. If you predict that future yields for a token will be higher than the anticipated yield on Pryzm, you can swap for yTokens and profit when yield increases.
If you believe that the staking yield for a cToken that you are holding will decrease, you can refract the token and sell the yield, effectively shorting the yield of the asset and profiting if the yield decreases.
pTokens
Principal tokens (pTokens) represent the underlying asset portion of a liquid-staked cToken. pTokens have a maturity date, which is the date at which the token can be redeemed for its equivalent value of cTokens. pTokens often trade at a discount relative to their future value once they reach maturity. For example, if you purchase 1 pAtom for 0.7 Atom, when the pAtom reaches its maturity date you will have profited 0.3 Atom.
You can also refract an asset and trade the pToken for more yTokens if you believe the yield will be more profitable than the principal value of the token.
Restaking
Pryzm uses the Alliance module, which enables restaking of assets to earn staking rewards. You can visit the staking page to stake various assets in Pryzm to validators in exchange for rewards. Any asset whitelisted by Pryzm governance can be restaked. Some restaked assets can be yield-bearing already, in which case you'll be earning even more yield. Visit the staking guide to learn how to stake assets on Pryzm.
PulseTrading
Pryzm's Pulse Trade function lets you swap between two assets gradually over time with many customizable parameters. This flexibility lets you optimize your trades. Trades will be placed at regular intervals, and limits can be selected for each trade. Similar to DCA strategies or grid trading, PulseTrading is fully programmable and can help you optimize your trades. Visit the Pulse Trade guide to get started.
Liquid Voting
This is a form of arbitrage on governance tokens in the context of Pryzm that involves capitalizing on the varying values of governance rights across different platforms. In some cases, governance tokens might be undervalued on Pryzm compared to other platforms where the demand for such governance influence is higher.
- Identify undervalued governance tokens on Pryzm that grant voting rights or influence over the network. This might involve analyzing the potential impact of upcoming proposals and the current sentiment towards governance participation.
- Purchase or acquire these governance tokens at a lower price on Pryzm.
- Leverage voting rights for strategic proposals to increase the value of these tokens by demonstrating active and impactful governance.
- Sell the voting rights to larger stakeholders who are looking to secure outcomes favorable to their interests but may not have sufficient voting power.
- Arbitrage the difference by either selling the governance tokens at a premium after influential votes or by renting out your voting capacity to others for a fee.
Visit the Liquid Governance guide to get started.
Arbitrage Opportunities
These opportunities may arise between the prices of yTokens representing future yield on Pryzm and the actual yield or perceived value of those same assets on other platforms or within different components of the same ecosystem. For example, an investor notices yATOM tokens, representing the future yield on staked $ATOM, are trading at a discount on Pryzm compared to the expected yield or similar products on another platform. The investor buys yATOM on Pryzm at a price that undervalues the expected yield based on current market rates for staking $ATOM.
The investor then either sells the equivalent staking position on another platform where the yield is valued higher, directly profiting from the higher market rate for the yield, or waits until the yield matures, collecting the higher-than-purchased yield directly, if they have correctly predicted an increase in yield rates.
pToken and cToken Swaps
This strategy involves trading between pTokens (fixed yield) and cTokens (floating yield) based on their relative yields to capitalize on inefficiencies or expected changes in yield dynamics. The key is identifying when the fixed yield on pTokens diverges favorably from the expected floating yield on cTokens.
Buy pTokens when the fixed yield becomes relatively attractive compared to the floating yield on cTokens, suggesting that fixed yields are high or expected to rise. Sell cTokens when their floating yields are lower than the yields available from pTokens, or when floating yields are expected to decrease.