Introduction

In the DeFi space, yield trading and tokenization redefine investment strategies and asset management. Yield trading, pursuing investment returns over time, has become a cornerstone of decentralized finance (DeFi), attracting people to it.

Pryzm, a layer-1 blockchain, transforms the way we approach yield optimization. Built on Cosmos SDK, Pryzm offers a flexible, fast, and powerful platform that empowers users to tokenize and trade their future yields from any asset.

What is Pryzm?

Source: Pryzm website

Pryzm, a layer-1 blockchain, empowers users to tokenize and trade future yields from any asset, heralding a new age of financial flexibility and opportunity.

Built on the robust framework of the Cosmos SDK, Pryzm is a bespoke ecosystem designed with precision and purpose. The Cosmos SDK’s flexibility, speed, and power are the pillars upon which Pryzm is constructed, enabling it to deliver a seamless and sophisticated user experience.

The true power of Pryzm lies in its ability to interconnect with many other blockchains through the Inter-Blockchain Communication Protocol (IBC). This interoperability is a game-changer, allowing unprecedented fluidity and integration within the blockchain ecosystem.

At the heart of Pryzm’s technological prowess is Optimistic Execution, a groundbreaking feature that propels the Cosmos SDK chains to construct blocks with astonishing velocity. In internal testing, block times have been recorded at approximately 0.4 seconds, a testament to the efficiency and scalability that Pryzm brings to the table. With Optimistic Execution slated to be enabled post-mainnet, Pryzm is poised to push the boundaries of what’s possible in blockchain technology.

Pryzm’s Vision and the DeFi Landscape

The DeFi ecosystem is brimming with potential but is not without its limitations. Traditional DeFi platforms often grapple with fragmented liquidity, volatile returns, and restricted access to fixed-income opportunities. Pryzm’s vision is to mitigate these issues by introducing yield tokenization on its custom-built Layer-1 blockchain. This innovation allows users to tokenize future cash flows generated by DeFi protocols, offering enhanced liquidity and predictable income streams.

Cutting-Edge Features of Pryzm

These features collectively empower users to optimize their yield strategies, providing a robust and flexible environment for yield trading.

• Yield Tokenization: Users can turn their future yield into a tradable token, enhancing market efficiency and capital utilization.
• Fixed Yields & Discount Tokens: Pryzm enables locking in fixed yields and purchasing favorite tokens at a discount, providing stability in the volatile DeFi market.
• Liquid Governance: Pryzm offers the ability to access and trade the governance power of any token within its chain.
• Liquid Staking Derivatives (LSD): Stake tokens and receive a liquid derivative in return, maintaining liquidity while earning staking rewards.
• Specialized AMM: Pryzm’s advanced automated market maker (AMM) allows for low-impact trading and high-efficiency liquidity provision.
• Limit Orders and DCA Tools: Set desired prices for automatic trade execution and use dollar-cost averaging (DCA) tools to minimize market volatility impact.

The Mechanics of Yield Tokenization

Source: Pryzm X

Yield tokenization involves converting the future yield of an asset into a tradable token. This process unlocks new dimensions of liquidity and investment strategies, allowing for more granular control over financial outcomes.

In traditional finance, yield typically refers to the earnings generated from an investment over a certain period. In DeFi, yield can be derived from activities such as staking, lending, or providing liquidity. Yield tokenization takes this concept further by allowing users to “lock” their cryptocurrency tokens for a set period to earn rewards managed with smart contracts. Yield tokenization also pays interest with rates ranging from a few percentage points to triple digits.

The transformative potential of yield tokenization in DeFi lies in its ability to provide users with flexibility and liquidity. Investors are no longer bound to the constraints of fixed-term investments; instead, they can trade the tokenized yields on secondary markets, potentially optimizing their returns and managing risks more effectively.

Pryzm’s Role in Yield Tokenization

Pryzm facilitates the creation and trade of fixed and variable yield tokens, offering users unprecedented control over their investment strategies. With Pryzm, users can:

• Tokenize Future Yields: Turn future yields into tradable tokens, enabling the buying and selling of anticipated earnings on the open market
• Choose Fixed or Variable Yields: Depending on risk preference, users can opt for fixed yields for stability or variable yields to capitalize on market fluctuations.
• Trade Yield Tokens: Pryzm’s decentralized exchange allows for the seamless trading of yield tokens, providing a platform for users to engage in yield swaps and other sophisticated trading strategies.

The Technology Behind Pryzm

The architecture of Pryzm is designed with performance, security, and scalability at its core. It employs a layered approach and modular design, ensuring that the platform can scale to meet the demands of tomorrow’s decentralized applications. Pryzm’s network stands as a decentralized blockchain ecosystem that serves as foundational support infrastructure for other blockchains.

Unique Features of Pryzm Architecture

Pryzm’s architecture’s unique features are a reflection of its innovative spirit:

• Optimistic Execution: Pryzm’s Optimistic Execution enables the blockchain to build blocks with groundbreaking velocity, pushing the limits of block times and efficiency. This feature will be enabled after the mainnet launch, offering block times of approximately 0.4 seconds.
• Inter-Blockchain Communication (IBC): Pryzm leverages the IBC protocol to connect with other blockchains, facilitating seamless cross-chain interactions and expanding the horizons of yield trading.
• Purpose-Built Modules: The platform is powered by purpose-built modules that ensure optimal performance and scalability. These modules are the engine of Pryzm, driving the platform’s ability to meet the dynamic demands of yield trading.

How Does Pryzm Work?

Pryzm operates on a sophisticated yet intuitive principle that revolutionizes our interaction with yield-bearing assets. It’s a system that accepts and creates liquid tokens that automatically compound their yield, separating it as it accrues. This process is facilitated by Pryzm’s ability to integrate tokens from other platforms, like Lido, or to generate its liquid staking derivatives, known as “CTs” (collateral tokens).

The Process of Tokenization

Imagine your assets as trees in an orchard. These trees, whether they be ATOM, TIA, INJ, or OSMO, bear fruit over time—the fruit being the yield or interest earned from staking your assets. Pryzm introduces a novel way to manage these assets by splitting the tree into two distinct parts: the Principal Token (PT) and the Yield Token (YT).

• Principal Token (PT): The Principal Token (PT) represents the original asset in its traditional form. When an investor locks in an asset on Pryzm, they receive PTs equivalent to the underlying asset’s value. The PT is essentially a promise that the investor can redeem the original token at a set maturity date, ensuring that the principal amount of the investment is preserved. The PT is akin to the deed of your tree. It’s the foundational part of your investment.
• Yield Token (YT): The Yield Token (YT), on the other hand, embodies the potential earnings or yield that the original asset is expected to generate over time. By holding YTs, investors have a claim on the future yield of the investment, allowing them to earn returns as if they were holding the original asset itself. This separation of yield from the principal enables investors to trade yields independently, providing a new avenue for yield management and speculation. The YT is comparable to a contract granting you exclusive rights to the fruit produced by the tree. It embodies the future yield of your asset.

PT and YT come with fixed maturities, meaning they have a predetermined expiration date. Upon maturity, the YT becomes worthless, as it no longer entitles you to any future yield. The PT, however, retains its value, allowing you to redeem it for the original asset, reaffirming your ownership of the tree.

Pryzm’s Decentralized Exchange for Yield Trading

Pryzm’s decentralized exchange (DEX) is specially designed for yield trading, providing users with the tools and flexibility to tokenize and trade their future yields. The DEX operates on the principles of an advanced automated market maker (AMM), allowing for low-impact trading and high-efficiency liquidity provision.

The DEX enables users to trade both Principal Tokens (PT) and Yield Tokens (YT), offering more control over yield and opportunities to make profits by buying individual tokens. This system allows users to customize their exposure by breaking tokens into their core elements, optimizing their exposure to yield, price, and governance.

A Practical Example with ATOM

Let’s illustrate this with ATOM:

1. Deposit and Stake: You deposit ATOM, which Pryzm stakes, to begin earning income. In return, you receive a liquid token, such as cATOM, representing your stake and accrued rewards.

1. Tokenize Income: You choose a maturity date for your income tokenization. By depositing cATOM, you receive yATOM, representing your income, and pATOM, representing your deposit. Both tokens will expire in one year, with yATOM granting you all the income from staking ATOM during that year, and pATOM ensuring reimbursement of the equivalent in cATOM at year’s end.

2. Trade and Utilize Tokens: You can trade your tokens on Pryzm’s DEX, taking advantage of market pricing for pATOM and yATOM. You can also swap between fixed and variable yields and use pATOM for amplified voting power in governance matters.

3. Redeem Underlying Assets: By merging equal amounts of yATOM and pATOM with the same maturity, you can redeem cATOM. You can also burn cATOM to retrieve ATOM. These tokens are liquid, allowing you to swap them for the original asset on the DEX at any time. Post-maturity, pATOM alone can reclaim the corresponding amount of cATOM.

Trading on Pryzm

Built into the core of Pryzm are several trading tools designed to enhance the user experience and provide strategic advantages in the DeFi market. These tools include YAMM, WAMM, PulseTrade, and FlowTrade, each serving a unique function within the ecosystem.

YAMM & WAMM: Advanced Market Making

YAMM (Yield Automated Market Maker) and WAMM (Weighted Automated Market Maker) are specialized versions of AMMs that Pryzm utilizes to facilitate efficient and effective trading. These tools are designed to minimize price impact and provide high capital efficiency, ensuring users can trade tokens with low slippage and maximize their returns.

PulseTrade: Precision Trading

PulseTrade is a feature that allows users to set their desired prices for automatic trade execution. This tool is handy for traders who want to lock in profits or enter positions at specific price points without having to monitor the market constantly

FlowTrade: Streamlined Token Swaps

FlowTrade is a module built on the Cosmos-SDK that enables token swaps within a specified timeframe. Users can establish a stream of tokens distributed over a certain period to be exchanged for another token in an open market. The tokens can be swapped continuously or at set intervals during the swap period, providing a flexible approach to trading.

The FlowTrade module allows users to initiate a flow by securing a deposit, and other users may participate by contributing a certain amount of tokens. The token offered for sale by the flow creator is termed the token-out, while the token supplied by the buyers is referred to as the token-in. This system ensures that the token price is computed based on the total quantity of each token and the time elapsed since the flow’s commencement, offering a dynamic and responsive pricing mechanism.

Liquidity Provision on Pryzm

Providing liquidity on Pryzm is a straightforward process, thanks to its user-friendly interface and advanced tools. Users can contribute to liquidity pools using the specialized AMMs and benefit from swap fees, Pryzm chain revenue, and Pryzm rewards. This not only provides a passive income stream for liquidity providers but also contributes to the overall health and stability of the Pryzm ecosystem.

Participating in Pryzm’s Ecosystem

Engaging with Pryzm’s ecosystem is a journey into the future of yield trading and tokenization. Whether you’re looking to trade, provide liquidity, or explore the possibilities of DeFi, Pryzm offers a user-friendly gateway to get started.

Setting Up a Wallet

To participate in Pryzm’s ecosystem, the first step is to set up a compatible wallet. Pryzm supports wallets that interact with its blockchain, allowing users to store, send, and receive tokens securely. Here’s how to get started:

1. Install a Wallet: Choose a wallet that supports the Cosmos SDK, such as Keplr, and follow the official tutorials to install and create your wallet.

2. Connect to Pryzm: Once installed, launch the Pryzm application and connect your wallet. This will enable you to interact with the Pryzm blockchain and its features.

Participating in StakeDrop - the Pryzm Airdrop

The Pryzm Airdrop, known as StakeDrop, is an innovative way to reward the community and decentralize ownership of the Pryzm tokens. It’s an opportunity for users to earn tokens by participating in the network’s security and governance through staking. It’s designed to democratize the token-earning process and ensure a fair distribution of tokens before the mainnet launch.

To be eligible for the StakeDrop airdrop, you must be delegated to the Pryzm validator on supported blockchains such as ATOM, TIA, DYM, INJ, or OSMO.

1. Delegate to Validators: Choose a Pryzm validator on the blockchain you’re interested in and delegate your assets to them.

2. Earn Tokens: For each dollar of validator commission donated, you’ll receive a certain number of Pryzm tokens. Weekly snapshots will be taken to determine your rewards.

3. Register for Airdrop: Visit the Pryzm airdrop page, select the blockchain you’re delegating on, and verify your wallet address to check your eligibility.

4. Connect Wallet: If eligible, you’ll be prompted to connect your Pryzm wallet to receive the airdrop. Enter any Pryzm wallet address you own to link it.

Pryzm Tokenomics and Governance

Pryzm’s tokenomics are centered around the $PRYZM token, which serves multiple purposes within the ecosystem:

• Utility: $PRYZM tokens are used to pay for transaction fees, yield tokenization, and other services within the Pryzm platform.
• Rewards: Users earn $PRYZM tokens by participating in activities like staking, providing liquidity, and contributing to the platform’s security.
• Governance: $PRYZM holders have the power to vote on proposals and make decisions that shape the future of the Pryzm ecosystem.

Pryzm plans to launch with a total supply of 1 billion tokens, out of which 20% (200 million tokens are reserved for StakeDrop. The distribution of $PRYZM tokens is carefully structured to incentivize various stakeholders, including early supporters (Prism OGs), validators, and users participating in the StakeDrop events.

Pryzm Governance

Pryzm’s governance model is built on the principle of decentralization, ensuring that the power to make decisions is distributed among the community. The governance process involves several key components:

• Proposals: Community members can submit proposals for changes or improvements to the Pryzm platform
• Voting: $PRYZM token holders can vote on proposals, with each token representing one vote.
• Validator Selection: As the staked amount increases, Pryzm governance will select more validators in consultation with the host chain stakeholders, reflecting the community’s commitment to decentralization.

Pryzm’s Fundraising Journey

Pryzm’s path to innovation in the DeFi space is a unique narrative of community support and participation. Unlike traditional fundraising methods, Pryzm’s journey did not involve private sales or venture capital backing. Instead, it was propelled by the overwhelming support of a community that numbers over 543 thousand participants, all of whom contributed through the StakeDrop campaign.

The success of the StakeDrop campaign highlights a new model for blockchain project fundraising, one that is rooted in community engagement and participation. By staking their assets, community members could earn $PRYZM tokens, effectively becoming stakeholders in Pryzm’s future.

Conclusion

Pryzm is set to be a key player in the future of DeFi, offering a layer-1 blockchain that’s fast, flexible, and interconnected. It’s a platform where users can tokenize and trade future yields, giving them more control over their investments. With tools like YAMM and PulseTrade, Pryzm makes trading and liquidity provision efficient and user-friendly. Its governance model encourages community participation, ensuring the platform evolves with its users’ needs. In essence, Pryzm is shaping up to be a vital hub for yield traders, providing the tools and environment to thrive in the evolving world of DeFi.