Introduction

Prism is a relatively new protocol on the Terra blockchain that allows users split their LUNA in two parts: the yield-bearing part of LUNA called yLUNA and the price (or principle) part of LUNA. Splitting your LUNA into yLUNA and pLUNA is called refracting. This process can also be reversed in an event called merging where an equal amount of yLUNA and pLUNA is necessary to yield a token called cLUNA, which is just a bonded or staked version of LUNA (like bLUNA on Anchor). 1 yLUNA and 1 pLUNA together should always be equal to 1 LUNA. So the sum of the price of yLUNA and pLUNA should always equal the price of 1 LUNA. However, the respective price of yLUNA and pLUNA can vary independently of the price of LUNA. In this dashboard, we will make the case for the relative value of pLUNA and yLUNA by analysing the utilities of both tokens.

Methodology

To get the relative prices of yLUNA and pLUNA, the PRISM/yLUNA and PRISM/pLUNA liquidity pools were used in combination with the price of the PRISM token. The liquidity pools allowed us to find the ratio with which PRISM and yLUNA or pLUNA were exchanged. Using this ratio and the price of the PRISM token, the average daily price of yLUNA and pLUNA can be calculated.

Use cases

• Staking

As can be seen, the relative value of yLUNA over pLUNA quickly became apparent as the price of yLUNA is now around 4x the price of pLUNA. Why is this the case? Let's look at the use cases for both tokens.

• Liquidity providing

Key Findings

• yLUNA is currently about 4x the value of pLUNA
• yLUNA is mainly more valuable than pLUNA because of the additional use-cases like staking.

As yLUNA is the yield-bearing part of LUNA, only yLUNA is able to be staked. Prism allows for two types of staking. yLUNA staking is 'normal' staking. Only difference being that airdrops and staking rewards are converted to pLUNA and yLUNA.

There is also the PRISM farm. Here, yLUNA can be staked and rewards are paid out in the PRISM token. Users can even stake their PRISM rewards for xPRISM, which in turn can be used for so-called AMPS to further boost the rewards of the PRISM farm. The PRISM farm is currently an attractive option as the current base APR is about 27%.

The only way to earn some yield on your pLUNA token is to provide liquidity in the PRISM/pLUNA pool. Currently, this allows you to earn an APR of about 8.6%. This is not bad, but you do have to consider that you have to pair your pLUNA up with the PRISM token to be able to provide liquidity.

I think the relative value of pLUNA and yLUNA is mainly dependent on these use-cases. Because yLUNA currently provides more use-cases in the form of staking, the demand for yLUNA is higher.