Finn 0:42 Hello and welcome to The Ether. Today is Thursday, January 20th 2022. Today's episode The Ether is brought to you by Talis. Talis Protocol is the NFT platform for independent artists on Terra. Talis is dedicated to providing artists with the tools and resources needed to transition from traditional art into the NFT world. With their v1 launch coming soon, Talis will be the place to see real world art reflected on Terra. Find your next favorite artists on talis.art. TerraSpaces appreciates their support. Today on The Ether, we have a Cephii space with MrRefractor. It's Prism Strategies. Let's take a listen. Cephii 1:21 Your yLUNA and things of that nature. So there's quite a bit of information about there on that, I would certainly recommend looking at the Prism site for that. And there'll be plenty of instructions once everything gets started as well. Also details can be found, I think, in the white paper as well as... MrRefractor, do you have any other resource or reference for the most up-to-date information as well? MrRefractor 1:52 Yeah, so we tried to put everything everyone could need in one place. And so if you click in the top of the Prism Protocol bio, you'll see a link to our Notion site. And there you have links to our Twitter, Discord, Telegram, lite paper, our YouTube video explaining how Prism works, our Medium website, and then we've got links to the launch announcement, and then also some of the helpful community content that's been put together. So danku has put together a video and a tweet thread explaining how to launch works. lejimmy's put together a dashboard where you can kind of put in your own numbers, and it kind of spits out how much revenue Prism is going to make. And then there's a great article by lunaisfreedom that he put together trying to look from an ex-equity fundamental analyst, he's kind of had a bit of a crack at seeing what evaluation could look like. And then we've got helpful tweets the community put out, some of the podcasts, there's great Delphi podcasts on there. So that's got everything. Hopefully everything you can need, and if there's anything missing, let us know. And anything that could be helpful, and we can pin it up. Cephii 3:13 Okay, great. Yeah. So there's a fair amount of info out there. Certainly check the Prism Twitter feed as well. And I think you can pick up some of that. What I wanted to get into a little bit today was regarding hopefully a little bit more technical nitty gritty and possible strategies for the trading of yLUNA and pLUNA, and perhaps expectations about what I might have for the process of moving from LUNA to pLUNA and yLUNA, and then specifically, also the concept of making sure I have enough pLUNA and yLUNA if I want to convert back to LUNA, the various arbitrage opportunities related to the individual price of yLUNA and pLUNA, and maybe how I might take advantage of that. So I was just gonna do a little brainstorming here just to look at some ideas and maybe take some maybe theories and ideas from people in the audience as far as what you guys expect to do with your various tokens. Cephii 4:37 Before we get to that, one idea I wanted to develop a little further, I think everyone has some idea of what yLUNA is good for, since obviously it has some yield attached to it. That yield is something in the 8%-9% range right now, plus or minus if you include airdrops and whatnot. And then that yield is going to actually decrease over time in theory. The reason is because the yield is super high right now due to the Ozone community pool burn that I believe has resulted in an increase in yield over the period of like a couple of years, if I'm not mistaken. So at some point in the future, yLUNA will actually have less yield than it does now. And that yield, though, will fluctuate considerably depending on how much economic activity is happening on Terra, how much seigniorage is being collected via the stablecoin LUNA burn mechanisms, and also just how much trading activity is happening or just transactional activity's happening on the Terra blockchain. So with that in mind, just keep in mind, I think most people understand what your yLUNA might be for. I might sell... For example, I might refract my LUNA, take the pLUNA, sell it for whatever it's worth, buy more yLUNA assuming that I wanted more yield for whatever reason, and then I can deploy that yLUNA for staking, or in theory I could use it on other protocols, to my understanding, such as Pylon Gateway, and other possible integrations. But MrRefactor, can you cover for us briefly, first, the yLUNA potential integrations that we might be able to use that for? And what the roadmap is for that right now? MrRefractor 6:55 Yeah, of course. So yLUNA, as you mentioned, is gonna give you the rights to all of LUNA's yield, so that's staking rewards, and airdrops. And so, at the moment, we're starting off... The first sort of big opportunity to use yLUNA is Phase Four of our launch, which is going to be a farming event, where people who are familiar with Apollo community farming event, or Stader's farming event, you're going to be able to use your yLUNA in that and effectively swap your LUNA yield for PRISM tokens. And then in terms of future integrations, really, it's kind of open season, because I think people want to maintain their LUNA exposure. I know, at least for me, fundamentally, I mentioned on a Spaces the other day, I really like Pylon and I think it's an amazing tool. But for me, I want to have my underlying exposure in LUNA, because I want to be exposed to the upside of LUNA. So by doing yLUNA farming, or yLUNA in something like Pylon Protocol, you're able to keep your LUNA price exposure, and just swap your yield for tokens in new protocols. So with the new Pylon governance, if our farming event is a success and Pylon would like something similar with yLUNA, or ySOL, or yETH, whatever it ends up being, then you would be able to use that on Pylon. MrRefractor 8:41 There's also the opportunity when Nebula launches to kind of have clusters of YTs. Mars, you're going to potentially be able to kind of lend out your yield tokens. There's also the opportunity to make a compounding yield tokens. So you don't even need to collect your yield, which has potential admin and tax benefits. We also are talking with Kinetic, you might have seen some tweets on that, between Prism and Kinetic, but that's a potential exciting integration, where you can use your yLUNA to start paying down your loan faster or the capital on your loan faster. So I think there's... White Whale mentioned that they actually might potentially switch over one of their pools or look to do another pool with yLUNA farming later on as well. So there's lots of different integrations. And I think these are the kind of things where it's tip of the iceberg and you see with Anchor, once that launched the amount of protocols that are built on top of it and what we're aiming to do is to try and create a money Lego or building block that people can then build on top of and I'm sure there'll be lots more interesting ideas beyond those. Cephii 10:01 So I think the imagination is easy to be sparked using yLUNA and what yield might do for you. I think even gaming applications or some other interesting almost machines that can be built with the energy flowing out of the yLUNA, if you kind of look at it that way. But on the pLUNA side, besides governance, the valuation presumably is going to have something to do with the fact that you need one pLUNA to match with one yLUNA to return to one full LUNA, is kind of the concept there. And the presumption would be that your pLUNA and yLUNA in terms of valuation would be the value of pLUNA plus the value of yLUNA together should equal approximately the same price, the spot price of LUNA at any given moment. So let's say LUNA is $100. And yLUNA is priced at 30% of it, that would mean that it's worth $30, which automatically means that pLUNA should be worth $70. Now, the arbitrage opportunity in my mind would be, let's say there's a point in time where at the moment that you look at the prices, you're like, hey, look the pLUNA is valued at 60% of a LUNA, and yLUNA is valued at," let's say, I don't know, 30% of a LUNA. So now that adds up to 90%. But you're getting a discount of 10% because the combination is actually worth less than one LUNA. So the opportunity would be you buy both of them, and then convert it to LUNA immediately and in theory you derefract it... Phildo UST. Baggins 12:04 Right, I'm listening and five minutes later I'm like, "It's pretty quiet. Oh, I missed everything I wanted to hear." [chuckle] Cephii 12:10 We'll get everyone out on in a second. Yeah, while we get Hyperion back on... Yeah, man, I've had the weirdest day. So we had a friend that basically... Well, a friend that died and there's just blood all over his apartment. It's a fucking disaster. And doing like a damn CSI investigation over here. It's insane. Trying to figure out what's going on and where all his paperwork is, and all that kind of junk. But let's get Hyperion back on here in a second. That's a story for another time. [chuckle] Hey, are you there? MrRefractor 12:49 I'm back. What did I miss? Cephii 12:54 Well, what happened was my car was connected to CarPlay or some crap. And then my phone came through, someone's trying to call me, and then it kicked us all off, or at least I couldn't speak into the thing anymore. So it went nuts. Sorry about that, guys. [chuckle] Hopefully everyone more or less got back on. But anyway, yeah, getting back on topic here. Yeah, the thing I was asking was, do I have it right in terms of in theory, the pLUNA-yLUNA ratio, the combination of the two should approximately price wise add up to one LUNA? MrRefractor 13:30 Yeah, exactly. And for the reasons you mentioned, there's going to be... If the example you gave earlier, if you have $100 LUNA and the sum of pLUNA and yLUNA is trading at less than $100, then you have a very similar arbitrage situation to bLUNA, where you can buy bLUNA at a discount, which I think is definitely one of the favorite arbs in the ecosystem. And I think, obviously, that's closed up now. But I think people that were around in May, were able to get that arb at like 30%, on the odd occasion even more. So when you introduce new primitives like this, you start getting those new opportunities and so for people that are aware of them early on, it can be exciting. And then you also have the other side of the arb, which is when the sum of pLUNA plus yLUNA is trading at more than $100, And that's a much quicker arb because you're able to take $100, buy $100 worth of LUNA, refract that LUNA to get pLUNA and yLUNA, and immediately sell that pLUNA and yLUNA for more than $100. and so that one's really quick because it doesn't involve any unstaking period, like bLUNA to LUNA does when you buy it at a discount. So those are the two main arbs. Cephii 15:07 Yeah, I was dreaming up ways of how to buy either pLUNA or yLUNA. It's almost like the idea's either, A, whichever one is below 50% at any given time might be one way to start acquiring one or the other to get LUNA exposure. Or if like you said, basically, the sum of the two parts is uneven, then maybe you pick up more of the one that is actually cheaper at that moment, for whatever reason, and it just sort of represents a different type of dollar cost average where, in theory, you could program something that would buy one when it's lower, buy the other while it's lower, and then come back and convert them back into LUNA at some point if you desire to do so. So I just was thinking about the various volatility arbitrages available. One theory I had... Oh, separate question I had, actually, before we get to all that, pLUNA, besides governance, and besides its utility of converting back to LUNA, what's your sense as far as things I might be able to do with pLUNA? The ones I kind of heard some rumors about were the possibility of a pLUNA Levana 2x type perpetual long, or a perpetual short, if you want to play the price action. And then the other one, I think I understood correctly was, besides governance, is you could use pLUNA possibly to borrow against it on something like Mars? Are those about right? Or is there other things that pLUNA can do that I've missed? MrRefractor 17:06 Yeah, I think that's a good summary. You'll have things like Mars and Edge Protocol, which are creating money markets, and so you will be able to potentially deposit there as collateral. And then I think you're also going to get things like, the utility that would flow to an owner of LUNA is going to flow through to pLUNA. So for example, and this is something we have we haven't announced yet, but I'm sure they won't mind, is if you have this staking as a service now with Coinhall. Now, if we theoretically were to use Coinhall, as one of our validators, because they're providing a great community service, and, potentially, there's some other really interesting integrations that we're going to announce with Coinhall. But one of the things that Coinhall does is staking as a service now. And so if you stake your LUNA with them, you're going to have access to various tiers of services via Coinhall. Now, if Prism were to use Coinhall, as one of its validators, then the rights that the delegated LUNA get would flow to the pLUNA holder rather than the yLUNA holder in that instance, because your rights are as an owner, rather than it being a right conferred by your yield. So it's those sorts of things. MrRefractor 18:43 And then I think it's going to be really interesting, because there's a lot of different views people have of where pLUNA and yLUNA should trade. And a lot of people want to look at stuff on a fundamental bottoms-up cashflow basis. And if something doesn't have a cashflow, then they have views that the value strongly flows to yLUNA. And then some people want to look at it and be like, "Well look, if that's the case, then why does DOGE trade where it does? Why does Bitcoin trade where it does, and these assets that don't necessarily have a yield associated with them. So there's a lot of kind of different views. But hopefully it's kind of just thinking about what does principal ownership represent versus what does the rights to yield give you. Cephii 19:32 Yeah, and then there's some differences too between, say, for example, ATOM which is an inflationary coin with inflationary yield, which exerts its own selling pressure because of that, and something like LUNA which is by default deflationary with a non-inflationary yield. So some of the theories I had were, okay, once we have these various primitives, it might be very interesting to take, for example, the very high yield of ATOM, as yATOM. The yield is a bit more consistent and fixed because it is inflationary. I think it starts at 7% inflationary, and then right now the yield is like 14%, I might take all of my ATOM, convert it into yATOM, and then take all of the yield off of that, flowing from that, and then go buy myself, say, for example, pLUNA is less expensive, maybe I just get a truckload of pLUNA using the yield off of that yATOM. So in my mind the real fun and games begin when you really get these other primitives, because then I can use the pros and cons of the various coins' deflationary and inflationary tokenomics to my advantage, because I look at this more of over a long period of time. And over a year or two those kinds of things do matter. If you look at, for example, the price velocity of LUNA, it's considerably greater than ATOM's is, and that's probably for reasons that I've described in that Polkadot and ATOM are essentially inflationary. So when selling time comes, or when a top shows up, there's plenty of tokens there that people can sell or can send off to do other things. And there's just a lot more selling pressure in that regard. Cephii 21:39 Also, because LUNA is yield is partly UST and partly LUNA, the UST portion is fixed. And the amount of LUNA being brought into the ecosystem is not nearly as high as, say for example, the amount of... It's orders of magnitude lower than the amount of ATOM being produced in the ATOM ecosystem for an equivalent staked amount. So there's some magical things you can do with those combos, in my view. Some of the products I'd like to see built are, let's say for example, I really want mostly LUNA exposure, and I'm pretty confident that over time... Like, yLUNA or P LUNA, I'm not too worried about which one I have, but I want to play the price action of the two, I might look at doing for example, a rebalancer bot where I have, let's say 50% yLUNA, 50% pLUNA. And as the price of yLUNA rises a rebalancer naturally will sell off, let's say, 1%... Let's say I'm in a 2% rebalancer bot, what would happen is, is if the price of yLUNA goes up 2% compared to my pLUNA side, it's going to sell off 1% of it, buy yLUNA or vice versa, and it's going to rebalance and auto trade the volatility. So I like this idea, because instead of having half of my position in UST and half of my position and LUNA, for example, I now can get full LUNA exposure, while still getting the volatility arbs off of yLUNA and pLUNA. So that's a really compelling game for me to play. And then if you add in the volatility of, let's say for example, pATOM, you could do something really interesting, like a triple rebalancer. Or if I have on top of all of that, let's say I took my yATOM, and I wanted to keep the 14% yield, I could actually have the yield redirected out of the yATOM token and spill into the rebalancer bot of all the hyper volatility coins. And it's just printing money like crazy while preserving my yield output out of my original ATOM token. So these are kind of my fantasy world video games here. Any thoughts on any of those theories, Hyperion? Have you thought of similar concepts and what to do about them? MrRefractor 24:24 I guess my background is fixed income. So when I think about these kinds of things, I always go back to government bonds, for example. What if you could have the safety of a German government bond, but take the yield of Italian government bond or a Greek government... Cephii 24:46 Your voice is cutting out a little bit there, his connections been kind of so-so. I actually want to explore the topic he's discussing which is like if you have a yield token, I'm still not sure how it becomes like a bond though. I think you guys have noticed... yLUNA's price ultimately is going to be somewhat pegged to LUNA price. So let's say yLUNA is worth 30% of what LUNA is worth.... Hold on. Let me get him back on. Then let's say LUNA goes from $100 to $200. Yeah, there you go. No, I was kind of thinking about the mechanics of this a little bit. Yeah, go ahead and finish your thought. And we'll... MrRefractor 25:29 Yeah, I guess what people do in fixed income a lot is they'll go long Italian bonds and short German bonds, or long Greek bonds and short German bonds. And this actually gives you a similar thing that you can do, but even more focused because you're able to do exactly what you're talking about, where you might decide that fundamentally you want to own some ATOM, maybe, but the yield ATOM's paying, you take a view that you'd rather actually take a load of money up front for your future ATOM ield and use that to buy more LUNA exposure, or you might want to decide that, do you know what, I don't like ATOM yield, I'd rather keep my ATOM principle exposure, and sell off my ATOM yield in order to buy SOL yield, or something like that. So you then actually just create this hybrid of being like, "Well, the asset, I really want to own is ATOM, but for income I'd like to own Solana yield," or something like that. And so you can mishmash these kind of different things. So yeah, definitely something I think about. I'm not going to be your guy, so much, to have strong views about bots and stuff like that. But I think that people like... The innovations that protocols like Nexus are having on these strategies for people, I think, once we create these Legos, they're going to be able to build some really, really interesting stuff on top of it, if that's what the community wants. Cephii 27:13 Yeah, there's a couple of observations about yLUNA on that bond discussion. The interesting thing about yLUNA though is technically it's still pegged to LUNA's price. It's not like you're getting zero price exposure with it, right. Because one of the concepts was you'd get more price exposure with the pLUNA token. But if yLUNA generally trades at a ratio, or multiple to LUNA, you would think that... You're not being protected from price action, necessarily, am I right about that? Because say, $30 worth of yLUNA, plus $70 worth of pLUNA gets you $100 LUNA, then I don't necessarily solve the problem of... I don't make myself price-exposure free just because I'm in yLUNA, correct? MrRefractor 28:11 Yeah, exactly. You will have price exposure to LUNA still, because as I look at it now, there is... In the oracle rewards contract, which is what pays out your yield on LUNA over two years, there's currently 34 million LUNA and 1.4 billion UST. So you are exposed to the price of that 34 million LUNA. But it's less so than you would be with the principle token. So you're kind of amplifying your exposure to LUNA's price if you're long the principle token, and you're reducing your exposure to LUNA's price if you're in the yield token rather than the principle token, but you're not market neutral or price agnostic to LUNA. Cephii 29:13 Got it. So yeah, what I was thinking was, it's kind of strategically what I might use this for is I like to kind of look at the idea that I can trade in LUNA, while being almost fully exposed to LUNA, which is kind of interesting, by buying pLUNA when it's cheap, or yLUNA when it's cheap and vice versa. So I think that's kind of a fun element to this. And there's some interesting basically... MrRefractor 29:47 Yeah, I 100% agree with you on that. I think if you have views on where these things are going to trade and they start settling in a range, then you're able to kind of trade that range, then you're going to be able to keep your LUNA exposure and just juggle around which asset you use. And the net result might be that if you're skillful at it, and you have a strong view at it, you're going to end up overall significantly increasing the amount of LUNA that you have by the end of it. Cephii 30:17 Yeah, my theory was I was going to sort of look at the concept maybe with either Nexus or Prism or whoever, and essentially develop kind of a strategy where you have yLUNA and pLUNA in like a rebalance or situation, and you're just playing off the fact that some of the time pLUNA goes up in value, some of the time yLUNA goes up in value, because it's going to move pretty much 24/7, right. And if it's doing so within a fairly narrow range, it actually makes it fairly easy to just simply get the arb volatility trade yield on it. But yLUNA as it stands is not a liquid staked token, correct? MrRefractor 31:02 So, it is a liquid token that you can freely trade around. If you wanna be... Cephii 31:08 But you have to stake it on your site to get the yield, no? MrRefractor 31:11 Exactly, exactly. So as it stands in the first iteration, you can mint yLUNA and pLUNA and do whatever you want with your yLUNA and pLUNA, and they're free tokens that you can trade or LP, or borrow or lend when that becomes available. But if you want to start claiming your yield, then you just need to put it into one of these staking contracts. There's there's no unstaking period. You're free to dip in and dip out as much as you like in that staking contract. But it's just because LUNA yield is paid in various different forms, you need to have a contract where people can effectively stake to so that they can start claiming that. And I guess on that point, one of the things, one of the questions that we've been getting a lot is, LUNA yield is paid in lots of different stablecoins, some LUNA, and then obviously your airdrops, and so what we're doing to kind of simplify it for people, and a kind of requested feature was we're taking that stablecoin bit so KRT, and UST, we're converting that to LUNA, and then we're splitting it into yLUNA and pLUNA. And so users who stake their yLUNA are going to end up getting their yield paid in yLUNA, pLUNA and then their airdrops, so Anchor airdrops and everything else. And then in the future, we're going to be able to build a autocompounding yield token. So in that situation what would happen is, all of LUNA's, all of that yield would be used to buy more yLUNA, and then that would be dropped into the autocompounding yLUNA contract. And then you have an autocompounding yLUNA token that you can freely trade around, you can LP with, you can send to cross-chain, and you're still going to be all the time compounding. So that's very similar to the way that aUST works, for example. Cephii 33:15 And this would be like autocompounding yLUNA only? What kind of design were you thinking about kind of like the... What exactly is being autocompounded? So you're getting your UST, you're getting your LUNA rewards, and then it autocompounds to a super yLUNA or whatever, like what do you... What's the mechanism? MrRefractor 33:43 So the way autocompounders will have to work if you want them to be liquid tokens is, you put in your original token, so say yLUNA, and then what you'd be given is xyLUNA. An x is just the acronym used for a lot of these autocompounding tokens like LunaX or xSUSHI, or xASTRO, or xMARS, or xPRISM as we're going to have. So really all that happens in reality is you take your yLUNA, you drop it into a pool, and then you get given a token called xyLUNA which just represents your share of all the yLUNA in that pool. Now every single day that yLUNA in the pool is earning more yield. And so that yield is then all converted to yLUNA on the AMM and then dropped into that pool. So you don't have to do anything with your xyLUNA token. But your pool that that represents a share of is getting bigger and bigger every single day. And so that's the way that a UST works. You originally drop UST into that big aUST pool, and you get an aUST token out, and every day LUNA's yield is converted to UST, dropped into that aUST pool, and the value of your aUST token increases. So with these autocompounding tokens, it would be exactly the same. So the way I'd describe yLUNA because it's a... Would be the same architecture or infrastructure for any other token. You could easily have an autocompounding ySOL token, or an autocompounding yATOM token, or you could end up having... MrRefractor 35:32 One the contracts that we're building is LP tokens where you can split up and LP token. So you could have, say you're in the bLUNA-LUNA LP pool on Astroport right now, for example. You're getting AMM fees, and you're also getting paid ASTRO rewards where your... We could create a yLP autocompounding token, where all of those rewards, AMM fees and rewards, are used to buy more of the yLP token, and you're consequently getting bigger and bigger and bigger. And the advantages of these compounding tokens, as you've seen maybe with, say, LunaX, or staked LUNA that's coming pretty soon from Lido, is that they can still be earning you yield, and just getting bigger and bigger and bigger whilst they're in an AMM. So Loop's been really successful recently by adding aUST as collateral versus some of its pairs. And the thing about that is it's still earning yield, whilst it's being LPed. So that's a big advantage for it. And also you have this admin and tax... These tax reasons in some jurisdictions where it becomes a capital asset rather than an income asset, because it's not paying you out a regular income, just the value of the token is increasing over time. Cephii 36:55 Yeah, there's no question that the... Whether it's in an LP or in a rebalancer situation, like an aUST versus an autocompounding yLUNA, for example, would be pretty sweet. And then you could even do kind of interesting things like take numerous types of autocompounding tokens that like move in different price action. So for example, you can do a LunaX from Stader, plus a yLUNA autocompounded, plus an aUST, rebalance that and have good results. Because really what you're looking for in those type of scenarios is you're looking for volatility, and capitalizing on the volatility while by and large having very, very close to neutral exposure to your total amount of yLUNA that you have. So it's really pretty much an up only situation for the most part, there's not a lot of ways that that can go wrong, interestingly. So the more of these types of protocols, whether it's Nebula, Nexus, or some of the other folks that are building cool stuff, Stater, etcetera, the more of these things that I think that bring in Prism into their strategies, and especially if you can create relatively low-risk opportunities, where yields are redirected to doing things like feeding into rebalancer bots, or feeding into LP pools or something like that, you can build your position in numerous combo autocompounders where all of the tokens you're dealing with are autocompounding. And on top of that, you're getting rebalancer yield on top of that, so it can be very, very interesting. Cephii 38:47 And I think the cleaner and more, I guess, low risk those strategies become the more popular they become, especially for folks who are Anchor borrowers, for example. So if you can get a pretty decent 100%-200% APY on a rebalancer arb yield, which typically, are going to beat most LP yields, by the way, almost always, then what you end up having is a relatively low risk way to get LUNA exposure, or for that matter, for example a yATOM, yLUNA, ySOL, rebalancer exposure, which would be amazing. Now, if you can make autocompounders of all of those things, and you're getting the arbitrage volatility yield, it's just magic internet money at that point for real. And what's interesting about rebalancing volatility arbitrage is there's an endless amount of volatility in crypto, and you're just feeding off of that energy. It's completely sustainable in that there's nothing specific about that that just runs out of steam, it just keeps going. And so, I can foresee Prism primitives, particularly in some of those being very, very popular. And that being the case, what you end up having is you have a lot more locked up LUNA, you have a lot more people that are not willing to sell their LUNA because they're making so much money off the volatility arbs, and then what you get is this perpetual machine of LUNA's price appreciation, actually. Cephii 40:23 So I believe... Prism primitives in my mind, actually increase the holding pressure of LUNA and the creation of these sorts of techniques, or vaults, if you will, ends up creating buying pressure for LUNA that creates even a higher, longer term target price for LUNA. Someone had made the comment at some point that, wait a minute, if we are getting yLUNA and pLUNA, and now a lot of the trading is happening between these derivatives, for example, pLUNA versus being traded in LUNA itself, doesn't that affect the perceived volume of LUNA being traded. And at the end of the day, it may not matter because if you have things like LUNA-pLUNA rebalancers, for example, just playing off the volatility of those, you're gonna get all sorts of little vaults being created and whatnot that will create all sorts of, I think, LUNA volume. So I'm not too concerned about a drop in LUNA to, let's say, UST volume, versus volume amongst the various primitives. So I think the holding pressure of things like Prism, things like Stader, and all these vaults and whatnot, is going to lead itself to sufficient price exposure to offset any kind of issues regarding direct LUNA volume. MrRefractor 42:00 What I'd add in there really is, fundamentally, as a... Obviously, the more utility and the more growth and expansion UST has, obviously, the more LUNA gets burned, what happens here, with protocols like ours, protocols like Stader, is if you're providing more utility to LUNA, and it's based around its yield, then in order for LUNA to generate yield, it has to be staked. And so yes, we're offering people pLUNA and yLUNA, but obviously, what's happening in the background is they're depositing their LUNA into Prism, and it's getting staked in the background. And that's just taking the LUNA out of circulating supply and dropping it into being staked. And so fundamentally for the ecosystem that's extremely bullish for LUNA. And if you have a situation where you're able to get basically all your LUNA yield via yLUNA token, or more, if you participate in the Prism farming event, then you're earning more yield with your yLUNA than you would on normal LUNA. And if your pLUNA token ends up having extra utility and you can use that to be an LP provider and earn additional yield, or you can lend it out in Mars or Edge, then really the gross yield that you're making out of your pLUNA and your yLUNA is going to be significantly higher than you would with just staked LUNA. And as a result of that, my suspicion is the natural arbitrage will be that pLUNA and yLUNA wants to trade a lot higher than LUNA. And the result of that is that loads of LUNA gets bought out a circulating supply gets deposited into PRISM which stakes it, these people mint pLUNA and yLUNA and sell that to make this riskless arbitrage. MrRefractor 43:56 And then really in the background, why LUNA stake has should care about that is because that's just taking LUNA out of circulating supply and just dropping it into a staking contract. And so fundamentally, if UST growth and expansion happens, then more and more LUNA needs to get bought out of circulating supply. But if you have protocols like ours and Stader that are taking this LUNA out of circulating supply, then that only really increases the impact of each LUNA buy that's required for the minting of UST. Cephii 44:29 Yeah, not to mention, UST yield off of any sort of LUNA primitive in the form of autocompounders or otherwise, I think it tends... I don't have data on this but I would imagine it tends to get back into buying more LUNA and the more efficient that becomes that creates a strange self-perpetuating price floor for LUNA, where a lot of the revenue from the system actually just goes back to buying more LUNA anyway, which is pretty cool. So, yeah, I don't know of any other system in DeFi at the moment that has so many positive feedback loops, making it worth holding your LUNA one way or the other, whether it's in Prism or otherwise. Yeah, pretty cool stuff. I think what will end up happening, actually, when we bring in other primitives like ATOM and such is, my intuition would be to take the yield out of hyperinflationary coins, and redirect that to buying more LUNA. That would be what I would do. And the reason I would do that is because now I'm taking some of the risk off of inflationary selling pressure by buying something that is a deflationary by nature. On the other hand, because the inflationary yields are so high on ATOM, if it takes a big dump in price, I might be interested in getting more ATOM at that point. So that's the time when I'd want more of it, and so a rebalancer automatically would do that with yATOM. And then the yield could be theoretically redirected to LUNA instead. Cephii 46:10 So yeah, it's not just the autocompounders that interest me, it's the idea of taking yield from one style of coin and diverting it to a different style of coin. And I think that would really dramatically increase. When we have those kinds of capabilities, it's going to actually cause another set of feedback loops, where we're essentially taking the yield from other chains, and essentially driving up LUNA's price yet again. So this is the reason I'm just hyper bullish on LUNA compared to other chains, I just don't see this potential. The only thing I haven't seen happen is, of course, not everything that I'm imagining my head has been built yet. Prism, Stader, some of the things that Nexus is... We're working on, and I want to see what Nebula has to do. But yeah, some really, really cool investment products can be built from this. I was thinking, I've been talking out loud about the idea, Hyperion, of the ability to ultimately create some kind of a, between Kinetic Money and yLUNA and some of these various tactics you could possibly create a replacement for, essentially, health insurance, using these tactics. And I can kind of see the the puzzle pieces coming together in my head of how to make that occur. So I'm really excited to see how all this plays out, how the community utilizes these systems and I think, ultimately, prices yLUNA, pLUNA. Cephii 47:41 And over time as yield changes for yLUNA, how all of this... The balance for supply/demand plays out. Because once there's more of an equilibrium at some point where we don't have some of the artifactually high yields, I think it's going to be interesting to play between these things and create weird and interesting new financial products that people haven't thought of. If folks want to jump on for questions and such, hop on ahead. I don't know if we've... Hopefully haven't spoken too far above people's heads. But really the goal of this discussion is really to spark the imagination of all the crazy things you can do, all the possible protocols that can be built with the strange Web 3.0 native primitives, and I think these are the kinds of things that are gonna attract lots and lots of people from other chains, and really build the Terra ecosystem, is these financial tools or whatever. So yeah, anyone want to hop on? I don't know if we have Ryan and danku here. Ryan, let me hop you. I don't know if you have time. Let's see if anyone has any commentary or some theories of how you want to play with the Prism ecosystem. And Phil's on here, let me get Phil on for a second. Phildo UST. Baggins 49:13 Your entire life with this is like extremely powerful, and I think people are gonna are gonna go insane. Cephii 49:18 Yeah, you mean how it changes how you think about your money, period, right? Phildo UST. Baggins 49:24 Yeah, and it's allowing people to, use thoughts and learning types and structures that they used for games, which are completely different. We've talked about this to apply into finance and I think that's going to be extremely powerful. Despite all of the complicated things that we can talk about right now. Cephii 49:44 Yeah, no, there's... Yeah, the gamification of your life almost. Yeah, you're right. It's almost like when you're playing a video game, like realtime strategy games are good examples, you'll have certain kinds of pieces on the game board that, for example, just churn out gold or whatever, right. If you've played these kinds of video games, where certain things you do for gold, certain things you do for offense, certain things you do defense, and depending on what your goal in the video game is you get different combos of these things. It's similar to how you live your life, I guess, is what you're saying. Phildo UST. Baggins 50:24 It's starting to be, I think... That's making sense to an entire generation who spent their lives with their head in video games, you know. Cephii 50:33 Yeah, sure. And that's why I was saying from... If you look at how countries are run, or you look at how governmental departments are run, you look at how, I don't know, financial systems are run, there is a lot of game theory in play. And when there isn't sufficient game theory in play, the people that do play video games are like, okay, I could probably run that department better than this. And you don't even have to necessarily know all the nuances or science behind how that's run, you just see all this stuff. It's broken, it's like, wait, you could have predicted this had you thought this out, right? [chuckle] Phildo UST. Baggins 51:13 And if you have the information, which is the other very cool part of this is, in this space, right now, anyone who wants can take part and there's not like a bunch of secrets kept to make more money that make the entire system so hard to figure out. So that's pretty exciting. Cephii 51:27 Yeah, that's a good point. Yeah, in other words, if rebalancer bots work, and I tell you guys how to use them, I don't lose any money by doing this, right? They'll actually... The funny thing is the more convenient... Use Prism components or PRISM tokens, or whatever, it works out better for me in the long run, because my LUNA goes up in value, because people use it and find it useful. Yeah, it's amazingly self... Phildo UST. Baggins 51:54 So you can help everyone, and you help yourself. Truly, it's a nice profit model that you can... Like Angel protocol is an amazing, powerful concept, doing charity and getting paid, for instance, similar. [chuckle] Cephii 52:07 Yeah. Which is why like... By the way, I talk about these volatility arbs, and things like that, because they're sort of perpetual, there's not really an end to them. And what's also... Unless, Terra money becomes all the world's money, and all the arbs have been leached out of the system, but at the end of the day, volatility is going to be there, especially when you add things like Levanaa leverage and whatnot, and you can make some interesting things out of that. Yeah, but it's not like me telling you what possible theories could come out of this, or helping a protocol develop this somehow is negative for my personal well being, or my ability to make a buck off of this or something. It's really interesting how that plays out. It's kind of like we're all gonna make it kind of theory. [chuckle] Phildo UST. Baggins 52:59 Yeah it's weird. It's really hard to get through to people. MrRefractor 53:05 My view on this stuff is, when you join a new ecosystem like this, you have an amazing opportunity, we all have an amazing opportunity because it's such a new ecosystem, there's so many different projects coming out, there's so many different arbs and interesting strategies that are going to happen. And I like technical analysis as a way to decide when to get into a long term trade and when the right time to get out of potentially a long term trade is, but for me, personally, I think when you think about yourself as a retail investor, where your advantages are... Sorry am I still on? Cephii 53:55 You're kind of cutting a little bit, but you're okay. MrRefractor 53:57 Sorry, I'm just saying, as a retail investor where your big advantages are, and that you have a longer time horizon than the smartest institutions out there. You have permanent money as a result of having permanent money, you can take much longer decisions than your average institution can that's taking in lots of different money from pension funds or insurance companies. So taking advantage of that, and also taking advantage of the fact that a lot of these institutions are promising certain returns for people, and if they have a down year, then everyone's gonna pull their money out, whereas you as a retail investor are able to wear a lot more volatility and take a much longer time horizon. And also because these institutions have huge amounts of money trading trading 30 LUNA on Astroport and making a nice arb isn't gonna make material rich for them, but for lots of users on Terra that's going to make a huge meaningful impact on their life. So playing to your advantage of being a smaller fish in a pond that isn't dominated by institutions and being able to wear volatility and take a long term view, I think are the key advantages that we all have in a newer ecosystem before all the institutional money floods into it. Cephii 55:26 Yeah, the concept that smart money always wins is simply not true. There's plenty of examples in crypto where the smart money missed the boat entirely. And it's actually the retail investor that did really well. But at the same time, there's a lot of education involved. When it comes to crypto and its volatility and such, it's really easy to make a lot of mistakes as a retail investor, too. And it helps to be able to help people through that. Let me get ML on for a second, are you there? CryptoML 55:57 Yeah, I just have the question around validator delegations. How's that gonna work? And will there ever be a time where users... I'm assuming that's the pLUNA side, pLUNA holders can vote on their own delegators? MrRefractor 56:15 Yeah, so it's actually going to be xPRISM holders, so the Prism governance token is going to vote on validators. So we have a shortlist now of the initial validators, for people that tuned into the GP Spaces that we did yesterday, we got some news there. And then I was mentioning a potential partnership with Coinhall earlier on. So we're trying to pick validators that are adding a lot of value to the ecosystem, are much smaller validators so that we're helping decentralize the ecosystem, and they're validators that are going to going to want to be active participants in the Prism community. And we don't want to just delegate to people that are just going to take the delegation and not do anything with it and not do anything helpful with it for the community. So we have the initial shortlist, but then once we go live, it's gonna be up to governance holders to decide which validators are the most helpful and the most relevant and can add the most value for the ecosystem. And in an interesting dynamic with that is that validators are then going to be incentivized to hold PRISM tokens so that they can vote and so that they can do their best to try and remain in the active set. Andyeah, so it's gonna... We just want to spit it out to governance and try and make it as fair and transparent as possible. CryptoML 57:51 Okay, yeah, that's what I was getting at, validator vote buying, pretty much. I saw something similar on a different chain, but that's gonna be at the PRISM token level, not the pLUNA? So I mean, yeah, just from experience from another chain, I saw a token's price stay elevated just because of validators wanting control and wanting to vote for their own validator. So what you're saying, that's gonna all be on the PRISM token side? Cephii 58:22 Let me get Nick on for a sec. I've got to actually break here. There's a couple of the questions, but I want to stop with Nick, just because I've kind of got a complicated day, as I mentioned before. [chuckle] Nick 58:34 Hey, thanks. I got on a little late, so if you addressed this, just feel free to stop. But as you see the space as it exists now, meaning there's no Mars, there are certain protocols that are coming on that would potentially affect price discovery for yLUNA, I mean, pLUNA sort of does whatever it's going to do based on, presumably, whatever the price of LUNA is, I mean, there's that correlation. What factors do you see like when Prism fully goes, when you're refracting into y and p, what factors do you see are going to help price discovery for both y and pLUNA? And do you see that potentially in that early phase, let's say for the first month, where it might cost more than the cost of cLUNA to put a yLUNA and pLUNA together? Or do you feel like the market will always settle where the cost of having a y and a pLUNA together will always be equal to c? And maybe I don't understand, maybe Hyperion can contribute to that since the AMM is going to be on Prism. MrRefractor 59:43 Yeah, so they'll always be an arbitrage if the sum of yLUNA and pLUNA a trading different to the price of LUNA. And so if the sum of y and p are trading above then you can just buy LUNA, and mint y and p and immediately sell those for a profit. And if it's trading below, then very much like with bLUNA, you can buy bLUNA at a discount, and then use it to redeem LUNA from the Anchor vault. So you'll have those dynamics of why it'll trade pegged around LUNA. And then in terms of the individual components, and what proportion of LUNA's price each of those components are gonna trade, it's gonna be really interesting, because I think people are going to start... At the moment people hold LUNA, and they know they're getting a good yield from it, but they don't necessarily think too much about, "How exactly am I getting that yield? How sustainable long term is that yield? What is the exact breakdown of UST versus LUNA that I'm receiving as part of that yield?" And so I think that's going to be where a lot of the conversation revolves around. People might be like, "Okay, well, I think there's a great ASTRO airdropped coming, like Astroport again, maybe I want to own some yLUNA over that airdrop event," or something like that. So I think you're going to get all these kind of interesting dynamics. MrRefractor 1:01:14 We saw, for example, when the community pool was burned, generating 1.5 billion or 1.6 billions worth of swap fees in UST. That would have obviously been a huge event for yLUNA. And in addition to that, the rewards were previously being paid out over three years, and it got moved down to two years. So right there, you'd have two events, that would be huge for yLUNA. So I think you're gonna get a lot of people now being like, "Right, what are the drivers of LUNA's yield?" Because that's going to shape why LUNA, and then those people will be looking at yLUNA and pricing pLUNA based off of where their pricing yLUNA. And then you'll get other people that will just be looking at the price of LUNA and say, "Well, I want to have more LUNA exposure. So I'm just going to try and max out my pLUNA," basically. So I think I think you'll end up having lots of different dynamics. And I think people are going to... It's going to be really interesting, because... And we're already seeing it, people are asking themselves different questions than they were previously when they were just holding LUNA, as they try to work out where for them it makes sense for these things to trade. Nick 1:02:25 And so how does the market get set? I mean, in terms of is it just pure demand orders that you see on Prism? Or how is it that the price gets set? I mean, I'm a big newbie, so could you give me some sense of like, let's just say an announcement gets made on Astroport. And then all of a sudden, you get 1000 orders for yLUNA, and then how does that market across the actual protocol in terms of how that gets resolved? MrRefractor 1:02:44 Yeah, of course. Yeah, so the protocol won't be deciding the price. What will happen is it will just be the market demand that decides the price. So the same way that if LUNA is getting bought loads on Astroport, the price of LUNA on Astroport is going to move up. And so it'll be exactly the same. On Prism, every liquidity pool is versus PRISM token. So you'll have a yLUNA versus PRISM, and a pLUNA versus PRISM liquidity pool. And people will still be able to buy with UST, or aUST, or whatever they want. But ultimately, the more buying pressure on the AMM, it moves the price up, the more selling pressure, it moves the price down. And so it'll just be those market forces that determine the price. And because LUNA price might not move, for example, and pLUNA price might not trade, someone comes in and buys a huge amount of yLUNA, then that suddenly means that there's going to be this arbitrage again, we were talking about where the price of yLUNA has spiked, but pLUNA and LUNA haven't moved. And so you have those kind of interesting dynamics. But ultimately, the price is going to be set by the market, and how much they trade on the AMM in which direction they trade on the AMM. Nick 1:04:18 So when you say that there's a liquidity pool, I mean, is there going to be a yLUNA-UST, or is it just yLUNA and PRISM? Because then the PRISM price itself also adds another layer of complexity, right. So PRISM versus xPRISM, and that's in itself, its own side of the equation of total value locked and how many... What you're going to produce in fees. I mean the first three months could be a total shit show. I mean, just now that I'm thinking about if that's really what's going to happen, and maybe I'm wrong, I mean, I appreciate your saying it's interesting, but I mean, there's going to be a lot of discovery that people are just going to have to start to get comfortable where they're going to be at. Am I misreading that? MrRefractor 1:04:58 No, I think the fact it's versus Prism is relevant for liquidity providers, but is less relevant for people just looking at the price of yLUNA and pLUNA. Because you'll always be able to get a price of yLUNA and PLUNA in UST. And so that's how it's gonna be presented to people on the webapp. And you can denominate it in anything you want. You can choose to denominate your yLUNA in LUNA if you want, or you can choose to look at it versus PRISM, or xPRISM, or aUST, or UST. So the fact that it's versus PRISM is relevant for liquidity providers, because you're going to have exposure to both assets. And for people that have been liquidity providers on Ethereum, you'll know if you were a liquidity provider on Uniswap, that a lot of those pools of versus ETH. So you have the protocol token versus ETH. And you have to remember, when you're doing that you're taking exposure to the price of both assets. And so when you become a liquidity provider, you better make sure you still like the token price of both of the assets. And when pools have been versus UST on Terra, I think people obviously got very used to just having to worry about what one of the assets was doing because the other one was UST and wasn't doing very much. So what you want to do is, if you like the price of yLUNA, and you'd like the price of PRISM, then it might make sense to be a liquidity provider, because you're then also going to be able to earn AMM fees and liquidity incentives. But if you think the current price of PRISM or yLUNA is overpriced, then you probably don't want to be a liquidity provider. Nick 1:06:50 Thank you. Cephii 1:06:51 Got it. Thanks, guys for showing up. I know there's a couple other folks with some questions, I'm sure Hyperion is going to have a lot more discussions like this going forward, you can't really get technical. What I would suggest people do is probably be careful with your LUNA initially, from the perspective of if you're suddenly taking all your LUNA and buying one or the other asset, you want to really be careful with the strategy there so that you don't do something you regret in terms of timing. So all the usual risks of market timing occur. What I would probably do here is I would take this kind of slowly, watch where the market goes and ease into it a little bit if you're concerned, which Nick's point is, you pretty much should be concerned, because in the beginning is when you're going to have really, really volatile price discovery which you can either use to your advantage somehow or wind up using it to your disadvantage. But my feeling is I'm just going to get whichever one's cheaper during this volatility. [chuckle] So if there is one that looks extraordinarily... Like yLUNA is way more popular for some reason, then I'll get the other as a countertrade is what I probably will do. But again, I'm not suggesting anyone do what I do. It's just how I'm thinking it through as far as how I might play this video games sort of. But I'm going to let you guys go because I'm kind of in a moving vehicle now and probably will get disconnected anyway. But it's been great having everybody. Hyperion thanks for chit-chatting with us and any closing remarks? MrRefractor 1:08:32 Yeah, thanks very much for hosting this chat. It's been super interesting. I mean, I'd echo your comments there. If you don't have a strong view on where yLUNA or pLUNA should trade, in the first instance, head into Prism, refract your LUNA into pLUNA and yLUNA, hold on to your pLUNA and use your yLUNA to farm in the yLUNA farming event. And then you can always know that you can combine your yLUNA and pLUNA back to your original LUNA if you want. And so in the first instance where there's price discovery happening, if you have a strong view then great, then trade it, if you don't then you're probably better hanging on to both your y and p until the market settles down. And then just on general stuff, obviously, I think there's probably some more questions. We have Telegram open now and we're having... There's some really high quality conversations going on there. We also have Discord. So any questions you have, there's there's a lot to think about with Prism and a lot of opportunities it's unlocked. So we'd love it the more people that want to come and be part of the discussion in Telegram or on Discord. And thank you very much, Cephii, for hosting the Space. Cephii 1:09:55 Yeah, have a great day everybody and thanks, guys. Finn 1:09:58 Thanks for checking out another episode of The Ether. That was the Cephii space with MrRefractor, it's the Prism Strategies. Recorded on Thursday, January 20th 2022. This episode of The Ether was brought to you by Talis Protocol. Talis is the NFT platform for independent artists on Terra. Talis is dedicated to providing artists with the tools and resources needed to transition from traditional art into the NFT world. With their v1 launch coming soon, Talis will be the place to see real world art reflected on Terra. Find your next favorite artists on talis.art. TerraSpaces appreciates their support. For terraspaces.org, I'm Finn. Thanks for listening.