Operation Rainbow Pegger
Proposal
This proposal aims to address the upward depeg of Prisma stablecoins by introducing two Peg Stability Modules (PSMs), and a simple UI for interactions.
These modules are designed to stabilize prices, improve liquidity, and provide a more cost effective experience to borrowers as they close out their positions on Prisma.
Background + Motivation
If the recently proposed PIP-46 passes, the Prisma protocol will be fully shut down. At the time of writing, both mkUSD and ULTRA are both meaningfully above their $1 peg which creates significant challenges for active borrowers as they must contend with:
- Rapidly increasing interest rates, pressuring quick action
- Dramatically insufficient mkUSD and ULTRA liquidity available to fully close all open positions
This liquidity shortage will only become even more acute with time as we can expect:
- Cessation of emissions, reducing incentives for liquidity provision.
- Speculative hoarding of mkUSD and ULTRA, creating artificial scarcity
Without a solution to address the liquidity shortage, a subsequent depeg is expected to occur as borrowers are forced to buy these tokens at higher and higher prices.
Specification
- Conditionally allocate $5k (roughly 125k PRISMA at time of writing) from the Fee Receiver as a grant to pay for UI development.
- Deploy Two New Peg Stability Modules:
- Prisma PSM: Mints mkUSD.
- PrismaLRT PSM: Mints ULTRA.
- Enable Borrower Repayments via PSMs:
- Allow users with open loans to repay mkUSD or ULTRA via the PSM in exchange for crvUSD at a 1:1 rate.
- Enable crvUSD redemptions for mkUSD and ULTRA:
- Allow users to purchase crvUSD from the respective PSM using mkUSD or ULTRA at a 1:1 rate