Thursday, July 18, 2024

In the ever-evolving landscape of cryptocurrencies, a new stablecoin has made its entrance, catching the attention of investors and enthusiasts alike. MKUSD, the brainchild of the decentralized finance (defi) protocol known as Prisma Finance, has swiftly gained prominence in the crypto market. Let’s delve into the details of this innovative addition to the fiat-pegged crypto economy.

The Emergence of MKUSD

As we step into 2023, the stablecoin ecosystem has witnessed a reduction in its size due to a series of redemptions. However, amidst this backdrop, new stablecoin assets have emerged, each vying for a piece of the market. Notable mentions include Aave’s GHO, First Digital’s FDUSD, and Paypal’s PYUSD. Yet, the spotlight shines on Prisma Finance, which introduced a game-changing protocol on September 1, 2023, allowing users to deposit liquid staking derivative tokens in exchange for MKUSD. Impressively, within its short existence, Prisma Finance has locked in a substantial value of $55 million.

The Essence of MKUSD

MKUSD, Prisma Finance’s stablecoin, adds a unique twist to the stablecoin narrative. It is described as a “non-custodial and decentralized Ethereum liquid-staking-token (LST)-backed stablecoin.” In practical terms, Prisma users can deposit supported liquid staking tokens into a vault and, in return, borrow MKUSD. However, there’s a catch – if the collateral ratio falls below 120%, the vault becomes susceptible to liquidation. The liquidated debt is then assumed by a stability pool, which redistributes the collateral to providers. Notably, the accepted collateral types are WSTETH, CBETH, RETH, and SFRXETH. The minted MKUSD holds versatility; it can be utilized on other defi platforms or redeemed for the liquid-staking tokens (LSTs).

The Growing Popularity of LSTs

Liquid staking tokens (LSTs) have gained immense traction over the past two years, with a staggering 11.96 million ether locked into LST platforms. Prisma Finance took a phased approach to set its borrowing limit, and by September 15, it had successfully secured $30 million. Presently, data from defillama.com indicates that Prisma’s total value locked (TVL) stands at an impressive $55.16 million.

MKUSD in Numbers

The circulating supply of MKUSD, as reported by Etherscan, currently stands at 29.99 million tokens. Remarkably, this stablecoin boasts only 129 holders, with a dominant 71.39% residing in the “Stability Pool” address. For those unfamiliar with the term, a stability pool serves as a mechanism employed by defi projects to ensure that the supply of a stablecoin remains adequately backed. The second-largest holder of MKUSD is Curve Finance, controlling 14.30% of the circulating supply.

A Comparative Look

In comparison to major stablecoins like USDT and USDC, MKUSD may appear relatively smaller. It also falls behind newcomers FDUSD and PYUSD but surpasses GHO’s supply of 22,706,149. To put it in perspective, there are approximately 368,787,867 FDUSD tokens and 44,376,440 PYUSD tokens in circulation. All four stablecoins, MKUSD, FDUSD, GHO, and PYUSD, share a common trait – a significant concentration of supply, with the top 100 holders holding the majority.

In conclusion, Prisma Finance’s MKUSD has entered the stablecoin arena with a unique proposition, backed by the burgeoning popularity of liquid staking tokens. While it may not yet rival the giants of the stablecoin world, its innovative approach and swift rise in value make it a project worth monitoring closely. As the crypto space continues to evolve, it’s evident that new and exciting developments like MKUSD will continue to shape the landscape. Share your insights and thoughts on Prisma Finance and MKUSD in the comments below.

Frequently Asked Questions (FAQs) about Prisma Finance MKUSD

What is MKUSD, and where does it come from?

MKUSD is a stablecoin introduced by Prisma Finance, a decentralized finance (DeFi) protocol. It is described as a “non-custodial and decentralized Ethereum liquid-staking-token (LST)-backed stablecoin.” In simple terms, users can deposit certain liquid staking tokens into a vault and receive MKUSD in return.

How does MKUSD’s collateral system work?

To borrow MKUSD, users must deposit supported liquid staking tokens into a vault. However, if the collateral ratio falls below 120%, the vault becomes susceptible to liquidation. In such cases, a stability pool takes over the liquidated debt and redistributes the collateral to providers. Supported collateral types include WSTETH, CBETH, RETH, and SFRXETH.

What can be done with MKUSD once it’s obtained?

MKUSD offers versatility. It can be used on other DeFi platforms for various purposes, or it can be redeemed for the liquid-staking tokens (LSTs) that were initially deposited as collateral.

Why are liquid staking tokens (LSTs) gaining popularity?

LSTs have gained significant traction in the cryptocurrency space over the past two years. They allow users to stake their assets while maintaining liquidity, earning rewards in the process. Prisma Finance leverages this popularity by using LSTs as collateral for MKUSD.

How does MKUSD compare to other stablecoins?

Compared to major stablecoins like USDT and USDC, MKUSD may appear smaller in terms of market capitalization. It also lags behind newer stablecoins like FDUSD and PYUSD but surpasses GHO’s supply. Notably, all four of these stablecoins have a significant concentration of supply, with the top 100 holders controlling the majority.

What is the significance of the “Stability Pool” address?

The “Stability Pool” address is a key element of Prisma Finance’s ecosystem. It serves as a mechanism to ensure that the supply of MKUSD remains adequately backed, contributing to the stability and reliability of the stablecoin.

What are the total value locked (TVL) and circulation statistics for MKUSD?

As of the latest available data, Prisma Finance’s total value locked (TVL) is $55.16 million. The circulating supply of MKUSD stands at 29.99 million tokens, with a relatively small number of holders, mainly concentrated in the “Stability Pool” and other significant addresses.

What sets Prisma Finance and MKUSD apart in the DeFi landscape?

Prisma Finance and MKUSD stand out for their unique approach to stablecoins, leveraging the popularity of liquid staking tokens (LSTs). While they may not yet rival the largest stablecoins in terms of market capitalization, their innovative features and rapid growth make them noteworthy additions to the evolving DeFi ecosystem.

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