Prism Fee Update

Last week at Consensus we had the exciting opportunity to reveal Prism, our non-custodial portfolio platform.

 

The response was incredible; we were hoping for 500-1000 signups, but we saw over 5,000 in the first 24-hours after the announcement.

 

CoinDesk and Bitcoin Magazine covered the launch, DA.Capital reviewed the new product, and we were thrilled with the discussion it inspired on Reddit and social media. And when you spend a year- and-a-half building a product that has never existed before, comments like this are immensely rewarding:

 

“I’m still catching my breath.”

 

“The whole ecosystem is going to go boom!”

 

“The video is awesome. The idea is awesome. Watch the bloody thing!”

 

But there was also one loud and widespread criticism: ”the fees are too damn high.” This started to permeate the discussion. The sentiment didn’t seem to be “this should be free” but rather, “1% per month is nuts.” People were clearly willing to pay for the service, but not with the fee structure we had initially conceived.

 

So we listened, and we’ve decided to make a change.

 

First, however, I want to explain what this monthly fee (announced at 1% per month) is all about.  

 

When a Prism is created, the “Buyer” (you) and the “Seller” (ShapeShift, for now) both put up 100% of the value of the portfolio, in ETH, as collateral into the smart contract. This allows the Prism portfolio to lose or gain 100% of its value and remain fully-collateralized and trustless (no need to trust that a counterparty will pay out, often called “performance”).

 

But capital isn’t free, and when ShapeShift, as the Seller, puts up ETH capital, it stays locked there until the Prism is closed. Thus, Prism as a service needs to offer some time-based rate of return on that capital (this would be true whether ShapeShift or anyone else is the Seller).

 

Hopefully that explains why that monthly fee exists: it exists to incentivize capital to collateralize the Prisms. It is not primarily intended as a revenue generator.

 

Short-term, for launch, we chose 1% per month, which is roughly commensurate with the ETH borrowing rates at exchanges recently. Long-term, however, the plan was always to let this rate float, meaning the monthly fee would be set by the market.

 

Indeed, once we open the other side of the service (allowing people to short), then Prism will have some users going long (the Buyers), and some going short (the Sellers).  

The key point: whichever group is bigger, will end up paying a monthly capital fee to the group that is smaller. Thus an equilibrium will be achieved, at some monthly rate. This monthly rate will change in real time, and can go either direction. In fact, if more people want to short than go long, the monthly fee for Buyers will actually be negative (i.e. - a fee is paid by the Sellers to the Buyers).

 

The 1% monthly fee from Buyers to Seller was thus a placeholder until that more advanced market-based capital fee was established.

 

Given the widespread community feedback, which saw that fee as a significant pain point, we’ve decided to adjust things (after all, what is a beta phase if not a chance to get real world user feedback and adjust the product accordingly?).

 

Original Prism Fee Structure

* 1% per month capital fee

* 0.05 ETH +2.4% closing fee (waived during beta)

* 0.5% rebalance fee

 

New Prism Fee Structure

* 0% per month capital fee (to become market-based post-beta)

* 0.05 ETH +2.4% closing fee (waived during beta)

* 0.5% rebalance fee

  

The monthly fee is intended to pay the cost of collateralized capital. Today, ShapeShift provides all the collateralized ETH capital on the Seller side – but in the future, Prism will open up the Seller side, such that Prism customers can take the long or short position on any basket of digital assets.

 

When this happens, this monthly fee will be set by the market: paid by Buyers to Sellers, or Sellers to Buyers, wherever the equilibrium exists at a given point in time. That was always the long-term plan, so we’ve done away with the arbitrary 1% placeholder in the interim.

 

Our community of users is our most important asset. We sincerely appreciate the great feedback and enthusiasm for Prism thus far, and hopefully this change in the fee structure addresses the community’s primary pain point. Prism is a living, breathing project, and will evolve over time to meet the desires of our customers.

 

If you haven’t applied for the invite-only beta already, please do so at prism.exchange.