Prism: Create your own Crypto fund.

Prism is a new investment platform created by shape shift. It allows investors to create a portfolio of cryptocurrencies. The value of this portfolio will fluctuate according to the value of the cryptocurrencies held.

The volume of the stock market (not the token market) is dominated by index funds. The benefits of such a strategy have been repeated by John Boogle . who created Vanguard funds , a company that provides a wide range of ETFs at a very low cost. (usually in under 1% a year)Not all index funds are created equal, fees, structure, leverage, stability and reputation need to be considered before investing.

Prism is similar to an ETF in many ways, but an ETF is not a perfect analogy of the Prism product. The list below is a non exhaustive list of the pros and cons of Prism.

Strengths and Opportunities

There are few opportunities to create a personalised portfolio of cryptocurrencies. Doing what Prism does manually requires significant technical knowledge, a lot of time and risk.

With Prism each investor can create their own prism of the cryptocurrency market. Each prism is a unique mix of cryptocurrencies. Initially investors will have a selection of 50 cryptocurrencies from which to build their prism.

The process to create a portfolio is rather simple:

  1. Create prism.
  2. Fund it, Pay the fees
  3. Liquidate the prism, pay the exit fees

Prism is an Ethereum based smart contract application, this creates a trust-less relationship between Prism and the user. (As long as the smart contract is respected by both parties.)

A Prism could be safer than holding cryptocurrencies in an exchange. Exchanges can be hacked. Prism may be an easy way to diversify. Investing in multiple cryptos means managing multiple wallets; each one needs to be backed up synchronized and updated.

Risks and Threats

The fees to use a prism are:

  • 1% a month
  • 2.4% closing fee of (closing fee will not be charged for the first few months)
  • 0.5% Rebalancing fee (only if you rebalance)

The prism smart contracts get their information from a network of Oracles. These are information providers about the current price of each cryptocurrency. Oracles are structured in a safe way, so that the Prism will be created and exited at the real prices. If the Oracle process is hacked, the pool of Ethereum backing the prism could be compromised.

If the price of Ethereum increases between creation and exit of a Prism, this can have an impact on the actual profits.



Prism claims that exchanges have a higher risk of theft then their system.

Prism is purely for investing purposes. Investors do not own the cryptocurrencies in their Prsim, they own the value those coins represent. Investors cannot withdraw any coins, they can only close their Prism and unlock the increase or decrease in price.

Prism is still in private Beta and this will likely extend at least six months after open beta begins.

When the value of a Prism reaches 100% it will automatically close, Prism is looking to change this in the future.

The Prism smart contracts need to be 100% solid, otherwise a repeat of the DAO fiasco is possible. Prism has already done a code audit to prevent this from happening and is performing others.

It seems the fees of cryptofunds similar to Prism such as Taas and Incomi are lower.

The Prism contract will not directly buy the cryptocurrency selected by the investor. Investors are entering into a contract with Prims/Shapeshift that promises to deliver the equivalent value in Ethterum at closing time. This type of contract is called a “Contract for Difference”. In effect it is a bet between the investor and Prism/Shapeshift. A more detailes post about this can be found here: https://medium.com/@DA.Capital/review-of-shapeshift-prism-e34dceaef5ca .

What this means is that if you invest in Dash, there will be no Dash in your name but a promise that Prism will pay the equivalent price movments of Dash at the time of close or up to 100%.

Conclusion

Cryptocurrency markets are the wild west of investing both the upside and downside are intense. Prims gives investors the tools to diversify the capital across many crypto projects. Prism is a step in the right direction, although as in every development market there are both pros and cons. Investor need to be aware of both before they start investing.

For the latest on Prism please visit: https://prism.exchange/


  • Joshua Davis

    What is not explained here is that assets in the prism need to rise relative the value in ETH which means that participants are effectively shorting ETH. If I believe that ETH will rise more than other assets I should therefore never use Prism. Is this a correct understanding?

    I mean are Prisms priced relative to USD or BTC or ETH? This part is not clearly explained.